As soon as upon a time, Nigeria found oil. Quickly sufficient, it turned our primary supply of livelihood, the inspiration upon which our nationwide funds rests, and the one commodity that gives most of our foreign exchange inflows. To have the ability to extract worth from this oil, we created refineries – all of that are government-owned and managed. Sadly, the remainder of the story consists of heavy bouts of politicking, numerous bloodshed, corruption, explosions, and billions of Naira in losses. Oil might need been one in every of Nigeria’s greatest blessings, nevertheless it additionally undoubtedly doubles as its greatest curse.
On Monday, the Nigerian Nationwide Petroleum Firm (NNPC) launched its audited monetary statements for 2018, noting that its refineries recorded losses of N154 billion. As embarrassing and disappointing because it sounds, it’s not as shocking. The nation’s 3 refineries positioned in Port Harcourt, Warri, & Kaduna, reported mixed losses of N154 billion. Kaduna Refining and Petrochemical Firm (KRPC) incurred a lack of N64.5 billion, Port Harcourt Refining Firm (PHRC) recorded a lack of N45.6 billion, whereas Warri Refining and Petrochemical Firm (WRPC) recorded a lack of N44.four billion. The losses additionally aren’t new as all refineries carried out higher than the previous yr 2017. The one factor extra confounding than the billions in losses is the comfort with which Kaduna refinery conveniently recorded zero income for 2018.
The insanity behind the numbers
Many points feed into the wreckage that has turn into Nigeria’s refineries and most of those points date way back to many years previous to now with the final of the nation’s refineries constructed 40 years ago. For a recap, right here’s an outline of a few of the issues which have led us this far.
1. The three incapacitated refineries
Way back to the 1970s, Nigeria, Norway, and Malaysia arrange nationwide oil corporations for the exploration, manufacturing, and refining of oil. So when Norway got here up with Statoil (now Equinor) and Malaysia, Petronas, Nigeria created NNPC. Immediately, whereas Malaysia and Norway boast of getting the most important state-owned oil and fuel corporations on the earth, NNPC has an extended record of excuses and mind-boggling losses to point out for it. Whereas PH and Warri and in oil-producing states, Kaduna doesn’t produce any oil. For the sake of stability and to have a nationwide unfold, a few of the crudes are moved to Kaduna through pipeline. Maintain that thought.
The capability of all three refineries can also be insignificant, in comparison with the required consumption of the nation. Therefore, most of our oil continues to be imported as a result of we can not produce sufficient. This charge of importation is over 80% of our consumption. The prevailing refineries additionally function considerably beneath capability. Someday final yr, the refineries operated as low as 5.55 percent capacity. To improve capability, the nation carries out turnaround upkeep periodically and not solely does it price an arm and a leg, it takes months – however barely something ever adjustments. Manufacturing stays low and price stays excessive. Even when we flip all Three round efficiently, we have proven that we’re incapable of accelerating their capability. Basically, Nigerians will nonetheless must import. Different elements contributing to the losses are spillages, explosions, and theft.
But within the midst of this, salaries and worker advantages are large. KRPC, WRPC, and PHRC reported 13.eight billion, 13.eight billion, and 9.2 billion in worker wages and salaries, excluding administrators’ remuneration, employees pension and different advantages. Given the inefficiency of the operations of the refineries, the solely factor that might have been performed asides creating higher refineries is to have an overhaul of your entire factor and shut down the refineries. However that’s a distinct downside.
2: The politics of it
The very first thing you’ll find out about oil in Nigeria is that everyone desires it. All of our refineries have been constructed within the Army regime – way back to that. Given the failure of the refineries, the primary try and promote them off was made by former president Olusegun Obasanjo. When Umaru Yar’ Adua turned president, he reversed it citing that the method lacked transparency. The fears of the unions within the oil and fuel sector was additionally palpable as they noticed the sale of the refineries as a ploy by the federal government to award the deal to its cronies. In November 2012, former President Goodluck Jonathan additionally really useful that the refineries be offered on account of insufficient finance and under-performance, however they nonetheless remained. It didn’t take lengthy earlier than extra points emerged.
With developments happening in non-oil producing northern components of the world just like the State’s capital and barely any developments within the south, Niger Delta Militants sprung up and swore to wreak havoc on your entire nation. Additionally worthy of notice is that at present, President Buhari nonetheless stays the minister of petroleum.
3: The rip-off that’s gas subsidy
One of the vital confounding issues is the gas subsidy saga. With the fee of import landed price excessive, the federal government had thought it an ideal concept to subsidize gas for the typical Nigerian. Neglect the query of whether or not we needs to be paying subsidies or not, how a lot in subsidies is the federal government actually paying? Subsidies are primarily based on the amount of petroleum consumed, however one unconfirmed info is how the subsidy is being calculated. Even at present, NNPC and PPRA can not agree on the amount of petrol being consumed each day in Nigeria.
If DPR says Nigeria is consuming round 38 million litres in a day and NNPC means that the nation’s each day petrol consumption is round 50 – 60 million litres, it means there are vital discrepancies. As it’s, nobody is aware of how a lot subsidies Nigeria is definitely paying day-after-day and the place the cash goes to if we’re not really consuming as a lot.
But, the king of all the issues is corruption
Of the sequence of challenges the refining house is plagued with from theft of petroleum merchandise, to poor upkeep and a sequence of operational challenges, corruption ranks tops – and it isn’t information. Corruption in the downstream sector was additionally uncovered throughout the subsidy probe. It revealed that a few of the corporations that took cash for subsidy didn’t even import refined merchandise in any respect. With entrepreneurs preferring to import, our refineries keep dormant. The funds utilized in Flip Round upkeep (TAM) yearly additionally doesn’t additionally contribute to any significant and may be one other avenue for exploiting the business.
Whereas Nigerians sit and watch the decay within the system fester, one billionaire is on the right track to supply an alternate that each the federal government and the non-public sector are basing all their hopes and goals. Aliko Dangote’s 650,000 barrels a day refinery which is ready to be one of the world’s largest, is because of begin operations in lower than a yr’s time. At the same time as we hope that the refinery brings some sanity to the modus operandi and reverse the decades-old rot within the system, it too isn’t bereft of flaws. But, it’s the solely foreseeable hope we now have to place an finish to the joke that’s our refining system and start the method of restoration.
— to nairametrics.com