In a recent development, President Bola Tinubu has taken a bold stance on the viability of Nigeria's state-owned refineries, particularly those in Port Harcourt, Warri, and Kaduna. This move has sparked a heated debate, pitting Tinubu against his predecessor, former President Olusegun Obasanjo, who has expressed doubts about the refineries' future.
A Clash of Opinions
Tinubu, in a statement made to the Nigeria Union of Petroleum and Natural Gas Workers, asserted that these refineries will indeed come back online. He emphasized the need for a comprehensive restructuring of the economy, highlighting that mere flames and smoke do not indicate profitability or success. This declaration stands in stark contrast to Obasanjo's long-held belief that the Nigerian National Petroleum Company Limited is incapable of successfully operating these government-owned assets.
Obasanjo's Experience and Argument
Obasanjo, drawing from his tenure as President from 1999 to 2007, has advocated for a public-private partnership (PPP) model to manage major government assets. He cites the successful example of the Nigerian Liquefied Natural Gas (NLNG), where private entities hold a majority stake, as proof that PPP works. Obasanjo's argument is further bolstered by his unsuccessful attempts to transfer the management and ownership of the refineries to private investors during his presidency. He approached Shell, offering them a 10% equity stake and even proposed that they run the refineries without taking equity, but both offers were declined.
Shell's Perspective
A top Shell official, when asked about their reluctance to operate the Nigerian refineries, cited several reasons. Firstly, the official pointed out that the refineries are too small, with capacities of 60,000 and 100,000 barrels, compared to the industry standard of 250,000 to 300,000 barrels. Secondly, he highlighted the poor maintenance of the refineries, suggesting that they are not well-maintained and are often handled by unqualified individuals. Lastly, the official mentioned the high levels of corruption surrounding the refineries, which Shell wants to avoid.
Dangote's Offer and Reversal
Obasanjo also revealed that Aliko Dangote, the President of the Dangote Group, had offered $750 million for a 51% stake in two of the refineries during Obasanjo's presidency. However, this transaction was later reversed by Obasanjo's successor, the late President Umaru Musa Yar'Adua, due to pressure from the NNPC. Obasanjo warned Yar'Adua that the government might lose out on substantial value by not accepting the offer.
The Cost of Rehabilitation
The expenditure on these state-owned refineries has been a contentious issue. Obasanjo stated that the government has spent approximately $16 billion on fixing the refineries, which is only $4 billion short of what Aliko Dangote used to build Africa's largest refinery. This highlights the significant financial commitment made by the government without achieving profitable results.
Stakeholder Opinions
Aside from Obasanjo, various stakeholders, including oil marketers, manufacturers, and the organized private sector, have called for the sale of these facilities. However, Tinubu's latest statement aligns him with the NNPC boss, Bayo Ojulari, who has announced a memorandum of understanding with two Chinese companies to fix the Port Harcourt and Warri refineries.
Expert Analysis
Energy expert Dan Kunle criticized the continued rehabilitation of Nigeria's old government-owned refineries. He argued that the President should privatize these facilities and redirect public funds to other sectors of the economy. Kunle believes that the information being presented to Tinubu on the rehabilitation efforts is biased and influenced by self-interested managers of the refineries. He challenges the government to build a new refinery alongside the existing ones to demonstrate the viability of the old plants. Kunle urged Tinubu to open up various sectors of the economy to investment, rather than concentrating resources on these old refineries.
Marketers' Support for Tinubu
Interestingly, the Port Harcourt Refinery Host Community Bulk Petroleum Retailers Association has pledged their support for Tinubu if the refinery resumes full and sustainable operations before the next general election. They believe that the revival of the refinery will not only create jobs and stimulate businesses but also strengthen local capacity and improve energy security in Rivers State.
Conclusion
This debate highlights the complex issue of managing Nigeria's state-owned refineries. While Tinubu remains optimistic about their future, Obasanjo and other stakeholders advocate for privatization and alternative models of operation. The outcome of this disagreement will have significant implications for Nigeria's economy and energy security. It remains to be seen whether Tinubu's efforts will bear fruit or if the refineries will continue to be a contentious issue.
