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Petrol Alone: Over N925.5 Billionn Drain In One Year As Subsidy

June 28, 2011

Every day that passes in Nigeria produces at least one harrowing revelation of the colossal waste of our desperately- needed resources by corruption-inspired people who imposed themselves on us as leaders. This has nothing to do with the man who currently occupies Aso Rock. No. Rather it has to do with the word government and governance of our collective resources.

Every day that passes in Nigeria produces at least one harrowing revelation of the colossal waste of our desperately- needed resources by corruption-inspired people who imposed themselves on us as leaders. This has nothing to do with the man who currently occupies Aso Rock. No. Rather it has to do with the word government and governance of our collective resources.

As reported recently, the Federal Government spent over N385.64 billion on subsidizing Premium Motor Spirit (PMS) – commonly called petrol in the first five months of this year. Extrapolating, this will come to over N925.5 billion for the 12 months in one year. The question is: how much does it actually cost to build a new refining plant?

Is it not funny that a country that is ranked seventh oil producing and has three and a half refineries with combined installed capacity to process 445, 000 barrels of crude oil per stream day is almost 100 percent dependent on imports to meet its daily fuel needs? Is this ordinary?

Domestically, an average of 30 million litres of petrol is consumed everyday in the country as we were told by the NNPC and about 95 percent or more of this volume comes from outside the country as import.

It is pertinent we understand how the fuel import bill is incurred.

Imported petrol lands Nigeria at a cost of N150.13 kobo per litre. Government through the NNPC sells at N65 per litre. The gap of N85.13 kobo for every litre that arrives the country is bridged by the Government as subsidy.

Let’s we forget, the N385.64 billion import bill incurred in the first five months of the year is for petrol alone. Meanwhile, the country also imports other fuels particularly diesel (Automotive Gas Oil-AGO) and kerosene (Dual Purpose Kerosene- DPK). Diesel is partially deregulated while kerosene is heavily regulated. By the time you factor-in the cumulative bill for all fuel imports, the magnitude of the waste or rather stupidity of a nation will become clearer. This stupidity will even be worse when it realized that the import bill for petrol alone in one year can give this nation two sizable modern technology refining plant.
How long can we continue like this?

The Nigerian Governors Forum (NGF), in a communiqué signed by the Chairman, Governor Rotimi Amaechi, recently demanded an "immediate removal of petroleum subsidy" to enable the states to access the billions that the Federal Government spends annually on subsidy.

Though this call has been misinterpreted in several quarters, the governors’ argument was that the payment of hundreds of billions as subsidy to the petroleum marketers is only favouring a few business people both in and outside the federal government. According to them, it was expected that this money should be channeled to the Petroleum Equalisation Fund (PEF), “but we are not sure that this is the case. So, it is better that the billions used by the Federal Government to subsidise the sector is removed and channeled to refining at home.”

The governors have come under fierce criticism for their demand but the question now is must we perpetually import fuel into this country? The Governors’ demand simply is asking the federal Government to do the right thing by making the existing refineries work optimally and building more functional plants to ensure we stop the importation of fuels. The President should listen to all sides of the argument because we need to remove this reproach of fuel imports as a matter of urgency.

Why can’t our refineries work and new plants built? Over 18 licenses were issued for the building of new refineries across the country, what is happening to the licensees and their sponsors? What is the situation with the Federal Government’s oil-for-infrastructure deals with some Asian entrants and select Nigerian investors?

President Goodluck Jonathan recently tasked the NNPC to whip the three and half “name-plate” refineries to work full capacity within 24 months or be ready to explain to the federal government. This is laughable. Which NNPC was the President referring to- this one we know or another one from space?
The challenge to the NNPC clearly showed that President Jonathan does not know the magnitude of NNPC’s handicap both structural and staff (corruption)-made and he needs to be properly educated on the matter. Such mandate is only an avenue for managers of the corporation and their cronies in government to make more money for themselves.

How do you expect NNPC to resurrect the epileptic refining plants when the state of the facilities were not only deliberately created by the “evil spirits” within the system but daily ensure that nothing good comes out of any of the plant in terms of capacity utilisation and performance?

The Presidency also has been and still remains the biggest impediment to any refinery working efficiently in this country. It has been said severally that until the Presidency 'debottlenecks' itself from the day-day running of the NNPC and its strategic business units, nothing good will ever come out of the corporation. The vicious scenario has been for ‘them’ (agents of or from the Presidency) to steal the money appropriated for the corporation’s operations; turn around to accuse ghost top officials in the NNPC; and shout to the public that Government cannot afford to continue the huge funding of fuel subsidy bills. Is this not self deceit?

NNPC’s recent decision to go back to the drawing board in order to find a lasting solution to the nation's ailing refineries would have been a welcomed development if not that it is coming from this same NNPC we know that has deliberately refused to cast out the “evil spirit of corruption and mismanagement” that has held the corporation down for a very long time.

Re-engaging the original Engineering Procurement and Construction (EPC) contractors to rehabilitate and restore the epileptic refineries to their original design capacities sounded a good idea but the problem of the nation’s apex oil concern has always been that the gulf between good concepts/ideas and their actual implementation is so wide that it always swallows any genuine initiative.

Austine Oniwon , NNPC’s group managing director was quoted as haven said in Abuja that: “We have taken this deliberate decision because all of us here are witnesses to the past four, five, six, turn around maintenances that have been done in our refineries, which returned the plant worse than before the contractors came. So, management took a decision to call the original contractors that built each of these refineries. I am confident that this approach will lead to the desirable result of improving on the refineries' contribution to the national petroleum products’ demand.
Is the NNPC re-engaging the original contractors that built the plants or the owners of the technologies at the plants?

This question is pertinent because at the Warri and Kaduna refineries, at least the ones I know, NNPC did not deal with the owners of the technology of the plants.  Rather the technologies at the two refineries were gotten from a mere vendor- Snam who also built or more aptly participated in the building of the two plants.

The problems at the refineries are more of technology issues than mere construction. For example, the major problem at the Kaduna refinery and some parts of the Warri plant were created by outright design defaults. This has been the problem hindering the smooth and sustainable running of the plants particularly Kaduna. And until that is corrected or at least measures taken to ameliorate the effects, no amount of turn-around will ever make that plant work beyond certain level of capacity utilisation. The NNPC people are fully aware of this assertion except they don’t know what they doing at the plant.

At best what the President and the NNPC have proposed are palliative measures. We need a permanent solution to this problem and that is only going to come by constructing new refineries in the country. It’s not too big or difficult for new plants to be constructed especially by private investors with full backing of the federal government. Is this going to be done? We are waiting.


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