Just about seven months to end of his tenure, Minister of State for Petroleum Resources Ibe Kachikwu is still talking about getting the country’s refineries working again. At the ground breaking ceremony of a 5,000 barrels per day modular refinery in Imo State on October 3, Kachikwu was quoted as promising that the government is committed to making the country’s refineries functional again by the end of 2019.
He has been making the same promise since he was first appointed Group Managing Director of the Nigeria National Petroleum Corporation (NNPC) in August 2015 and later as Minister of State for Petroleum in July 2016. Few weeks after his appointment as NNPC GMD in 2015, Kachikwu, during an on-site inspection visit to Kaduna refinery on September 10, 2015 promised that the country’s four refineries would be fully functional within ‘90 days.’ It is already more than 1,095 days after the 90-day promise, and instead of ‘fully functional refineries,’ we are getting another promise of 365 days to get the refineries functional again.
The NNPC just recently released its May 2018 monthly performance report which puts the combined capacity untilisation of the country’s four refineries at 20.12 percent, up from a combined average capacity utilisation of seven percent in the previous month of April. In the 12 months to May 2018, the highest capacity utilisation recorded by the four refineries is 26.99 percent, which was achieved in December 2017 while the lowest capacity utilisation was achieved a month before at 5.81 percent. In the last three years that Kachikwu has been at the helms of the oil ministry reporting directly to the President Muhammadu Buhari, who is the Minister of Petroleum, the refineries have continued to overwhelmingly under perform.
The refineries are not only underperforming but they are also making losses. In May 2018, the combined ‘operating loss’ of the four refineries stood at N20 billion. In the month before, it was a marginal operating surplus of about N928 million but before then, the refineries had incurred nine consecutive months of operating losses amounting to N90 billion. It does not take a legal degree to know that the country’s refineries are bleeding and costing billions to keep them running. If the refineries were private businesses, they would most likely have filed for bankruptcy by now or would have been forced to close down by their creditors.
In more than 1000 days, Kachikwu and his immediate boss, President Buhari combined have definitely not been able to find a solution to make the country’s refineries functional. It is difficult to see how they will find that formula in less than 210 days to the end of their tenure. The truth, which Kachikwu knows but which he and President Buhari have refused to admit, is that there is no magic wand to make the country’s refineries work, especially as long as they remain under the management of the government. The refineries have not worked for more than two decades and they would not, if given another two decades.
And that is because, the challenge is not necessary with the refineries, the challenge is with the management of the refineries, in this case the Nigerian government. As long as the government is in charge of the refineries, they will remain comatose and bleeding pipes on the country’s increasingly lean treasury.
It is quite ironic and sad that while the government is currently borrowing to repay interest on the debts that it is piling up, and while we struggle to release funds to build roads and bridges, fund education and healthcare, the government stands by and watches the refineries bleed it of more than N110 billion in 10 months.
This is enough money that could have been used to complete the Lagos-Ibadan expressway, or fund basic education to take away from the streets some of the 13.2 million children that are now said to be out of school, and roaming the streets. For the comfort of a few refinery staff, millions in the country are suffering.
Kachikwu had in May 2017 promised to resign in 2019 if the country does not stop importing petroleum products by that date. It is already 10 months into 2018 and there is no sign that the country will stop importing petrol by 2019. Instead of declining imports, what we have actually seen is a spike in imports of petroleum products. In the first five months of 2018, NNPC imported 8.24 billion litres of petrol. This figure is almost equivalent to the total petrol imports of 8.81 billion litres in the 12 months of 2015 imported by the NNPC. The NNPC is doing more importation of petrol products three years on than they did before Kachikwu was appointed.
Meanwhile, total productions from the country’s refineries have not changed significantly in the last three years. The four refineries produced 476 million litres of petrol in the first five months of 2018. Even though this is 23 percent more than the 384 million litres of petrol produced by the same refineries in the first five months of 2015, as a proportion of total imports, it is negligible.
This is not surprising because the combined capacity utilisation of the four refineries have not changed much from the position they were in 2015 even though, production has been a bit more consistent over the period.
Perhaps, Kachikwu should prepare that resignation letter now. Definitely, petrol imports is not going to stop in 2019. There is nothing on ground to make that happen. I am aware of the Dangote refinery but that is not a government initiative and besides it is located in a free trade zone which makes products coming from there into the country imports ‘technically.’
Kachikwu knows the long term solution to the refineries is to sell them. I sympathise with him knowing very well that if the decision were his to be made, the refineries would perhaps have been handed over to the private sector by now. But he is working with President Buhari, who obviously believes in state control of such assets even when they are more of a liability than an asset. However, it is the job of Kachikwu to convince the president of the non-workability of the refineries rather than keep making promises, which in his quiet time, when alone, he knows will never come true.
Anthony Osae Brown