By Sunny Chuba Nwachukwu
Corrupt practice and its various colourations significantly blindfolded policy formulators and opinion molders in the oil industry from taking the right decisions on planning, with programmes that ought to deliver this economy from total collapse. Otherwise, the national oil company, NNPC and its subsidiaries, might not be exonerated in all sorts of racketeerings that took place with crude exports, over the past four decades in upstream operations which, obviously, crippled the nation’s economy (judging from the empirical fact that oil proceeds was the main source of the nation’s foreign exchange earnings). This scheme extensively impacted negatively and affected the proactive planning for the needed volumetric expansion and repositioning of the already existing four local refining facilities since 1965 through 1989; located at Port Harcourt, Eleme, Warri and Kaduna (with a total daily output of 445,000 barrels per day).
This had been due to unpatriotic and shameful sharp practices for quick/easy money spinning deals amongst those involved in that sector, which included the “barter” arrangements with our crude oil for exchange of refined products. It gradually culminated in the mindless killing of these fully operational and vibrant local plants, by yet another ill conceived tactical mode of turn around maintenance (TAM); which a forensic study revealed did not involve the original builders of those plants for such routine maintenance rather, it was done through contractors that had little or no technical knowledge/structural historical information of those affected facilities; just for political gratifications, with a major aim of, just to unpatriotically do a haphazard, quick servicing on the plants.
Gradually (as a recap), the economy started and kept drifting down, instead of containing the daily local demand challenges through local refining and at the same time, to generate the commensurate revenue within the economy. This poorly managed, unfinished business eventually resulted to (1) the endemic “Fuel Scarcity” experience of the early 90s’, (2) the unnecessarily mounting weekly FX demands pressure, and its attendant stress on the nation’s foreign reserves (just for perishable imports/the daily local fuel consumption); (3) and finally, the complete crippling of those four government-owned existing plants. (4) Thereafter, came the total madness, notoriously called “Petroleum Subsidy regime” by importers till last year, 2020.
While all these were ongoing over the decades, the economy was constantly under terrible and unbearable financial stress (from many fronts), and was deeply drifting down the drain without recourse for any visible solution to save the economy (with full awareness that, the same oil business was the major source of FX for the economy). From 2008 some newspapers had declared subsidy “a thorn in the flesh”, and that government should scrap it!
The exchange rate of the local currency kept falling, with yet weaker naira value on a daily basis, in a “consumer-nation” that never made efforts to have “productivity” change the tide of her annual Balance Sheet in her foreign trade deals. So, here we are today! After blowing all the opportunities, without fortifying the downstream sector, we are now back to square one! The products’ pump price is now determined monthly by the Petroleum Products Pricing Regulatory Agency (PPPRA), with the prevailing crude price at the international oil market. The same crude we produce and export to other countries (without adding value to this raw material locally, at least for the sake and interest of the vulnerable Nigerians that have daily need of refined products).
With the oil glut of 2020, during the COVID-19 pandemic lockdown globally, if we had earlier developed our downstream with all the local refineries consuming a major chunk of what we produce daily, (with two million barrels of crude, Dangote takes up 650,000, our old refineries taking up 445,000, etc), would the nation have been at her Witt’s end of unsold crude on vessels in the high seas with the demurrage mounting, as sadly experienced in 2020?
Very recently, the news on the Dangote Petrochemical Complex and Fertilizer Plant was the talk of the town. The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, informed the nation that the crude oil feedstock shall henceforth be purchased in the local currency (the naira) by the Dangote Group (which also applies to all private local refineries). That made serious sense, and a good strategy by the federal government towards investors in the downstream sub sector of the economy because, it primarily eases some degree of FX stress from the shoulders of the nation’s foreign reserves.
It’s just among the packages needed to attract, encourage and protect the local investors to key into the downstream operations in the oil industry, and enjoy such incentives and more, as part of the “ease of doing attractive oil business”, that shall be profit oriented. This again suggests investment protection package by the government, in providing a conducive environment for a robust, healthy, competitive finished products’ pricing amongst the local investors.
…To be concluded
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