$3bn Repairs: MAN, Marketers Call On FG to Privatise Refineries

The Manufacturers Association of Nigeria has said the Port Harcourt, Warri, and Kaduna refineries are a drain on the country’s economy, calling on the Federal Government to sell the facilities.

This comes as crude refiners and marketers advised the government to sell the refineries as scrap and use the proceeds to fund modular refineries, saying the facilities are now a burden and liability to the government.

The Director-General of MAN, Segun Ajayi-Kadiri, stated that the refineries were gulping government resources with no result to show. About $3bn has been spent to revive the refineries, but all to no avail.

According to reports, the Federal Government has consistently expended resources on the refineries, which went moribund many years ago. It was gathered that about $1.5bn was approved for the rehabilitation of Port Harcourt refinery in 2021; $897m was earmarked for Warri refinery, while $586m was for Kaduna refinery.

N100bn was reportedly spent on refinery rehabilitation in 2021, with N8.33bn monthly expenditure. $396.33m was spent on Turn Around Maintenance between 2013 and 2017.

Despite all the financial allocations, the refineries remain unproductive at the moment. While featuring on a live television programme on Wednesday, the MAN DG, Ajayi-Kadiri, reiterated the call for the sale of the four refineries, saying anything that belongs to everyone belongs to no one.

Ajayi-Kadiri said Nigeria is too big to be ‘pocketed’ by anyone because there are many resilient and hard-working Nigerians ready to make good of private business, urging the government to partner with this set of people to run the economy.

“Those four refineries you are talking about are just a pure drain on the Nigerian economy, and it is not fair to the Nigerian people. We should have a situation where we can speak truth to ourselves and ensure that we encourage private sector investment,” he said.

Ajayi-Kadiri argued that the refineries would be functional if sold to private investors, adding that this would also reduce fraud and opacity.

He continued, “This is our natural endowment. We are the sixth-largest producer of crude oil in the world, yet we suffer. I can tell you that if you completely go private, it will be difficult for anybody to steal. It will be difficult for anybody to be unaccountable. It will be difficult for anyone to have a situation where there are continuous insinuations of massive fraud anywhere.

“Those four other refineries should be competitors with the Dangote refinery. We were told that one was working, but now we’ve been told that it is no longer working. The government should give it to people who would ensure that it works.”

Speaking with our correspondent on the matter, the Publicity Secretary of the Crude Oil Refineries Association of Nigeria, Eche Idoko, urged the Federal Government to sell the refineries to fund modular refineries.

Idoko expressed concerns that the Federal Government has expended billions of dollars to rehabilitate the refineries, yet none were working as of the time of filing this report. According to him, modular refineries should be given intervention funds, which would also give the government stakes in the refineries.

“From what you have seen, do you think it is viable to keep these refineries? I think the refineries should be sold as scrap, and then the government should invest in private refineries.

“They can still sell the refineries. At the last time, some people were willing to buy them. People can buy the refineries and turn them around. Let the government have equities in these refineries, but not own and run them.

“At the end of the day, the refineries are liabilities. The refineries still add to the government’s total pay. The refineries still have overheads that the government has to pay. It’s becoming a burden, but they can dispose of those assets and use the proceeds to invest in viable refineries and have equities in the new refineries that will be giving returns to the government,“ Idoko stated.

In a recent interview, the Executive Secretary and Chief Executive Officer of MEMAN, Clement Isong, said MEMAN had consistently requested that the facilities be handed over to professional refinery managers.

Isong said Nigeria needed the refinery to avoid a single source of fuel distribution or supply, saying there should be healthy competition with the Dangote Petroleum Refinery.

“I have been consistent. We need those refineries. We need them to work. And we have been consistent in proposing that the refineries be handed over to professional refinery managers, whether with or without a stake, in order to ensure that there is some competition with Dangote. We think that competition is always important in the sector,” Isong said.

Asked if he meant the NNPC could not run the refineries effectively, Isong reacted that the refineries might be suffering from political interference and the perception of the NNPC’s social role. These, he said, had prevented the NNPC from taking hard decisions like reducing its staff strength, like a private business would do.

“History has shown that the challenge may be a result of the political interference in the past and the perception of its social role. Those are the two things that have prevented NNPC from taking hard decisions. For instance, a private enterprise will have optimal staff strength, whereas NNPC will struggle to reduce its staff strength because there could be a crisis as it struggles to manage its relationship with the union,” he maintained.

Speaking further, Isong explained that the refineries are also being affected by the government’s inability to manage its economic environment and costs. He emphasised that the private sector has consistently outperformed government-owned corporations.

Isong added that nobody could harass Aliko Dangote, knowing well that he is running a private business. “There is also the inability of the government to manage its economic environment and costs. The private sector, historically, in every geography, has done better. Government-owned corporations struggle because of their perceived social role. The private sector is much better at managing this decision-making simply because stakeholders understand that they are privately owned.

“Stakeholders behave differently when they know you’re government-owned; they challenge differently. But if you’re private, nobody can harass you. Nobody can harass Dangote, he’s running his business; it’s his pocket,” he stated.

On his part, the Director of Research and Strategy at Chapel Hill Denham, Ibrahim Tajudeen, backed the call by MAN and other stakeholders that the nation’s refineries should be sold.

Tajudeen suggested that the authorities consider a Public-Private Partnership with the overall goal of improving the efficiency of the refineries.

“I think what can work is the first thing that they said, which is a complete sale to a private investor or a consortium of private investors. What can also work is a partnership or joint ownership. What we call a public-private sector partnership or PPP arrangement may also work where the private sector will bring down their expertise, and the only thing that happens is that the Federal Government reduces its share in those refineries. I think either they completely sell it or they sell part of it, there is a need for efficiency to be restored in those refineries, no doubt.

“So in this case, I think the Manufacturers Association of Nigeria is making the right call. But my own sense is that even if they will not sell them outright, they can consider selling part of them and bringing a partner from the private sector that will underpin the efficiency of those refineries.

“I think the fact that Dangote is able to do it is in itself a demonstration that private investors are highly needed for those refineries to be back in operation and running efficiently,” he said.

A former Chief Economist at Zenith Bank, Marcel Okeke, also echoed similar sentiments, pointing out that the sale was long overdue and that the refineries should be sold as they are.

He said, “They are a huge drain on public resources. You know they have not been producing. If you recall, the government was almost through with the privatisation of the refineries. It was almost concluded until another government came in and reversed the process. So since that time, they have remained a drain on the Nigerian economy. Monies had been claimed to have been sunk into their refurbishment and at the end of the day, there is nothing to show for it.

“MAN is saying the correct thing and it is long overdue. The privatisation is long overdue. So, I recommend that they be sold. They should be privatised or sold as is, meaning in whatever condition they are, they should be privatised like that. Do not try to refurbish them again. There are people who know a lot about refineries. When they buy them, they know what to do to reactivate them. Government has no business in business.”

The shutdown of the Port Harcourt refinery for maintenance entered its second month, and the plant has yet to resume operations. The Nigerian National Petroleum Company Limited had earlier stated that the maintenance, which started on May 24, would end in one month.

Calls for the privatisation of the government-owned refineries, under the management of NNPC, intensified following the shutdown of the 60,000 barrels-per-day old Port Harcourt refinery, six months after it was declared operational.

The Warri refinery was also shut down one month after the former Group Chief Executive Officer of the NNPC, Mele Kyari, declared it open in December.

There are reports that the Economic and Financial Crimes Commission is currently investigating over $7bn spent on the turnaround maintenance of these facilities. The Managing Directors of these refineries have since been fired.

It was earlier reported that the EFCC was probing the disbursement of $1.5bn allocated to the Port Harcourt refinery, $740m released for the Kaduna refinery, and $657m approved for the Warri refinery.

Recall that former President Olusegun Obasanjo and former Vice President Atiku Abubakar have repeatedly called for the sale of the refineries. In separate remarks last year, Obasanjo said the NNPC was aware that it could not operate the refineries, saying international oil companies like Shell once refused to run the refineries when he requested them to do so.

According to Obasanjo, some Nigerians, including Aliko Dangote, once paid $750m to take over the refineries; however, his successor, Late Umar Yar’adua, turned it back. Again, in January, Obasanjo said, “I was told not too long ago that since that time, more than $2bn have been squandered on the refineries and they still will not work.

“If a company like Shell tells me what they told me, I will believe them. If anybody tells you now that it (the refinery) is working, why are they now with Aliko (Dangote)? And Aliko will make his refinery work; not only make it work, he will make it deliver.”

Obasanjo concluded with a Yoruba proverb, comparing inflated claims about the refineries’ performance to a farmer who planted 100 heaps of yam but falsely claimed to have planted 200.

“They say that after he has harvested 100 heaps of yams, he will also have 100 heaps of lies. You know what that means,” he said.