By Sunny Chuba Nwachukwu
Barring other sources of revenue, Nigeria’s economic growth can improve and be positively impacted by aggressive investment strategies in the downstream of the oil and gas industry. The national oil company, Nigerian National Petroleum Corporation (NNPC), the acclaimed ‘state oil giant’, now going public, is urged to take the right, ambitious steps of making more investments that can benefit the economy with improved revenue generation and GDP ratio from its downstream operations. Otherwise, the present moves being made to take stakes in private refineries shall amount to nothing substantial for the economy!
I offer a note of caution to the top management, that the style of Corporate Governance in decision making for their initiatives presently, may not favour the national economy. The entrepreneurial ideas of NNPC should be progressive, and aimed at moving the general economy forward, from high inflation (even if the country is assumed to be 100 percent reliant on the revenue accruals from this subsector). Well thought out plans, policies and programmes ought to be progressively germane at all times, and ought not be on a framework of policy summersault for a perceived economy in distress.
At the recent 2-day Nigeria Oil and Gas Opportunity Fair (NOGOF) 2021, with the theme: “Leveraging Opportunities and Synergies for Post Pandemic Recovery of the Nigerian Oil and Gas Industry’’, the NNPC chief operating officer, refining and petrochemicals, Mustapha Yakubu, had disclosed the ongoing discussions for acquisition of 20 percent minority stake in Dangote Refinery. But such a move, in my view, if eventually taken, will not augur well for the economic future of the country, and will clearly be showing the corporation as having taken a defeatist posture in that subsector; expected not of an institution of such magnitude in other parts of the globe.
One, therefore, makes bold to sincerely advise against such a move; and this is without prejudice to this globally acclaimed signature facility, that stands out as the pride of the nation. It is not only that it would be counterproductive in the long run, especially on the Dangote Group’s performance-based operations, being a purely private business venture, it also amounts to taking a decision that does none of the parties concerned any good (in terms of mutual or corporate economic growth), judging by all economic standards and the NNPC’s hierarchy in the schemes of activities in the global oil and gas industry. It might also mortgage the ‘expected’ principal roles it presently plays within the economy, as a federal government agency and regulatory authority (being the expected and known unbiased umpire for the industry) on allocations, provision and usage of crude oil as raw material for refining of petroleum products.
In pure business terms, this decision by NNPC will be unfavourable in the long run for the proposed partnership arrangement because, there ought to be other competitors and players in the same oil sector; that could of course, leverage on this and take advantage, and strategically manage the available deregulated options more freely, for a better competitive edge.
Unless there are other undisclosed reasons such ‘collaboration’ should be a clearly spelled out customer relationship (presented in concrete terms of a seller-buyer relationship); but definitely not an undefined partnership that could sink the height and position of a national oil company of this caliber in the future. The COO’s claim of availability of “huge quantity of crude for that refinery”, does not in any way professionally sound cogent enough and convincing, for overriding public interests. The attractive business opportunities in the subregion, where pump prices of refined fuel are above N400 per litre, offer strong enough evidence to be leveraged and capitalized on for the establishment and development of greenfield refining projects for bigger volume and better accruals of foreign exchange revenues, generated for the economy.
If an economic growth plan is borne in the minds of the top management of the NNPC, they should be proactive in policies and programmes and shun every aspect of seemingly tainted, retrogressive policies that do not influence improvement in national productivity, which is desperately needed for the economy now.
The ugly experience in Q1 of the 2020 crude oil glut/export challenges faced in upstream operations due to the COVID-19 pandemic global lockdown should not (for whatever reason) be forgotten so soon – the challenges of laden ships on the seas without any space to berth, accruing daily charges on demurrage; equally, the crude producers were paying for storage of unsold crude that period. Let such past mistakes or unprofitable ways of running oil business not be repeated again by the NNPC.
Rather, the NNPC arm, Greenfield Refining Projects Division (GRPD), should now face the unfinished businesses it has at hand. The federal government’s three greenfield refineries projects since 2011, proposed to be sited in Lagos (200,000 bpd), Bayelsa and Kogi (100,000 bpd each) should be brought to full realisation and commissioned for operation; with a proviso that private investors be allowed to buy into the projects, and that it be totally managed as a fully privatized business.
Also, instead of planning to invest a whopping sum of $2.5 billion (20% of $12 billion net worth of Dangote Refinery) as a minority stake holder in an already completed facility, our national oil company, NNPC, should be focusing on the ongoing rehabilitation of the moribund Port Harcourt Refineries at a total cost of $1.5 billion, the Warri and Kaduna Refineries (225,000 bpd collectively), which are yet to be fixed and revived to life, to increase the nation’s total output capacity on local refining. This should make more business and economic sense, than tying down such funds unproductively. With or without approaching Dangote Refinery, the 650,000 bpd facility must be on stream 24/7 come February 2022! The NNPC is therefore urged to be better focused in its investment strategies in the downstream subsector, for the specific purpose of improving this battered economy.
Nwachukwu, a graduate of pure and applied chemistry with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce.
Sunny Chuba Nwachukwu (FICCON, LS)