THE $1.5BN WASTEFUL VENTURE

The expensive plan is unlikely to revive the Port Harcourt refinery

Nigeria relies solely on imported petroleum products to meet its domestic energy needs as its three refineries have remained in a state of disrepair for so many years. In the current scheme of things, the plants in Kaduna, Port Harcourt and Warri have been shut down for more than a year for rehabilitation. The consequence of this is that petroleum products are imported from abroad, subsidised with funds the country can hardly afford while jobs that could have come from functional refineries are unavailable. Besides, perennial repairs of the nation’s refineries are replete with unpleasant tales of corruption, deceit and even missed opportunities.

Shortly after assuming office as the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC) in 2019, Melee Kyari announced that the corporation has adopted a phased repair of the refineries all the refineries. He disclosed that an agreement reached with their original builders (ORB) would restore the refineries to at least 90 per cent efficiency levels between 2020 and 2022. Furthermore, according to a statement from NNPC, a $50 million contract to undertake full integrity check and equipment inspections of the Port Harcourt refinery was reached with Tecnimont SPA and Tecnimont Nigeria Ltd (TNL). The planned revamp was said to begin with Port Harcourt and the scope of this deal included a six-month onsite assessment of the refinery as well as engineering and planning activities which will lead to the second phase of the refinery revamp to a minimum of 90 per cent capacity utilisation.

Without the fulfilment of that pledge by the NNPC, the federal executive council recently approved $1.5 billion for the repair of the Port Harcourt Refinery. Assurances from government officials that the money which will be borrowed will be well spent do not elicit confidence of the public. “Even with the paucity of funds, we continue to ramp up government involvement in sectors that ought to be left to the private sector; with the latest being the ill-advised $1.5bn so-called rehabilitation of the Port Harcourt refinery that has failed to turn a profit for years”, said former Vice President Atiku Abubakar whose views resonates with that of many Nigerians.

We fear that history could repeat itself. It has happened several times before. If we may ask, why is the federal government adamant on throwing money to repair the Port Harcourt refinery when it can sell it and save itself lots of troubles? How much could it possibly profit from selling the refinery after spending $1.5 billion for its repair? Wouldn’t it be economically realistic to allow private funds to revamp the refineries since the NNPC has failed woefully to keep them running profitably?

Our position on the state of the nation’s refineries is clear and has not changed. We have always argued that the refineries have become huge cost centres to the government and country and should be handed to credible private entities to restore their full productive capacities. Private businesses are better commercial managers than governments. A quick visit to the Port Harcourt refinery and its neighbour, Indorama Eleme Petrochemical Industry which was taken from the NNPC and privatised in 2006 reinforces this. If Eleme can be restored to efficiency with private funds and still pays out dividends to the government, privatising Port Harcourt should not be a problem.

We believe that borrowing $1.5 billion to repair the Port Harcourt refinery is not smart economics. This government should do well to resist the lure for borrowing and heaping debts on the country on such patently wasteful ventures.