Nigeria Refineries: To Sell Or Not To Sell

The Petroleum and

Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) are set to join the league of labour unions on strike in what seems like a season of strike actions in Nigeria.

The leaders of the two oil workers unions said last Tuesday that their members will commence a nationwide strike from January 2014 if the Federal Government fails to reverse its plans to privatise the country’s four refineries.

It would be recalled that the planned sale of the refineries was made known few weeks ago by the Minster of Petroleum, Deiezani Allison-Madueke.

She said the government would like to see major infrastructure facilities such as the refineries transferred from the public sector, adding, “government does not want to be in the business of running major infrastructure entitles and we haven’t done a very good job at it over all these years.”

Unsurprisingly, the Minister’s pronouncement did not go down well with many people, especially the oil workers unions who would rather see that the refineries are fixed and run by government.

Some commentators have also posited that the planned privatisation is an attempt to hand over the nation’s refineries to cronies of the Federal Government. Others are worried that the “national assets would be put into the hands of foreigners. They think it is not safe for government to put the refineries entirely into the hands of private investors especially considering the nation’s huge dependence on oil for existence. Some other citizens are concerned about the privatisation  process. They are afraid that the three months period within which the assets are expected to be sold is too short to allow for global best practices and transparency.

Be that as it may, I will totally align with those who believe it is high time we got rid of the four moribund refineries.

As admitted by the Petroleum Minister, these refineries, two in Port Harcourt, one each in Kaduna and Warri have performed sub-optimally for almost two decades as state run entities. Billions of naira have been pumped into their turn around maintenance (TAM), yet the desired results could not be gotten due to inefficiency, corruption and age.

As a result, Nigeria, Africa’s largest oil producer and the world’s ninth largest producer of crude oil shamefully relies on fuel imports to meet more than 70 per cent of its needs. These state owned plants operate at a fraction of their capacity cord. According to Nigerian National Petroleum corporation the country exchanges 60,000 barrels a day of crude product with Trafigura Beheer BV and a similar amount with Societe Ivoirienne de Raffinage’s refinery (SIR) in Ivory Coast and  refineries in other countries.

It is interesting to note that while our refineries are almost dead, some of the foreign refineries which refine our crude oil like the SIR built in 1962 before the first refinery in Nigeria continue to function at more than 80 per cent of installed capacity. Reason being that the government of Cote D’Ivoire retains a minority stake in the plant while renowned international oil companies hold the controlling interest.

It has been established that all over the world, government has never been a good business man. Government has a poor and pathetic history of managing anything and vital sector of the economy such as the refinery will be better in the hands of the private sector. The aviation and telecommunication sectors quickly come to mind as typical examples of how privatisation can make a dead industry come to live.

Over the years, Nigeria has witnessed regular pump prize increase causing untold hardship due to scarcity of petroleum product. Presently kerosene used by many families for cooking is out of reach for the poor. Many have resorted to the use of firewood and charcoal for cooking. If privatisation will make petroleum product available and more affordable, why don’t we opt for that?

So I think instead of the oil workers threatening fire and brimstone if the refineries are privatised, they should dialogue with government on how best to go about  the privatisation process in the interest of the nation. They should concern themselves with the process through which the buyers will emerge. This is a period to put sentiments and personal interests aside but rather seek for ways to develop the economy of this country.

It is also advisable  that the oil workers and other stake holders are carried along if the privatisation process must succeed.

Perhaps if government has been a bit more transparent, there shouldn’t have been any protest. Keeping the people in the dark on government dealings most often leads to disaster.

It is also my opinion that drastic measures are taken to check pipeline vandalism if the privatisation will yield positive results. Most importantly, as government prepares to hand over the refineries to private investors, government should set up a regulatory body which will set rules to be followed by the investors. Our leaders, particularly the president require no reminding that they are constitutionally mandated to pursue sound and beneficial economic policy options at all time.

Therefore the planned privatisation of refineries should be done in favour of the citizenry instead of a few privileged individuals.

Calista Ezeaku