The cacophony of voices in the downstream sector of the oil industry over the sustainability of the pump price of petrol at N145 per litre is a clear indication that the invisible hand of the market forces of demand and supply has lost control of Nigeria’s fuel price mechanism. Nigeria National Petroleum Corporation (NNPC) picks the bills for that loss of control. No one knows how long the government oil behemoth can continue to fund the unbudgeted subsidy before the delicate balance of supply and demand for the products snaps.
The permanent solution to the problem is self-sufficiency in refined petroleum products. Ironically, no one in the federal government knows why Nigeria cannot refine its crude oil and derive the enormous benefit from its value chain.
The tension in the Niger Delta would ease when Nigeria is able to refine the petroleum products it consumes. The jobless youth used by the militant leaders to cause havoc would be gainfully employed and would not want to risk their lives for a venture that enriches just a handful of people.
The Nigerian Navy is waging a losing war against local refinery operators in the Niger Delta.
In the last three years, the navy has destroyed hundreds of improvised refineries used in Niger Delta to refine crude oil into diesel. The crude refineries produce thousands of litres of diesel that manages to reduce the cost of importing the product. Each time the navy destroys 10, they return to meet 20 in place.
The war against local refinery operators is reminiscent of the war against local gin brewers waged by British colonial masters in the 1940s and 50s. The local gin was spoiling the market for Scotch Whiskey and Dry gin. The colonial masters declared them illegal and herded their brewers into jail. One man in my village was jailed for two months for brewing the local gin. When he came out of prison he switched to the upstream segment of the gin business and became a palm wine tapper. Gin was brewed from palm wine and palm wine did not contest the market with imported British gin, so the colonial masters pretended not to notice the booming business. The case of the local refinery operators is quite different from that of the local gin brewers banned by the British Colonial masters. The British were protecting the selfish interest of industries located thousands of miles from Nigerian shores. They regarded the local gin brewers as saboteurs and declared their business illegal. On the contrary, the operators of the illegal refineries in the Niger Delta can contribute to job creation and also reduce Nigeria’s wasteful dependence on imported refined petroleum products. They are entering a huge dormant market which government refineries cannot supply. The market can accommodate everyone.
The crime of the illegal refinery operators is that they steal crude oil to refine. The illegal aspect of the business can be legalized to make the industry contribute its quota to the development of the economy. Today, Nigeria is not protecting anybody’s interest by demolishing the crude refineries in Niger Delta. It is rather worsening a calamitous unemployment situation in a region it has cheated for decades. If the first two letters in the “illegal refineries” business are deleted, it automatically becomes legal business with significant contribution to the economy. They could well become our own modular refineries. The solution to the problem is to sell crude oil to the operators of the illegal refineries at subsidized rate that would empower them to create jobs and raise Nigeria’s refining capacity.
The Department of Petroleum Resources (DPR) should register the local refinery operators, set a standard for them and ensure strict compliance with the standard. Any operator who is not licensed for the supply of crude oil by government should be driven out of the business. In this case, registration for the supply of crude oil by government would draw the line between illegal and legal refinery operators.
Besides, government must work out a system that would end the management of the four refineries by civil servants. It has been argued that governments in other African and Latin American countries own and operate refineries. Nigeria can therefore not be an exception.
The government of Venezuela owns and runs one of the world’s largest refineries. Niger Republic also owns. But Nigeria has failed over the last 30 years to run its refineries efficiently. It is only Donald Trump, America’s racist president-elect that knows how to do things the same way and get different results.
He persistently insulted American women during the campaigns and the polls showed he was losing. On November, 8 the women voted out one of their own and handed the bigot a triumphant ride into the White House. Nigeria is not that lucky. Public management of the refineries in the last 30 years has been a colossal failure. Management style must change.
Government should sell 51 per cent of its holdings in the refineries to private investors who would manage them without interference. The shareholding structure and management of the Nigerian Liquefied Natural Gas (NLNG) should be adopted to breathe life into the refineries.
