Deregulation: What Government Must Do To Revive Moribund Refineries—-Stakeholders

As the Federal Government deregulate the oil sector and plans to offer majority stakes of its four Refineries to private investors, oil sector experts have stressed on the need for the government to create the enabling environment for their smooth operation.

The Group Managing Director, Nigerian National Petroleum Corporation, Mele Kyari, had explained that efforts are ongoing to implement an operating model which allows the government-owned NNPC to be a minority shareholder in the refineries as the Government does not have the resources to fund 100 per cent of the Refineries.

“All the four Refineries are shutdown as delivering of crude oil to the refineries is challenged because the pipeline network have been compromised by vandals.

“Government does not have the resources to fund 100 per cent of the Refineries. We are resorting to private capital, this will free NNPC from direct responsibility of running the Refineries, support the processes and we will have a more efficient way of running it.”

THE WHISTLER findings showed that the four Refineries which include the Port Harcourt Refining Company (made up of two refineries), Kaduna Refining and Petrochemical Company Limited and Warri Refining and Petrochemical Company Limited have a combined installed capacity of 420,000 bpd but could not produce up 60 per cent.

The Vice President of Independent Petroleum Marketers Association,
Abubakar Maigeandi, in an exclusive interview with THE WHISTLER said that handing over the Refineries to the private sector is best way to go.

But he cautioned that there is need for the government to create the enabling environment for their operation.

He said that the creation of an enabling environment and competitive market will lead to efficiency in the running of the Refineries.

He said, “On this issue of effective running of the Refineries, I think the private sector will do better. But the government will have to create the enabling environment and ensure full deregulation.

“If we look at the case of privatising the power sector, it did not yield the desired result because the government is still running the sector one way or the other.

“If privatisation must succeed, there must be complete deregulation of the sector.”

Speaking further, Maigeandi stressed on the need to promote a competitive market in the sector to curb cases of monopoly.

Also speaking with THE WHISTLER, a former Director-General, Abuja Chamber of Commerce and Industry, Dr Chijioke Ekechukwu, said that privatisation would lead to more efficient running of the Refineries.

He, however, charged the government to ensure effective monitoring of the projects afterwards to function optimally.

He said, “Privatising the refineries is a great step to ensuring efficiency, but it is unfortunate that we do not follow up on issues like this.

“After concessioning we need to monitor them to ensure they operate at optimal levels.

“Most times, institutions do better when they are being run by government. Institutions like NICON Insurance, NEPA, among others were better managed as government institutions.

“Theoretically, it should have been better to privatize but with the way it is done in Nigeria, it creates a cause for concern.

“Once it is privatized, it will run efficiently, but the government should not take its eyes away from monitoring.”

An Abuja based Economist, Aliu Hassan, said that privatisation remains the best decision to reposition the Refineries.

He stated that while successive governments had spent huge funds to fix the Refineries in the past, the current administration should devise strategies to check sabotage.

“There is need to explore other options for a possible solution. The Federal Government should consider bringing in private investors to run these refineries.

“The role of government should be that of regulation and monitoring. The government should retain a percentage for control while the private investors would operate it.”

He explained that the government must take a firm stand on the Refineries and have them privatised to ensure effectiveness and profitability.

“This is a country known to be the largest producer and exporter of crude oil in Africa, ironically it is the largest importer of refined products.

“This has to stop, let us privatize the refineries and ensure the right environment for it to succeed,” he concluded.