The federal government has finally taken a clever decision that would eventually place Nigeria on a steep climb out of the abyss of senseless dependence on imported refined petroleum products. The presidency recently announced plans to privatise the four refineries owned by government. That is good news.
The refineries in Port Harcourt, Warri and Kaduna have been a thorn on Nigeria’s flesh. They have not only remained dormant and made Nigeria totally dependent on imported refined petroleum products, but they have drained the nation’s beleaguered coffers through spurious turn around maintenance (TAM) that siphoned trillions of naira into private pockets in the last 30 years.
For decades now, experienced industry watchers had called on the Nigerian National Petroleum Company Limited (NNPCL) to either sell the refineries or give them to reputable firms in the industry to manage.
The company insisted on managing the plants despite the indisputable fact that it could not manage the four refineries with the level of proficiency that would make them profitable.
Kaduna Refinery has been dormant for more than 10 years. Ironically its idle workers collect their jumbo monthly pays before some productive civil servants in the ministries are paid. One credible source lamented that the monthly pay of the lowest ranking worker in the four refineries is bigger than what a level eight officer in the civil service collects in a whole year. The four refineries have on their pay rolls thousands of idle workers, who get their stupendous salaries paid regularly while government at the same time spends billions of dollars annually in importing the products those idle workers are paid to produce.
Port Harcourt and Warri Refineries have been dormant for more than five years.
The recent decision by government to privatise the refineries is a sad reminder of the catastrophic decision by the late President Umaru Musa Yar’Adua in 2007 to reverse the sale of Port Harcourt and Kaduna refineries.
Yar’Adua terminated the sale of Port Harcourt and Kaduna refineries to a company floated by Aliko Dangote, chief executive of the Dangote conglomerate.
Former President Olusegun Obasanjo had sold 51 per cent of Port Harcourt Refinery to the company at $561 million, while Kaduna was sold a week later to the same company.
Yar’Adua terminated the sale under pressure from selfish workers unions and greedy politicians on claims that they were sold to Obasanjo’s allies.
If that sale was allowed, the private company would have managed the refineries efficiently and saved Nigeria the agony of total dependence on refined petroleum products imports.
The transaction had only given the purchasing company a total of 51 per cent of the shares of the refineries while government was to keep 49 per cent. That would have given government enough seats on the boards of the refineries and consequently the ability to influence the running of the refineries.
Yar’Adua’s decision to terminate the sale was short-sighted and catastrophic. It has inflicted untold hardship on millions of Nigerians today.
The decision by the federal government to privatise the refineries will bring multiple benefits to Nigeria. Even as the failed refineries may no longer fetch as much as what they did when they were sold in 2007, they will eventually be managed along profit lines by private investors who would make sure they no longer remain dormant.
That will give Nigeria an enviable position in the prestigious club of nations exporting refined petroleum products. Dangote Refinery has already led Nigeria into that club. Nations from far and wide are in a long queue to lift refined petroleum products from Dangote Refinery.
Even South Korea, a leading Asian Tiger nation, has finally joined the long queue of nations waiting to lift refined petroleum products from Dangote Refinery.
Strangely enough, that development in the downstream sector of Nigeria’s distressed oil industry and the strange improvement in oil production in the upstream sector of the oil industry is translating into a seeming boom in forex inflow to Nigeria.
The Central Bank of Nigeria (CBN) announced last week with a measure of self-acclaim that Nigeria’s foreign reserve has risen to a record $40.8 billion.
For more than 10 years Nigeria’s foreign reserve had hovered around $35 billion. There are strong indications that when the four public refineries are privatised and they are managed with maximum proficiency, they will boost the nation’s exports of refined petroleum products and rake in more foreign exchange.
The most important development in the downstream sector of the oil industry where the refineries belong is what major petroleum product marketers announced last week.
The marketers stressed that even as they are still armed with petrol import licenses issued them by the NNPCL, they will no longer import petrol since Dangote Refinery can satisfy the nation’s needs.
With the firm decision of the major marketers to finally halt petrol imports, Nigeria will now be saving the $20 billion it spent annually on refined petroleum products imports.
With the supply of forex to the nation’s foreign reserves inching up and the demand thinning down, the naira cannot but start a gradual climb out of the abyss. The demand for forex is thinning down because Nigeria will no longer wash $20 billion down the drain on refined petroleum product imports. Forex supply is inching up because Nigeria is exporting what it was importing in the last 30 years due to the breakdown of its four refineries.
The naira will appreciate if the CBN is willing to check the excesses of the bank managers enriching themselves through forex hoarding and round-tripping.
The federal government will come under intense pressure from selfish trade unions to halt the privatisation and protect the humongous pay of failed refineries workers.
Government responsibility now is to make sure it does not follow the path of the late President Yar’Adua. This is the time to sell the refineries. Nothing should stop it.
