Recurring Refineries’ Repairs As Metaphor For Good

The criticisms of the latest plan by the Nigeria National Petroleum
Corporation (NNPC) to repair the nation’s refineries with $1.2
billion (N342.72 billion) reflect a genuine concern over the
desirability of such a step in the light of the fact that previous efforts
failed to yield the desired result. Such reservation is telling based on the
awareness of the discerning stakeholders about the humungous amounts
so far spent in previous exercises, with little or no benefit to Nigeria.
Their opposition to the plan is premised on the conjecture that the
Federal Government may have spent close to N963 billion in the last 18
years on the seasonal Turn Around Maintenance (TAM) without getting
good result. At the moment, the NNPC has four refineries, two in Port
Harcourt Refinery Company (PHRC) and one each in Kaduna Refinery
and Petrochemical Company Limited (KPRC) and Warri Refinery and
Petrochemical Company Limited (WRPC). They have a combined
installed capacity of 445,000 barrels per day.
Recently, the NNPC’s Group Managing Director, Dr. Mainkanti Baru,
justified the latest effort on the need to prove that the facilities could
be run profitably. He stated inter-alia while inaugurating the committee
on the repairs: “We want to show everyone that we can fully run the
refineries. You must all work together to operate them at 100 per cent
capacity as this is the only way to ensure profitability”.
But the informed opinions of these Nigerians, namely Mr. Godwin Igwe,
pioneer director, Centre For Gas, Refining and Petrochemicals, Institute
of Petroleum Studies; Mr. Olumide Adeosun, an Associate Director, Price
Waterhouse Coopers (PwC) and Dr. Ifekam Onwusando, a financial
consultant based in Lagos, run contrary to the Baru’s sentiments. They
have not only dismissed the NNPC’s decision to go ahead with the TAM
as not well-thought-out, but also noted that the abysmal failure of the
previous exercises should have dissuaded the oil corporation from
embarking on such an unprofitable course.
We agree with the views canvassed by the aforementioned persons
for two reasons. First is that government, at all levels in the country, has
not shown manifest competence in managing businesses profitably, a
factor which apparently spurned the privatisation programme in the
mid-1980s. Two is the pervasive opacity with which the NNPC has
been run since its establishment in the latest 1970s, although we must
conceded to the fact a modicum of transparency has been engendered
by the current administration since it took office in May 2015.
Somehow too, the obsolete nature of the facilities continues to affect
the optimal working of the refineries. Since there is an inherent wear
and tear associated with the usage of those facilities over time, , the
NNPC cannot feign ignorance of such a factor. What is at stake is the
workability of seasonal maintenance efforts on facilities which have
aged considerably and have obviously become out- modelled compared
to the those in operation in the advanced economies.
Granted it is not totally a bad idea to initiate such repairs, but the
repeated TAMs of the past years have bled the nation financially. The
fruitless repairs have become a somewhat metaphor for waste. The
wasteful outcome of the past exercises validates this viewpoint. For
instance, the former NNPC Group Managing Director, reportedly testified
before the House of Representatives in 2007 that $1 (N306billion)
was spent between 1999 and 2007 to repair the refineries. Similarly,
in 2013, former Minister of Petroleum, Mrs. Diezani Allison-Madueke,
said that $1.6 billion (N489 billion) was budgeted for the turnaround
of the refineries, even as she noted then that over 75 per cent of the
spare parts maintenance of the Port Harcourt Refinery had arrived in
the country.
Our opposition to the current TAM is that even if the refineries
become operational after the exercise, they cannot meet the domestic
needs for fuel and other derivatives by Nigerians. In retrospect, the
Minister of State for Petroleum, Dr. Ibe Kachikwu, had told journalists
at the inception of the current administration that even at 100 per cent
installed capacity, the refineries would only provide about 50 per cent
of the country’s consumption, meaning that the remaining half would
still be imported.
Given such a scenario, the option available to the government is to
privatise the refineries and stave off the continual wastage of scarce
resources. The government should do away with its apparent mindset
on TAM as such attitude conveys the unenviable management style of
national governments in sub-Saharan Africa which tend to repeat the
same mistakes all the time, but quite surprisingly, expect a different
Handing over the management of the refineries to private investors is
a road that should be taken this time around. It is imperative if Nigeria
must reverse its long negative narrative of governmental ownership of
business and the corollaries of poor management and huge financial
The time to act is now!