On ending the fuel importation regime

WHEN Industry, Trade and Investment minister, Olusegun Aganga, disclosed the Goodluck Jonathan administration’s plan towards ending the country’s depressing regime of fuel importation in 2018 and highlighted its conscious efforts at making more of non-oil exports to boost revenue, the excitement that followed was not surprising. But if past initiatives and especially the conflicting policy signals from this government are anything to go by, disappointment may be an end-result. And Nigeria does not deserve that. Undoubtedly, the plan is the most desirable option for a country, which wastes too much money importing what it can produce. But corruption and lack of political will have prevented the nation’s leaders from doing the right thing.

   The high dependence on fuel importation, linked to a low domestic refining capacity, has been the tragedy of Nigeria’s oil sector. If only the government would get more serious with the reform processes, including ending importation of fuel products!

   Based on the industrial revolution launched in 2012, by the Goodluck Jonathan administration, Aganga said: “There are many sectors we should have developed over the years, but for decades, we relied entirely on exporting raw materials. That era has gone.” Part of the good news from the minister is that stopping the importation would save the country a minimum of $10 billion, having spent about “three billion dollars importing steel, about six billion dollars importing cars and spare parts, about $1.7 billion on sugar.” According to him, 13 other products that would replace oil and in which Nigeria has comparative advantage as well as export capacity in agro-industrial, mining related and industrial products have also been identified. This sounds good.

   Contrary to Aganga’s hope, however, only a few months ago, Petroleum Minister Diezani Alison-Madueke who has been in charge of the country’s oil and gas assets for the past four years had, in an address practically dismissed hopes of ending fuel importation by some African countries, including Angola, Uganda, Mozambique and Nigeria in the next 20 years. 

   Considering her powerful position in the industry, Alison-Madueke is adequately informed about developments in the industry. So, the question is: who do Nigerians believe between Alison-Madueke and Aganga? What informed the oil minister’s claim of an irredeemable situation for another 20 years before the importation regime becomes history? And what informs Aganga’s optimism?

   The existing, under-performing four refineries, no doubt, are part of the general malaise. That the bulk of Nigeria’s crude oil is refined abroad is a pointer to the high level of inefficiency in the industry. The four refineries including the old Port Harcourt Refinery (1965), the Warri Refinery (1978), the Kaduna Refinery (1980) and the new Port Harcourt Refinery (1987) are all functioning at sub-optimal capacity, thanks to official ineptitude and a regime in which maintenance culture is almost zero.

   The result: Nigeria continues to spend substantial foreign exchange to import fuel – at international price per metric tonne plus other landing costs – for domestic consumption. Quoted NNPC figures claim the four refineries had, up to 2011, a combined installed capacity of 445,000 bpd but ran on less than 30% of installed capacity. Also, for almost the whole of 2010, the four complexes could only refine a mere 80,757 metric tonnes of petroleum products (19,967 of premium motor spirit, PMS or petrol; 53,223.4 MT of automotive gas oil, AGO or diesel; and 7,567MT of liquefied petroleum gas, LPG or cooking gas. The rest volume of 8.1 million MT of petroleum products in the downstream sector was imported. The situation, it is being reported, is even worse now.

   Worse still, the country is faced with a process of importation that promotes corruption. Figures of imported products are allegedly inflated to facilitate high subsidy claims, at huge costs to Nigerian tax-payers. Interestingly, the insignificant quantity of crude refined locally (in relation to imports) is supplied to end users at same price with imported products. A regime of continued importation of refined fuel from all manner of sources to satisfy local consumption in a country that has everything going for it (to satisfy the domestic market and even export) is, of course, appalling and unacceptable. The government must therefore set as priority a commitment to ending the industry sleaze as soon as possible.

   Why have the international oil companies that have shipped the crude from Nigeria for almost six decades not found it worthy to run functional refineries locally as they do elsewhere? Collaboration with foreign interests or countries with the capacity should also have set the pace for the establishment of refineries across the country in build-operate contextual agreements. Such conscious efforts would have seen Nigeria not only satisfying local consumption but also exporting to countries on the West Coast for example.

  Nigeria has certainly had enough of net-importer status. A change in policy direction with a view to getting one or two of the four refineries to produce at optimal level, would be a starting point.