The merry-go-round on Nigeria’s refineries


On May 17th 2007, less than two weeks to the expiration of the President Olusegun Obasanjo’s administration, Aliko Dangote successfully bought the largest refinery in Nigeria, Port Harcourt Refinery. Less than 72 hours to the change of government, news broke that Dangote had also acquired a controlling stake in Nigeria’s third-largest refinery in Kaduna for an undisclosed sum. But few days after the Yara’dua administration was inaugurated, news emanated that the refineries were sold in a manner that did not fully take into consideration Nigeria’s interest. Being a man with some socialist leanings, it was easy for President Umaru Yara’dua to immediately revoke the sale of the refineries to Alhaji Dangote, thus halting private intervention in the running of our refineries. In an interview, President Obasanjo stated that his immediate successor reversed the sale of the refineries due to pressure. The former president also revealed that Dangote, leading a consortium of investors, had paid $750 million for the two refineries. President Yara’dua did not only cancel the sale, he also refunded the $750 million paid for the refineries.

Again in December 2013, the Bureau of Public Enterprises (BPE) stated that President Goodluck Jonathan had approved the privatisation of the nation’s four refineries – Port Harcourt Refining Company Ltd (PHRC) I, Port Harcourt Refining Company Ltd (PHRC) II, Kaduna Refining and Petrochemical Company Ltd (KRPC) and Warri Refining and Petrochemical Company Ltd (WRPC). The President also approved the constitution of a steering committee headed by the Minister of Petroleum, Diezani Madueke, to commence the process and make recommendations to the National Council on Privatisation. Following the announcement, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) immediately threatened to down tool if the government went ahead to sell the refineries. In apparent response to the threat by the labour unions, the Special Adviser to the President on Media and Publicity, Reuben Abati told newsmen that “the government is not going to sell any refineries. There is no such plan and there is no presidential approval for such. Nobody, not even the Minister of Petroleum Resources, has powers to sell any government property.” And that ended the plan to sell refineries by the administration of the former President.

Upon assumption of office as the Group Managing Director of NNPC in 2015, Ibe Kachikwu immediately issued a 90-day ultimatum to the Warri Refining and Petrochemicals Company (WRPC), to commence operation at its full capacity of 125,000 barrels per day. Similar directives were given to other refineries in a bid to force the refineries to perform. However, in an interview with CNBC in 2016, Dangote made a comment that sparked another round of debate on the state of the refineries. Talking about the prevailing recession at the time, Dangote said, “If I had challenges in my company, I would not hesitate to sell assets, to remain afloat, to get to the better times, because it doesn’t make any sense for me to keep any assets and then suffocate the whole organisation. What we need to do now in my own thinking… we have a lot of assets to sell. We can sell part of the joint venture; part of the shares. You know government normally owns 60 percent.”

On the contrary, Ibe Kachikwu as the Minister of State for Petroleum had reiterated earlier in the year that “We have the mandate to deliver value and money to Nigeria. So, we will not privatise our refineries. Rather, we have the approval to seek funding that will take us to a higher level in production.” Exactly one year later on May 26, 2017 at the 172nd OPEC meeting in Vienna, Kachikwu in an interview revealed that the government was “ready to offer all the three refineries for investors who have money to repair and manage.” In fact, the minister hinted that the whole process would be concluded by July/August 2017.

Towards the end of the year and in swift contrast to earlier assertions, the Nigerian National Petroleum Corporation submitted a request to the national assembly to approve $1.8 billion for the Turn Around Maintenance (TAM) of the nation’s four refineries. In response, the lawmakers noted that the refineries had already gulped more than $20 billion on TAM with nothing tangible to show for the money spent.  Now, speaking after a recent Federal Executive Council (FEC) meeting, Kachikwu said the nation has no money for the repair of the refineries and the best option is to explore Public Private Partnership.

The question now is: for how long do we intend to keep going round in circles as a nation? We have always known the right thing to do yet we have chosen to ignore that path. Time has shown that the solution is to embrace PPP, but we have resolved to make these refineries draining pipes for our economy. The minister should ensure that the right thing is done this time and let us put this issue of refineries behind us. Enough of the merry-go-round!