GOVERNMENT AND PRIVATE REFINERIES
The Federal Government's recent foreclosure of direct involvement in establishment of refineries is a logical reaction to the nation's discouraging experience with refineries that are unable to meet the people's yearning for regular fuel supply.
In spite of the billions of naira invested by government in construction and maintenance of refineries in the country, the edifices cannot meet local demand for petroleum products. They are, in fact, more often off stream than operational, while much of the fuel that is available in the country, is imported.
At the moment, none of the nation's major refineries is operating at full installed capacity. Corruption and inefficiencies in the system make further direct investments in new refineries untenable.
Jonathan, who disclosed the decision on refineries at a recent, question and answer town hall meeting during a state visit to Uyo, in Akwa Ibom State, said the federal government will now only provide a level playing field for the private sector to establish refineries.
The position of the government on this issue is understandable. But, since Nigeria runs a mixed economy, government cannot totally hands off refineries. In line with the Nigerian Constitution and the responsibility of government to the people, the authorities should continue to show deep interest and hold stakes, no matter how little, in refinery projects in the country.
There is no doubt that productivity in existing refineries does not justify the establishment of more state-owned ones. All the refineries in the country have not made much impact on the economy. They operate below their installed capacities. The nation has not benefited sufficiently from them to justify fresh investment in new ones.
But, even then, it makes good business, security and political sense for government to hold stakes in new refineries, whether through public private partnership (PPP) or other arrangements, for security reasons, and for the opportunity they hold for provision of gainful employment for Nigerians in their operating areas.
There is, however, a problem. Most of the licences that have been given by government to private operators to establish refineries have not been utilised. Government should find out exactly why this is so. The problem, as has been canvassed at different fora, appears largely due to the problem of pricing of petroleum products.
Potential private operators of refineries want a full deregulation of petroleum prices so that they can sell their refined products at prices that they consider profitable. Government, because of its responsibility to the people, cannot allow oil prices to be based, solely, on market forces.
All stakeholders in oil production and refining in the country need to come together and agree on operational details of private refineries, especially with regard to pricing, to break the logjam. Government and private refinery licensees need to work out confidence building measures to exit the existing cul de sac.
There is no doubt that Nigeria sorely needs new and efficient refineries to meet her fuel requirements. It is also incontestable that given our past experiences, the new refineries should be private sector driven, but with minimal stake by the government, to give leverage to Nigerians in the companies. The finer details of the execution of the projects should be worked out in the interest of the people.
Government should also invest massively in infrastructure and other critical requirements to encourage the licensees to bring the refineries on stream. One other way to encourage utilisation of refinery licences is to make them time bound, if they are not already so. Such licences must be used within a given period, or forfeited.
There should also be openness and clarity of purpose on the plan for private refineries. A way must be found to bring private refineries on stream without the people having to pay more than what is reasonable for petroleum products.
Since government has tacitly acknowledged failure in the management of its refineries, it should move quickly to fine-tune the technical and financial details of private refinery operations.
However, the quest for private participation in oil refining should not lead to abandonment of the existing refineries. They should be revamped.
The human factor in the mismanagement of the refineries should be dealt with. Let government find out strategies employed by other major oil producing countries to run their refineries efficiently, without having to import fuel. The refineries should be restructured and put under new management with Public Private Participation (PPP) to ensure efficient and effective operations, while the nation awaits private ones.