Protection: Key for private investors in local refineries (2)

By Sunny Chuba Nwachukwu

The national oil company, Nigerian National Petroleum Corporation (NNPC), from the recent pronouncements of its Group Managing Director, Mele Kyari (at the 5th edition of the special ministerial briefings coordinated by the presidential communications team), has revealed monthly “under recovery” expenditures of N120 billion spent by it on imported refined products since 2020 to keep petrol pump price at N162/litre from its imported cost of N234/litre (against the impression given to the general public in 2020 that the petroleum subsidy had been scrapped by the FG/Ministry of Petroleum Resources). This hidden unbearable and unsustainable financial burden by NNPC that has now been revealed, appears to show that the corporation’s agenda is a far cry from plans, programmes and packages that can ameliorate the damages done in the downstream of the oil industry; thereby delaying a path to solutions towards achieving improved results for the economy.

This self inflicted, naughty, jigsaw puzzle created in the downstream sector has no other solution than to urgently resolve it by shifting base back to local refining operations (through revamping the moribund government-owned facilities)! Head or tail, this solution is a “necessary evil”, no matter how it is debated (either in favour or against), considering the trendy technologies in cleaner energy sources (including the hybrid and voltaic/electric power driven cars) as against the fossil fuel deposits, which we still have in abundance for the oil industry; and shall still continue to be relevant in the global energy schemes for the next four decades; excluding the all important petrochemicals dimension of its economic uses.

From this April to February 2022 is barely 10 months, the time when the Dangote facility is expected to go into full blast local refining operations. Now, does it appear that the NNPC is not aggressively working out ways and modalities to woo other private investors in the private sector to get involved with attractive incentives (through privatization), in the already planned rehabilitation of the non-performing government owned local refineries located in Port Harcourt, Warri and Kaduna? This strategy that is time bound should be encouraged, considering the already chaotic situation at hand (with petrol at N162); while the labour unions, the likes of Nigeria Labour Congress (NLC) and Trade Union Congress (TUC), are already agitating against the incessant fuel hike in the country.

There seems to be a very illogical position by the GMD of NNPC, to offload the unsustainable newly claimed monthly under recovery expenses of N120 billion; the claim that it shall competitively subject pump pricing to market forces at N234/litre. Apart from the imminent risk of further public protests against yet another pump price increase, there’s no way healthy competitive pricing will suffice without locally operated facilities functioning! Unless NNPC means to further exacerbate the already bad situation, by grooming grounds of monopoly for Dangote Refinery once it starts production, come February 2022!

This action, if taken by NNPC (as already hinted by the GMD) will definitely be catastrophic nationwide! Reason is that the NNPC appears insensitive and unmindful of the already economic downturn of the vulnerable Nigerians (the ordinary, poor man in the street) with the presently high inflation rate already at double digits, yet to be implemented minimum wage in so many states, the rising unemployment rate, shrinking of businesses that would further spark a ripple effect on laying off workers, which further increases unemployment in the economy. The added negative impact it will have in society (with a high crime rate in a nation that is already laden and ridden with high insecurity challenges in all parts of the country), shall be unimaginable.

What needs to be done at this critical point is to prepare an attractive framework for the big players in the oil Industry (known with proven competence and capacity) to fully invest in those government facilities and operate/manage them with every seriousness of profit making like in private ventures. The government only needs to create an enabling environment for ease of running such profit oriented oil business and a visibly attractive indices of quick return on investment for these business moguls and captains of industry, that shall put their stakes on such huge business risks. Let the government start now with the already mapped out plan to fix Port Harcourt Refinery at Elesa Eleme, with a daily offtake capacity of 150,000 barrels of crude oil (built in 1989) to immediately privatize it through a very transparent bidding process, to be conducted by the Bureau of Public Enterprises (BPE). The prospective private investors shall be involved in the rehabilitation processes, as already programmed by the federal government at the same cost of $1.5 billion; for which  they shall clearly monitor all the expenditure profile of the entire sum, and  must eventually pay same back to the federal government coffers (as part of the purchase cost in the purchase agreement).

Naturally, a genuine businessman can never allow $1.5 billion, which he must eventually account for, to be recklessly spent, at his own expense. It is on this note that those prospective and successful private investors ought to be involved ab initio in the rehabilitation processes, as already programmed by the government. And Port Harcourt Refinery should be used as a template for all the other government owned refineries that shall be fixed, as well.

Concluded.

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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) Onitsha, +2348033182105