Nigeria’s petroleum refining losses have continued to increase amid a failing ability to locally refine crude oil. Experts have attributed this to weak fiscal governance and minimal disclosure from regulators of Nigeria’s oil and gas sector.
In spite of promises by successive governments to improve the performance of the refineries and commit significant resources to their rehabilitation, the four refineries continue to operate below a combined 20 percent capacity utilisation, data from the Nigerian National Petroleum Corporation’s 2019 monthly bulletin show. The refineries have also recorded consecutive losses in 2018 and 2019.
In the 11 months ending November 2018, the Kaduna Refining and Petrochemical Company made a loss of N31.62 billion, Port Harcourt recorded a N44.2 billion loss, while Warri refinery lost N38.5 billion.
These losses followed a similar pattern in 2019, according to the latest data obtained from the NNPC, which showed that the Warri Refining and Petroleum Company (WRPC), the Kaduna Refining and Petrochemical Company (KRPC) and the Port Harcourt Refining Company (PHRC) ran deficits for 13 straight months.
“To address concerns of the sector, the NNPC must be made to run as a corporate entity. It must run like a corporation independent of undue interference,” Henry Adigun Ademola, oil sector governance expert, told BusinessDay.
“There must be full disclosure on the activities of the corporation in terms of crude importation, what was imported, among others, to enable Nigerians who are the rightful owners of the corporation to track investments in the sector,” Ademola said.
In the draft National Oil Policy submitted to the Federal Executive Council (FEC) on November 2016, the Federal Government had planned to list the NNPC on the NSE after concluding reforms in the country’s petroleum sector.
Three years after, the plan is still far from reality as the state-owned oil company struggles with rot, lost investment opportunities, corruption, and controversies.
And there are wider concerns on whether the government can find investors for the sector, which is the mainstay of Nigeria’s economy, if the fiscal governance structure is not attractive.
Ode Ojowu, professor of economics and former head of National Planning Commission, said the NNPC is an enigma of some kind and people have questioned the correctness of the figures the corporation prints as revenue to the Federation Account.
“But if you say you want to list the NNPC, is it the upstream or downstream segment?” Ojowu asked. “Understand that the four refineries we have were registered as independent companies and they still report to the NNPC. The NNPC needs to be unbundled first. The refineries need to be put in a competition mode.”
The Petroleum Industry Governance Bill (PIGB), which sought to resolve some of these thorny issues, is yet to be assented to by President Muhammadu Buhari, regardless of the fact that the National Assembly has addressed the concerns raised by the Presidency for not assenting to the bill in 2018 and resent it in April 2019.
As of August, September and October, the refineries maintained an operating deficit of N10.7 billion, N6.9 billion and N9.3 billion, respectively. It grew worse in November and December 2018 and January 2019, recording N9.5 billion, N17.3 billion and N8.3 billion, respectively.
The operating deficits of the refineries have left stakeholders querying the rationale behind the decision of the state oil corporation to commence first phase of rehabilitation works on 210,000 barrels per day (bpd) Port Harcourt Refinery which would be followed by Warri and Kaduna refineries in line with government’s effort to attain local sufficiency in refined petroleum products.
Mele Kyari, group managing director (GMD) of NNPC, had a few weeks ago pledged to work with relevant transparent agencies to ensure the sector maintains ‘full disclosure’ of its operations while maintaining open government partnership.
Kyari gave 2023 as a target to ensure that Nigeria’s four refineries are appropriately fixed to ensure the harvest of maximum benefits from them, as he further pledged to run the corporation in such a manner as to compete with its peers such as Saudi Aramco, among others.
STEPHEN ONYEKWELU, Lagos, & HARRISON EDEH, Abuja
