FG And Sales Of Oil Refineries

In November this year, Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke announced plans by the federal government to sell the four oil refineries in the country. According to the minister, the planned sale was part of President Goodluck Jonathan’s effort to transform the petroleum sector through privatization. The Minister noted that all four state-owned refineries are to be sold to private investors in the first quarter of 2014 to end years of under-performance and financial burden on the country.

As expected, several stakeholders including  labour unions in the oil sector have all kicked against the planned privatisation of the refineries. Oil workers, under the auspices of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) have vowed to resist the privatization plan.b According to them, the proposed sale of the refineries, located in Kaduna, Warri and Port Harcourt, is against the overall national interest and is only in the interest of few Nigerians who are lurking around the corridor of power to milk the country dry. The two unions  alleged that the government advertently underfunded the refineries and deliberately refused to carry out routine turn around maintenance (TAM) and failed to supply adequate crude oil to the refineries to have reasons for selling them to their cronies.

While privatization in itself is not a bad economic approach, the fears of the labour unions and  Nigerians over the planned sales of the refineries are real. Nigerians need to know the true state of the four refineries. Billions of naira is budgeted for turn around maintenance without corresponding improvement. Corruption has been identified as the major problem why the refineries are not working. By planning to sell the oil refineries, government appears to have been overwhelmed by corruption.

Although government is determined to sell the four refinery sales, the suggestion in some quarters that government should adopt the Nigerian Liquefied Natural Gas (NLNG) model in making the refineries more efficient, should be considered. Under the model, the National Oil Company (NOC) will own the four refineries, holding a substantial minority share, while core investors and local participants will hold the majority while the staff, trade unions and the host communities hold minority shares.

If the planned sales must go ahead, an audit of the four refineries must be carried out by a reputable firm to ascertain the true state of the refineries and their monetary value. This should be done to prevent our collective assets from being sold off for peanuts. This is the second attempt by a Nigerian government to sell the refineries since the country returned to democracy. Former president Olusegun Obasanjo embarked on a similar drive. But his successor, the late President Umaru Yar’Adua cancelled the sale for what he called lack of transparency in the transaction.

The speed at which government is executing the sale process is also suspicious. While it has taken government more than four years to consider the Petroleum Industry Bill, the same government is planning to sell the country’s four refineries within two months. Nigerians are yet to reap the benefits of privatization in the power sector. Although many promises have been made, the epileptic power situation remains the same. Perhaps if the gains of the privatization effort in the energy sector had started trickling in, Nigeria would have faith that government’s similar plan for the oil sector would work.