EDITORIAL: The Nigerian Government Refineries: The Elephant in the Treasury House

For Nigeria, the acclaimed Africa’s largest economy blessed with abundant natural resources particularly crude oil which was discovered in commercial quantity 70 years ago (1956), the oil and gas historical trajectory has not been of a total blessing, but of mixed assessments and outcomes. To say the least, this critical economic sector (Oil and Gas) has been grappling with complex and paradoxical management crisis, one that depicts abundance of oil wealth on one hand, and a recurrent scarcity of refined petroleum products on the other.

At the heart of this complexity and dilemma are the government’s refineries, specifically the Port Harcourt Refineries Company (PHRC) and the Kaduna Refining and Petrochemical Company (KRPC), which have remained underutilized (operating below capacity), undermaintained (operating mostly in a comatose state), and continuously constituting significant drain on the nation’s Treasury. No less thanks to the inept managerial capability of the mother company, the Nigerian National Petroleum Company Ltd (NNPCL).

In a scandalous admission that depicts the deepening crisis within Nigeria’s energy sector, the NNPCL, through its Group Chief Executive Officer (GCEO), Bayo Ojulari, revealed recently that a humongous sum of N13.2 trillion was channelled into the country’s three state-owned refineries between 2023 and 2024.

Yet, “despite this massive injection of capital intended to cover turnaround maintenance, operations, and mounting bank charges, the facilities have remained largely dormant, serving as a significant financial anchor on the national economy rather than a solution to the country’s fuel woes”, reported the “News Scroll”, a foremost Online Media Publication.

The Port Harcourt Refineries, originally designed to process 210,000 barrels per day, and the Kaduna Refining and Petrochemical Company, with a capacity of 110,000 barrels per day, have consistently underperformed, leading to a reliance on imported refined products. Consequently, this has not only drained foreign exchange reserves but also exposed the country to price volatility and supply chain vulnerabilities.

Multifaceted reasons have been adduced for the underperformance of the refineries but clearly mismanagement, corruption, and inadequate funding have been cited as major factors. The refineries’ inability to operate at optimal capacity has resulted in significant revenue losses for the government, with the cost of importing refined products exceeding $10 billion annually.

The impact on the economy is substantial. Until lately, the scarcity of refined products has led to fuel shortages, crippling economic activities, and exacerbating poverty. The situation is further complicated by the fact that Nigeria has one of the highest fuel subsidies in the world, with the government spending over ₦1 trillion ($2.5 billion) annually on fuel subsidies. Though, the government affirmed early in May, 2023 that petroleum subsidy has been abolished, industry players hinted that the position might not be totally true, questioning the NNPC’s import bills in its financial.

While the government has recently braced up to address the challenges confronting the refineries through mixed options of privatization and the award of contracts for their rehabilitation, these efforts have yielded limited success, with the refineries remaining largely non-operational. Even with the audacious “PR Optics” by NNPCL to present the refineries redeemable for production just to prove critics wrong, last week’s public admittance by NNPCL’s GCEO has begged the question: who is fooling who?

For us at Penpushing Media, the concept of public administration entails prudent management of State’s resources including systematic blockage of wastage. The NNPC’s refineries have been technically declared non-productive and inefficient since 1999 when former President Olusegun Obasanjo had wanted to sell them off. It thus beats every reasonable thinking that as recent as 2023, the Tinubu’s Administration can still be persuaded to think that the refineries would be turned around for performance efficiency.

It is the opinion of Penpushing Media that the current situation presents an opportunity for a comprehensive reform of the Oil and Gas sector, particularly the desirability of retaining Nigerian refineries. While some experts have urged the government to prioritise the rehabilitation and modernisation of the refineries with the view to privatising them, Penpushing Media is of a very strong conviction that the refineries be disposed off, sold to willing investors without further delay.

Nigeria should, as a matter of urgency, divest from oil refineries business and redirect capital toward more productive ventures; encourage private sector participation, and foster a competitive downstream industry that delivers efficiency, innovation, and sustainable growth. Selling the refineries would not only relieve the government of a financial burden but also signal a commitment to pragmatic economic management, where resources are allocated to ventures with clear prospects of profitability and national benefit.

It is the considered opinion of Penpushing Media that the fund realised from the sale of the refineries can be used for specific purposes including the upgrade of the electricity infrastructure that has been yearning for attention; build or upgrade specific strategic roads; make some strategic investments abroad that will yield good returns for Nigeria, as well as initiate other solid, enduring projects of monumental benefits for the country, now and in the future.

Just as we firmly believe that the process to adopt for the sale of the refineries must be transparent and accountable, we hasten to admonish that the projected money realisable from the disposal of the refineries must not be wasted, or filtered on routine expenditures, unaccounted for. The experience with repatriated Abacha money back into the country in the last 26 years must open our eyes to prudent management of the Nation’s investments.

In the final analysis, Penpushing Media submits that the Nigerian government’s refineries are indeed the “elephant in the treasury house”, a glaring matter that demands urgent attention. It is imperative that the government takes decisive action to bite the bullet to sell off the refineries, and redirect the nation’s oil wealth towards sustainable economic growth and development. There are no two ways about it at this point in time. As business leaders often say, “let’s draw the line, cut our losses, and move on”.

Clearly, enough of the excuses in allowing the elephant to roam freely in our Treasury House; it is time to tame it permanently.

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