Of Nigeria’s refineries, proposed sale and failed attempts

Last week, the news of the Federal Government’s plan to sell the four state-owned refineries by next year came out of the blues and was greeted with mixed reactions.

Although, many stakeholders had over the years called for the privatisation of the near-decrepit assets, but successive governments have turned a deaf ear to the calls.

Diezani Alison-Madueke, minister of petroleum resources, had last week disclosed the planned privatisation of the refineries in an interview with Bloomberg TV Africa in London.

While it was seen as a welcome, albeit belated, development that would reverse the dwindling fortunes of the refineries, the news of the proposed sale apparently did not go down well with the likes of Independent Petroleum Marketers’ Association of Nigeria (IPMAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG).

On its part, NUPENG reckoned that the refineries “should remain in the control of government for security and strategic reasons and should not be allowed to be sold to government cronies and front men, as it has happened in the power sector.”

It added that sale of the refineries was not the solution to the massive importation of petroleum products into the country, noting that government’s blunt refusal to carry out the Turn-Around-Maintenance of the refineries over the years to make them function optimally had contributed to the poor state of the refineries.

“We in IPMAN are against the plan to sell the refineries but if the federal government will not rescind the decision, the refineries should be made fully functional before being sold,” Sule Magaji, chairman of IPMAN was quoted as saying.

It is believed in some quarters that the proposed sale of the refineries must have been informed by Aliko Dangote’s plan to build a 400,000 barrels per day (bpd) refinery, which would be Nigeria’s first private and Africa’s largest petroleum refinery.

Nigeria is Africa’s largest oil producer and the continent’s second-biggest economy, but still relies heavily on imported refined petroleum products for the servicing of the economy, creating a lucrative market for European refiners and oil traders at the expense of the Nigerian masses.

Philip Asiodu, former chief economic adviser, speaking at a recent conference had described as a national shame the fact that Nigeria with all the manpower available locally and in Diaspora could not maintain and operate petroleum refineries properly and that the country has had to rely on imports for the bulk of petroleum products consumed locally.

“The simple reasons for this situation are corruption and crude unpatriotic political interference in the management of the refineries and in the selection and deployment of personnel in the NNPC,” he said.

He recalled that by August 1993, towards the end of the Transitional Council, although reluctantly, agreements had been reached with three international oil companies to take over the three refineries then in the country, conduct technical and management audits and indicate what must be done on the basis of their findings and to modernise, restructure, retrain staff if necessary and to operate the three refineries would be privatised with the government retaining a minority interest.

“All that was left was to execute the agreements and kick off the process by September 1993. However, I refused to serve on the Interim Government. Unfortunately for the industry, the agreements were not executed and things continued to deteriorate,” he added.

An attempt to privatise the Kaduna and Port Harcourt refineries by the government of former president Olusegun Obasanjo was unsuccessful as the sale was cancelled by the succeeding government of late President Umaru Musa Yar’Adua for what was described as lack of transparency in the transaction.

Nigeria has four refineries (Port Harcourt Refining Company I and II, Warri Refining and Petrochemical Company Limited, and Kaduna Refining and Petrochemical Company) with a combined capacity of around 445,000 bpd or 70.75 million litres per day, but they operate well below full capacity owing to decades of mismanagement and corruption. The country imports much of its refined fuel demand at world prices, which is then sold to the domestic market at a discount.

By: FEMI ASU