After revoking the sale of the country’s public refineries to private investors in 2007, the federal government is again contemplating their privatisation in 2014
| By Anayo Ezugwu | Dec. 9, 2013 @ 01:00 GMT
THE federal government has begun the process of privatising the four existing public refineries in the country by the first quarter of 2014. Diezani Alison-Madueke, minister of petroleum resources, made this announcement recently in an interview with Bloomberg TV Africa in London. She said that the federal government plans to begin the privatisation of four of its state-owned oil refineries before the end of the first quarter of next year.
“We would like to see major infrastructure entities, such as refineries, moving out of government hands into the private sector. Government does not want to be in the business of running major infrastructure entities and we haven’t done a very good job at it over the years,” she said. The refineries that would be privatised are Warri refinery with 124,000 barrels per day capacity, old Port Harcourt refinery, with 60,000 barrels per day capacity, new Port Harcourt refinery with 150,000 barrels per day capacity and Kaduna refinery with 10,000 barrels per day capacity.
The Bureau of Public Enterprises, BPE, has confirmed the decision of the government. Chigbo Anichebe, head, public communication, BPE, said the agency would privatise the four refineries in the country next year. He said that the refineries’ privatisation was part of the ongoing oil sector reforms. Anichebe, said, however, that the privatisation plans were currently at the preliminary stage, where the blueprint of the policy would be decided.
“We are working with the Nigerian National Petroleum Corporation, NNPC and the ministry of petroleum resources on the privatisation of the four refineries. We are just in the preliminary discussion with them and very soon, we will make public the work plan for the privatisation processes, including the engagement of experts to advise us on the transaction. Once the work plan is fine-tuned, hopefully by the end of the year or early January next year, the work plan as well as the schedule will be unveiled to all stakeholders, including the media,” he said.
According to Anichebe, the privatisation would be handled in line with the usual strategy of the bureau, which was to sell a certain percentage of the shares and reserve a certain percentage for the workers, the host communities and Nigerians. He urged Nigerians not to be apprehensive about the refineries’ sale because only capable and visionary investors would be considered in the privatisation process.
“People should not be edgy about this transaction because we have done this over and over again. When we first started with the telecommunications sector, people were worried that we will give it to the wrong people. They were worried about the security implications and all that. I believe that whether these companies end up with local, home-based or foreign investors, what is important is the efficiency of whoever is handling it. The criteria should be that the buyers have the financial muscle and technical know-how to run the companies. We don’t bother about where they come from, as long as they are coming with clean money to invest in our economy. So, when we are doing our evaluation of investors for the transaction, that is what we will look at.”
The Central Bank of Nigeria, CBN, on November 22, also confirmed plans by the federal government to privatise its four refineries next year,. According to the bank, the plan is in line with the government’s drive to transform the nation’s economy rapidly in the next five years. Kingsley Moghalu, deputy governor, financial systems stability, CBN, said the economy would receive a massive boost when the transformation in power, agriculture and oil and gas sectors would have been completed. He made the assertion at a meeting with heads of Deposit Money Banks organised by the ministry of agriculture in Abuja.
“The economic transformation of this country is gradually becoming a reality. I have said that I see a very different Nigeria in five years with the way we are going and with the transformations that are taking place in several aspects of the economy. Agriculture is one; power sector is another; and the move to get private investors to take over the refineries makes me believe that we are going to reposition Nigeria’s economy to be one that is actually based on real production,” he said.
The National Refineries Special Task Force, NRSTF, set up by the President Jonathan in March 2012, also recommended the privatisation of the refineries. The Task Force headed by Kalu Idika Kalu, former minister of finance, recommended that for the country to achieve self-sufficiency in petroleum products in the shortest time possible, the refineries must be privatised.
The Task Force recommended urgent and far-reaching measures to turn the situation around. At the top of the list was a recommendation that the government should privatise the traditional refineries, divesting at least 51 percent of its interest in them. It further recommended that a programme should be put in place to achieve the divestment within 18 months. The committee, however, warned that adequate measures to alleviate the effects of full deregulation should be put in place beforehand. The process, the committee recommended, should also take into account the transfer of skills and technology as well as local content compliance.
Already, mixed reactions have greeted the proposed privatisation. The Independent Petroleum Marketers Association of Nigeria, IPMAN, has urged the federal government to repair the refineries before privatisation. Sule Magaji, chairman, IPMAN, said the federal government should repair the refineries before selling them off. “We in IPMAN are against the plan to sell the refineries but if the federal government will not rescind the decision, the refineries should be made fully functional before being sold. The government should also take concrete measures to further secure all oil pipelines across the country,” Magaji said.
According to him, repairing the refineries and securing the pipelines would motivate potential buyers and other investors to be part of the planned sale. He also expressed his fear that the sale of the refineries would lead to total removal of subsidy on some petroleum products. The Nigeria Union of Petroleum and Natural Gas Workers, NUPENG, has also cautioned the federal government over the proposed sale to private investors. Isaac Aberare, general-secretary, NUPENG, said stakeholders in the country must be involved, if the plan would see the light of the day.
According to him, “the sale of the refineries is not the solution to the massive importation of petroleum products into the country as the problem is government’s inability to carry out the Turn-Around-Maintenance, TAM, of these refineries over the years to make them function optimally.” He blamed the rot in the refineries on intrigues, power play, selfish interest and inordinate desire to protect the cabal importing fuel. Aberare explained that the refineries are key institutions of the nation’s economy, which should remain in government’s control, for security and strategic reasons. He insisted that they should not be allowed to be sold to government cronies as was experienced in the power sector.
“We warn that the proposed plan should be done with uttermost care, because the Union will not fold its hands to allow its members to be thrown into the unemployment market that is already saturated. The NUPENG and the Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, must be involved in wide consultations on issues like this before going on air to pronounce their sales, in order to avoid industrial disharmony. The Union wants the government to focus on how to curb oil theft from the pipelines and consider our proposal for the creation of a Pipelines Protection Agency that will be fully saddled with the protection of the nation’s more than 3,570 trunk lines crisis-crossing the landscape. The NUPENG also calls for the speedy passage of the Petroleum Industry Bill, PIB, that is before the National Assembly to address these challenges facing the oil and gas sector to bring about transparency and accountability and stop chasing the shadows,” he said.
This move would be the second time the federal government would unfold plans to privatise the refineries. President Olusegun Obasanjo had approved the sale of the refineries in the twilight of his administration but his successor, the late President Umaru Yar’Adua, in 2007 reversed the sale for lack of transparency in the transaction. But President Goodluck Jonathan in November 2012 recommended that the refineries be sold due to inadequate financing and sub-optimal performance.
It is uncertain, however, if the federal government would take into consideration the right of first refusal which was granted business moguls, Aliko Dangote and Femi Otedola, who bought the Port Harcourt refinery in 2007, but was reversed by the late Yar’Adua. Should the government consider this in the transaction, new prospective bidders would have to contend with both of them.