Government lacks strategy to address challenges facing refineries – Ekpo
Executive Chairman of the Foundation for Economic Research and Training (FERT) Lagos State, and former Director General of the West African Institute for Financial and Economic Management (WAIFEM), Prof Akpan Ekpo in this chat with KINGSLEY JEREMIAH, discussed issues of dilapidated refineries and the proposed Turn Around Maintenance (TAM).
What do you make of the present state of the nation’s refineries, especially against the backdrop of the heavy spending on Turn Around Maintenance?
The state of the refineries is very worrisome, particularly for a country that exports crude oil and imports refined products. The Turn Around Maintenance (TAM) has been going on for years, yet there are no positive results. One then begins to wonder whether the much talked about TAM actually took place, or it was used as a pipe for siphoning money from government’s treasury. That the refineries are producing and/or performing grossly below installed capacity is an indictment on every past and present government in the country, as well as past and present managements of the NNPC. I hope the experts are aware of the new technology in this area. In the 1980s, the refineries were doing well, and we were even exporting refined products. So what happened?
The current state of the refineries to say the least, is embarrassing because they have not worked to near capacity for several years, and millions of dollars have been spent allegedly on repairs and TAM, yet the country still imports most of her refined petroleum products.
Practically, every new group managing director of the NNPC, and ministers of petroleum resources have promised to overhaul the refineries upon assumption of office, but instead, the situation is worsening. With the latest promise, are you convinced that the assets will fully come on stream?
Only time will tell. But I don’t see anything different from the promises we have had. It is one thing to promise, and another to have concrete strategies to bring the plans to reality. I may be wrong, but I have not seen any plan by the NNPC that will overhaul the refineries.
What are the implications of the poor state of the facility?
The state of the refineries has implications for the economy. First, the country would continue to import refined products thus losing foreign exchange. The backward and forward linkages with other sectors of the economy would be affected thus resulting in job losses. For now, it is difficult to determine the linkage of the sector to agriculture and pharmaceutical industries, among others.
There are implications on efforts to diversify the economy. The revenue earned from the sector should aid the development of other sectors of the economy; with a comatose oil sector and refineries that are not performing, its contribution to the diversification process becomes a huge challenge. Other countries that have developed do not have oil, we do, but cannot use it effectively. I hope stakeholders in the sector are aware that oil would soon become a thing of the past based on new developments in the energy sector.
Of course, one is also concerned about the huge losses incurred through the TAM. This is foreign exchange that the economy would have saved up for other pressing needs. The reduced revenue partly explains the lack of resources to finance education, quality healthcare and the provision of basic amenities to millions of Nigerians. As a result, poverty in the country has increased.Those benefiting are the elite in the oil business; they prefer to import with government subsidy than to allow the refineries to work in the interest of the economy. It is state capture by those in the oil business.
The Ninth National Assembly is just taking off. How can that arm of government help in addressing issues surrounding the refineries?
The Ninth National Assembly has an oversight function. It is high time it acted wisely on salient national issues through its committees. There is also need for the entire chamber to take a look at the waste occasioned by the TAM. There is need for a comprehensive review of money spent on TAM and the outcomes. There should be sanctions for those found wanting in the process.
How can we get out of this quagmire?
It is necessary to commercialise the refineries, but not to privatise them. However, if they must be privatised then the process must be transparent and undertaken through public offer with a caveat as to how many shares an individual can buy. Let me note that the country has experience with privatised government companies; none if any ever became viable after privatisation.
We need a bold attempt and commitment to halt the waste and ensure that the refineries continue to work thus saving the economy the much-needed foreign exchange. It is a tall order because there are those benefiting from the TAM syndrome.We need to commercialise the refineries and demystify the oil sector. We should not forget that oil is a wasting asset hence it is non-renewable. Moreover alternative energy sources are being developed every day.
Nigeria has in recent years reportedly spent over N11t on payment of petrol subsidy. With a budget of over N300b for subsidy this year, what is your take on subsidy payment?
We need to carefully review subsidy and determine who the beneficiaries are. We can do a gradual removal if it is not benefitting the intended citizens. We need to know those who really need subsidy and target them. Subsidy itself is not bad; it exists on the demand and supply side. We could rather support those in refinery business, who do not have enough money. They have to pay back anyway. On the demand side, the amount of petroleum product that we consume in my view is exaggerated. We need to also be sure that what we are calling subsidy is not corruption. We need to determine the right price and level of petrol Nigeria consumes before we talk about subsidy.
However, if we need to remove subsidy, we have to be careful because when you remove subsidy prices of goods and services will go up. Our economy is petroleum-based. When prices go up it does not go down easily. We need to be very careful how we go about it.