Yesterday, Nigerians woke up to the seemingly pleasant news that the federal government of Nigeria has approved the sum of *$1.5b, which is equivalent to #600B* for the rehabilitation of the Port Harcourt Refinery. The essence is to position the refinery to recommence production to it’s installed capacity of *210,000bpd* and thus, avail Nigerians of locally refined petroleum products.
On the surface, this appears fantastic but on the contrary, the decision is rather cursory and superficial. If one takes a holistic view of the package being put on the table, it becomes as obvious as white on rice that the outcome would not achieve the desired results in so far as the government would still be the main driver on the management seat of NNPC.
In my opinion, government needs to think slightly differently as the expected result of its continued direct involvement, no matter how much cash is injected, would appear as a cosmetic palliative, capable only of delivering a soporific effect in the short term and ultimately, over time, will just expose the undesirability of implementing the proposed strategy.
A lot of us are privy to the level of inefficiency and leakages associated with government’s direct management of any public profit-making venture in our country and there seem to be no end in sight to this any time soon.
A recent audit of the operations of NNPC according to *Premium Times Online*, showed that the corporation has been incurring losses running into billions of Naira yearly due to under par management of it’s operations. For instance, in 2017, the Kaduna refinery had a revenue of just *#2B* and a whopping loss of *#112B*. In 2018, it had a revenue of *#0:00* and a loss of *#65B* . The Port Harcourt Refinery in 2017, had a revenue of *#1.96B* and a gross loss of *#10.57B* and in 2018, it had a revenue of *#1.45B* and loss of *#22.04* while the Warri Refinery had an operating cost loss of *#45.39B* within the same period under review.
What the above shows is that Nigeria incurred a whopping *total loss of #255B* between 2017 and 2018 (two years) from government direct management of its Refineries. By extrapolation, we *might have* incurred similar total amount of loss between 2019 and 2020, which might have risen to *#510B* in the last 4 years.
Now, considering that government says the rehabilitation of the Port Harcourt Refinery will take seven years to complete, we can rightly estimate that losses would still be incurred until the Refinery recommences production and this could rise up to *#900B* ( in 7 years). If you add the above to the estimated *#600B* cost of the rehabilitation, we will have been offset with *#1.5T* before production recommences. This, in my thinking, is not a good investment strategy.
Rather than the proposed strategy, I think the government should in the short run, encourage ( by whatever means necessary) Dangote Refinery to commence production as soon as possible. The private Refinery has already projected to commence production *’early 2021’*.With the installed production capacity of Dangote Refinery of *650,000bpd* as against the combined installed capacity of the Kaduna, Port Harcourt and Warri Refineries, which is pegged at *420,000bpd*, the local petroleum products need of Nigerians, estimated at *51Million litres* a day could be met easily by the time Dangote Refinery commences business. The good thing about Dangote’s commencement of operations is that the sum of *$8.5B expended yearly on the importation of petroleum products* would be eliminated and this could make the Naira breathe a little. Truth is that Dangote Refinery has been labelled ‘ *as the solution to Nigeria’s oil import problem*’ and that is a fact. So, why go on a wild goose chase by wanting to invest *$1.5B* of government’s fund in an attempt at revamping the Port Harcourt Refinery (ies)?
The MD of Dangote Refinery, Edwin Devakuma said: *’My focus is to sell in any part of the world. I am ready for all the markets. The volume is so large; obviously, I can meet the requirements of all the products of Nigeria and I’ll stil have surplus to export’*. This is an assurance from the company to make the products available locally and so Government should channel the said *$1.5B* into another venture. It should consider investing it in *power generation*
So, in the short run, to avoid undulating prices of petroleum products imported into the country due to corresponding price differential of crude oil in the international market, the government should encourage Dangote Refinery to commence production in earnest.
In the long term, rather than government investing such huge amount to rehabilitate the Port Harcourt Refinery in a space of seven years, it should consider shopping for private investors to raise the *$1.5B* and invest in the Refinery as part of their share holding in a PPP arrangement. Obviously, it wouldn’t take a PPP run Refinery seven years to be rehabilitated. Dangote’s took just over two years to get to 90+% completion, building from the scratch.
Federal government should consider a PPP arrangement for all our public owned Refineries and save us the losses we have been incurring year after year and have in place efficiently run refineries under a PPP arrangement.
How do we give crude oil supplies to the local Refineries and still meet our OPEC quota? Nigeria has a crude oil production capacity of *2.5Mbpd* but only produces *1.4Mbpd* due to OPEC cap but If we have to supply Dangote products to its full capacity of *650,000bpd* as well the combined capacity of *420,000bpd* of the author’s proposed PPP refineries, then we have to ramp up our daily crude oil production to full capacity of *2.5Mbpd* so as to optimally cater for our OPEC quota of *1.4Mbpd* and combined local need of *1.07Mbpd*.
If we are able to achieve the above, we shall be earning forex both from our OPEC crude oil export quota and exportation of petroleum products.
Trust me, If the above is achieved, the Naira will breathe a little from the asphyxiating grip of the dollar and that could give life to the local economy.
That is the way I see it!
Beriye Austin Miller
