Kachikwu and Official Sophistry
I have met Dr. Ibe Kachikwu just once in Lagos when he came to tell editors about his big plan to turn around the Nigeria National Petroleum Corporation (NNPC). Then, he had not known that he was going to make history as the first Nigerian to combine two hefty portfolios of the GMD of the NNPC and junior minister in the petroleum ministry.
His presentation at that forum was so smooth; almost too smooth to be questioned. He made it sound as if all the problems in the oil and gas bureaucracy, especially the bottlenecks in the downstream sector, would be gone in a matter of months. He is transparently intelligent. He has a way of making very big issues look as simple as ABC when he speaks. Solutions to big problems flow from his mouth the same way miracles flow from the mouth of the General Overseer (GO) of a miracle working Pentecostal church.
For instance, he spoke of deploying drones to protect pipeline facilities and mobilizing the military, whose capacity is already stretched to breaking point by the security challenges in the Northeast and elsewhere, to stem oil theft. He had ready answers for all questions. I think, in the end, we admired his smooth delivery more than we listened to question him. Listening to Kachikwu gave hope that Nigeria’s four refineries; two in Port Harcourt and one each in Warri and Kaduna, had been programmed to work non-stop at installed capacity to solve permanently the unending fuel shortage in the country.
I had said on this page before that the man speaks English as if he was among those that invented the language. But he burnt his fingers last week when he had to explain the difference between ‘unbundling’ and ‘restructuring’ to labour leaders who were not convinced about his sincerity of purpose. Before the latest ‘unbundling’ of NNPC that put him on war path with oil workers, he had used the same semantics last year on the Petroleum Product Marketing Company (PPMC), a subsidiary of the NNPC.
The PPMC was ‘unbundled’ into three downstream companies to take charge of oil pipelines, fuel depots nationwide and the NNPC retail outlets. He boasted the move was going to make fuel available 24/7 without the usual hiccups. That did not happen, which might have warranted a second unbundling last week that got contentious and forced Dr. Kachikwu to change the grammar from ‘unbundling’ which, kind of, makes the NNPC look like a bundle of bandits to ‘restructuring’ which sounds more palatable.
If you ask me, I will say Kachikwu has been doing too much bundling and unbundling at the same time, which is why the workers are angry at him. Not long after the PPMC unbundling, he returned to bundle up all the subsidiaries of the NNPC into four companies to take charge of upstream, midstream and downstream operations of the industry and the gas/power subsector. He even appointed chief executive officers namely, Bello Rabiu for the upstream company, Henry Iken Obih for the downstream company, Anibor Kragha for the refining (midstream) company and Saidu Mohammed for the gas/power company.
It is these four companies that were re-unbundled again into 30 companies, according to initial announcement, before being re-bundled within 24 hours, into seven companies last week. One commentator on the social media said, kachikwu is ‘dancing azonto’ or more specifically, beating about the bush. He said the minister’s semantics of bundling and unbundling is not translating to the availability of fuel, especially petrol. Another said Kachikwu has been speaking only good English since his appointment about 10 months ago without delivering anything concrete that will grant Nigerians access to fuel without first passing through hell.
What I can sense is monumental ignorance of the workings of the public sector. Kachikwu came from Exxon-Mobil smoking with private sector enthusiasm. In one deft stroke, he stopped payment of subsidy to oil marketers and also further marked down the pump price of petrol from N87 per litre to N86. The heavens did not fall. Instead, there was deafening applause across the land. The move was seen as the death of the oil subsidy cabal that had made things difficult for everybody. Public faith in the Buhari’s administration soared.
But that was far from the reality and with the dawn of reality, Kachikwu has been caught on the wrong side. He is frantically searching for saboteurs to blame for the persistent fuel scarcity in the country. He should search no further because he is the enemy. For the records, Kachikwu never created a sustainable template through complete deregulation of the downstream sector. He only deployed short-term treatment to a chronic ailment and hoped, most naively, to earn an enduring cure. He added massive importation of refined products to the portfolio of the NNPC and made the corporation the sole earner of subsidy money. That is, instead of some private importers, government through the NNPC has been paying itself the arising subsidies from fuel importation.
Even so, the NNPC had shared the importation of fuel especially PMS to bridge domestic consumption 50-50 between itself and major marketers but the latter probably did not feel the compulsion to remain in the partnership when it was discovered that nothing was set aside for payment of subsidy in the 2016 budget. The importers have simply abandoned the NNPC to work alone and then chop the subsidy alone. Now it is time to die and the NNPC has been left by the marketers to also die alone.
Enough to say that the unending petrol scarcity underscores the huge challenges the NNPC is having importing the product for the whole country without the major marketers who now prefer the marginal role of receiving products imported by the NNPC in their storage facilities (Tank Farms) for a fee.
Also, Kachikwu had dismantled the subsidy regime on sheer populist impulse without first returning the refineries to production mode to create a buffer in case a thing or two went wrong with importation is given the volatility of the exchange rate. Today, the four refineries are an albatross on the nation. The occasional hype created around their returning to full production is another piece of fraud that is taking the country nowhere.
Even if the refineries are put back to shape, there is still the secondary challenge of restoring the pipeline infrastructure to feed them with crude from the various loading platforms deep in the Niger Delta. This is even a bigger headache in the light of the new criminal culture of pipeline vandalism. For instance, the few occasions the Warri refinery has roared back to life, the crude feeding is done from floating barges in deep seas. I don’t think it is anything different at the two refineries in Port Harcourt. I do not want to mention Kaduna, which is more than a 1000 kilometres away from the source of crude.
At full capacity, the four refineries can only give about 50 per cent of the daily domestic consumption of petrol put at about 40 million litres. Therefore, until new refineries come on stream, there is no answer to importation of fuel for domestic use. The refineries are not even producing anything currently and so the entire local consumption is imported and I dare add, subsidised.
The key words here are supply and price. The Buhari government through Kachikwu does not have the capacity to hold together the two ends. They cannot control price when they cannot ensure supply. Going forward, government through Kachikwu should either revert to subsidy payment and terminate the fallacy that the market is self-regulating at the N86 petrol pump price or deregulate completely to allow the interplay of supply and demand to determine a sustainable equilibrium. It is never too late to retrace from a wrong path that leads nowhere.