NNPC’s $1.5b Port Harcourt Refinery Rehabilitation Mess
It is quite obvious by now that the President Muhammadu Buhari’s administration is hell bent on exiting its tenure as one of the most unpopular government since independence in 1960. Since assuming office in 2015, the administration has left no one in doubt that Buhari only changed his military uniform to ‘mufti’. In reality, his actions and utterances have all the footprints and trappings of a maximum ruler. For a man who was packaged and marketed to Nigerians as a dictator who has transformed to a democrat, Nigerians had expected Buhari to lead more by consensus building through public participation in policy formulation and implementation. But what are they seeing?
Buhari, in his almost six years on the saddle, has demonstrated his disdain for people-driven democracy. He has jettisoned people’s power for rulership by a few or call it a cabal. He has transmuted from a President mandated by popular votes to an autocrat, a despot who rules without recourse to what the people want.
From his disregard for the rule of law through the level of contempt the administration shows to judges who are arrested and hounded out of office on charges of corruption to disregard for judicial rulings as in the case of Sambo Dasuki and leader of Islamic Movement of Nigeria (IMN), Sheik Ibrahim El Zakzaky who have remained incarcerated even after several court rulings for their release.
In the energy sector, Buhari’s sphere is influence is ubiquitous and strangling. Since his debut, Nigerians have experienced untold hardship never before known under even a military dictatorship. He has approved increases in electricity tariffs arbitrary severally with the latest being under the COVID-19 period when families are finding it difficult to survive.
Barely a year into office, he approved the first adjustment on May 11, 2016, when the price was raised by about 67 per cent from N86.50 per litre to N145. This was followed by a downward review in March to N125 following the drop in oil prices in the global market and deregulation of the downstream sector of the oil industry and hence removal of subsidy.
The price was raised again in May 2020 to a band of between N121.50 to N123.50 per litre for petrol. This was followed by another upward review in July to a band of N140.80 – N143.80 per litre. In August, the price was readjusted to N148 – N150, and further to price of N162.44 per litre in December following continued rise in crude price.
For a President that disparaged previous administrations and insisted that there was no subsidy regime except corruption; no one knows today whether the petroleum sector is regulated or deregulated largely because of policy inconsistencies and deceit.
According to a recent research conducted by BudgetIT titled “Nigeria’s Petrol Subsidy Regime: Dilemma of the World’s Most Populous Black Nation”, “Nigeria currently imports an average of 91% of its daily petrol needs, thus disproportionately exposing local petrol prices to price shocks from international factors of production and exchange rate volatility. There is a near perfectly inverse relationship between the fall in the value of Naira and the rise in the cost of imported petrol. That is, when next the Naira is devalued, Nigeria’s subsidy bill can be expected to jump.”
It noted that “the continuation of petrol price regulation perpetuates safety nests for exceptional forms of corruption within the country’s subsidy regime. Import subsidy creates petrol price arbitrage ( which is the differential between the regulated price in Nigeria and the high petrol prices in neighbouring countries) which is big enough to incentivise smuggling of subsidized products to neighbouring border towns.”
It would be recalled that Nigeria has spent about $25 billion in turnaround maintenance of refineries in the past 25 years, the prevailing development is coming after promises by the administration that the government would no longer spend on the facility.
Nonetheless, by its own admission, the Nigerian National Petroleum Corporation (NNPC) audit report had last year revealed that three of the nation’s four refineries recorded N1.64 trillion cumulative losses in their 2014 to 2018 details. “There was no associated crude plus freight cost for the three refineries since there was no production but operational expenses amounted to 10.27 billion.
However, opinions remain highly divided over the latest decision by the Federal Executive Council to approve $1.5b for the rehabilitation of Port Harcourt refinery in the light of the huge losses recorded in the last 25 years.
Throwing his weight against the FEC’s decision, founder of Stanbic IBTC Bank Plc, Atedo Peterside, who had earlier asked the government to subject the plan to a national debate, said NNPC would only “enmesh Nigeria into a deeper financial mess by throwing $1.5 billion (including debt) at a problem it created.”
He lamented that while the Port Harcourt refinery contributed zero revenue in 2019, it incurred N47 billion; almost N4 billion a month, the reason he is recommending an end to the ‘nightmare’ through a Bureau of Public Enterprise core investor sale.
Peterside, who thought Nigeria would have learned lessons from the COVID-19 pandemic by making informed decisions did not see the rehabilitation as a priority, adding that going ahead with the project amounts to “mortgaging the future of our children and grandchildren in the hands of people who have not shown that they can manage anything.”
Yet palpable fears of corruption continue to dog the refinery project, stakeholders are also raising concerns over what they described as scam in the return of petrol subsidy, questioning the nation’s daily petrol consumption, which now hovers around 60 million litres from estimated 52 million litres.
Energy expert Micheal Faniran, sees continuous subsidy payment as reinvigorating corruption and smuggling.
“That is the challenge with subsidy. At some point, people were getting subsidies in Nigeria and selling the product to other West African countries. So, in any case, we are subsidising the whole of West Africa,” Faniran said.
Predictably, it is government officials who remain adamant and have been defending the government’s insistence on spending $1.5 billion on the rehabilitation even as the nation may have spent over N360 billion on subsidy of Premium Motor Spirit (PMS) in the first quarter of 2021, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mele
Kyari, said the overhaul of the refinery remained the best option.
But people are angry that Buhari has taken them for a ride with fake promises. Their expectations were that given his campaign promises to reinvigorate local refining capacities, end products importation as well as subsidy regime and restore seamless petroleum products supply across the country, choosing to do nothing in the last six years is the hall mark of deceit and failed promises.
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