PRIVATISING THE REFINERIES

Odilim Enwegbara canvasses the need to sell off the refineries

Private ownership of businesses is as old as human civilisation. No economy is great without an army of private business owners running it. Unlike state-owned enterprises, privately-owned businesses have optimal capital structure, high profitability, high productivity, management and investment efficiency, and above all, more growth oriented with high jobs. Most modern and efficient economies such as US, Japanese, German, UK, and recently Chinese are predominantly in private hands.

The problem with state-owned firms starts with distortion of playing field in their favour. So pampered that the only way they can continue to remain in business is government subsidies and grant of monopoly in their sectors of operation.

On page 824 of his famous book ‘The Wealth of Nation,’ Adam Smith the father of economics stated “… When the crown lands had become private property, they would, in the course of a few years, become well improved and well cultivated.”

Publicly owned businesses only emerged in western economic activities in the 19th century because private owners of businesses were abusing their business ownership through their exploitation of workers to the level of slavery and their efforts to dodge tax responsibilities along with dodging corporate social responsibilities.

This became more pronounced immediately after Word War II, when capital became increasingly hard to come by across Europe for the production of the essential goods and services along with millions of unemployed that needed the none-existing jobs.

So, state enterprises were established to provide jobs to millions even though that meant low productivity and government subsidies, especially the creation of state-owned utility companies to provide those services that at their true market costs would be priced out of the reach of majority of citizens.

But after decades of running inefficient public sector economies across the postwar Europe, the huge cost of subsidising these state enterprises synonymous with corruption and cronyism, along with exaggerated cost transfers to the public and the accompanying huge deficit spending, privatising these state-owned enterprises became a matter of do- or-die in late 1970 and 1980s.

And where privatisation could not happen, to avoid product price skyrocketing, and to stop the increasingly difficult to fill huge deficit holes, commercialisation became the next option across modern industrial economies of the world.

During this same time, most western governments created powerful regulatory institutions, set up simply to ensure that private owners of businesses no longer engage in the race to the bottom, where they enjoy free ride, without having to take commensurate responsibility in the commonwealth. With these regulatory authorities, it became obvious that there was no more need for state run sector monopolies.

OF WHAT USE ARE THE NNPC REFINERIES WHEN WE HAVE TO IMPORT OVER 70% OF THE PRODUCTS THAT COULD EASILY BE REFINED AND DISTRIBUTED ACROSS THE COUNTRY AND SAVE THE BILLIONS OF DOLLARS IN IMPORT COSTS?

And as private owners of businesses were forced to provide better working environment and better pay for workers, along with tax responsibilities it became apparent that these same roles, once the main reason why state enterprises were created, had become less and less important hence state ownership of enterprises began to be unwarranted, and especially because globalisation meant corporate management efficiency, higher productivity, and possibly more taxes and corporate social responsibility.

The Nigerian National Petroleum Corporation (NNPC), especially in its four refineries, is populated by politicians’ inexperienced cronies, whose only qualification for getting the top jobs is because they are friends and family members of politicians.

Since it became synonymous with bloated cost of operations, over invoicing, sheer corruption through revenue transfer and diversion into private accounts, no right thinking politician has had the boldness to want to privatise them.

But the question is for how long should NNPC be mere petroleum products importer, instead of refining them? In other words, of what use are the NNPC refineries when we have to import over 70% of the products that could easily be refined and distributed across the country and save the country billions of dollars in import costs, reduce pressure on foreign exchange reserve accounts as well as drastically reduce the current high pump price of the products?

Atiku Abubakar knows that the permanent solution to these inherent problems is the sale of the refineries to competent hands with the technical know-how and the financial muscles.

Above all, with the refines in private hands, they will receive huge investments for their turnaround maintenance, will become profitable, pay more taxes, employ more Nigerians and compete locally and internationally so that petroleum products from Nigeria could be exported to earn more foreign exchange for the country.

Why the commercialisation of NNPC will not resolve the inherent inefficiencies and low productivity is because, so long as politicians are the ones to decide who gets the top jobs, the corporation will still suffer because politicians’ cronies when hired will still be there for what they and their senders can grab and not how to grow the company.

Not even commercialisation will bring to an end the inherent sabotage of the refineries by the big boys involved in fuel importation who connive with the managers of the refineries to ensure that the refineries are not producing petroleum products to ensure that they are always imported with huge subsidies given to them as importers.

We should not forget that commercialisation would equally amount to these refineries easily transferring their artificially created high costs of operations to the consumers who have no option or else they will threaten to go back to demanding government subsidising their day-to-day operations.