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Dr. Kachikwu's Blunders By Moses E. Ochonu

March 28, 2016

Whatever he is doing is not working. In fact it is clearly making things worse. Insulting Nigerians with glib comments about not being a magician only compounds his predicament. Even more painful is his failure to explain why the current fuel shortages will persist for another two months. What is causing the shortage? He will not say. How will that causative factor be overcome in two months? He will not say either. So, the sleek deception continues and is now bookended by arrogance.

We can disregard the latest patriotic posturing of Asiwaji Bola Tinubu, who is berating the Minister of State for Petroleum, Dr. Ibe Kachikwu, for saying he is no magician and that Nigerians ought to appreciate his efforts, a statement that is rightly being construed as insensitive at best and insultingly arrogant at worst.


Tinubu is kicking a man when he is down, a typical tactic of opportunistic politicians with an axe to grind. But it was not Tinubu who created the conditions that have now made him seem like the voice of empathy and sanity as Nigerians groan under the pain of electricity and fuel scarcity.

The person who has enabled Tinubu’s new, audacious claim to the patriotic high ground is Dr. Kachikwu. He deserves whatever opprobrium is heaped on him, and is responsible for Tinubu assaulting us with his hypocritical pronouncements. Kachikwu is a victim of his own knack for rhetorical flourish and contradictory pronouncements that often put him in a bind. When cornered by the collision of his own words and promises with reality, when he is called out on his numerous failed promises and self-imposed deadlines, he lashes out in frustration, expecting sympathy.

It is a self-created problem and Bola Tinubu is simply exploiting it to burnish his credential as the face of empathy and compassion in an administration that increasingly seems disconnected from the quotidian suffering and privations of Nigerians.

Kachikwu has no one but himself to blame. The man thrives on deception and propaganda. There is a limit to both, and it's a matter of time before reality intrudes and forces you to do a mea culpa--directly or indirectly, voluntarily or involuntarily. He said the NNPC was back in black thanks to reforms he was carrying out. But only cosmetic, ineffectual changes had occurred at the NNPC and the fundamentals of collapsed refining capacity and other systemic problems remained unchanged.

Later, the NNPC's own monthly report (I give him credit for releasing the monthly report as he promised) put a lie to that assertion, showing clearly that the oil giant was stilling losing billions each month. The new spin is that at least the loss is no longer as big as it was.

Then Kachikwu said the refineries were back in shape and were producing at 70 percent capacity. Many pro-government propagandists gleefully shared this news as evidence that change had come to the petroleum sector. Later it emerged, and the minister himself admitted, that the refineries were either not producing at all or they were producing near the 20 percent mark.

Early in his tenure, Kachikwu insinuated that once the refineries were refurbished and put to work, they would more than meet Nigeria's fuel consumption and that Nigeria would even begin exporting refined petroleum products. But just a few days ago, he said the refineries were obsolete and would never be able, even with a full turnaround refurbishment, to produce at their optimum levels.

Even more shockingly, he now says that even if the refineries started working at full capacity, which he says is virtually impossible, they would only be able to produce 50 percent of Nigeria's fuel demand. He is basically saying that importation is inevitable in the absence of new private domestic refineries, meaning that we will be at the mercy of the importers for a long time to come, or at least until Dangote's refinery project starts producing and hopefully makes importation unnecessary.

And yet, Kachikwu continues to boast about no longer paying subsidies to importers. With oil prices creeping up a bit and with fluctuating variables governing the business of importing fuel and thus raising the business overhead (or landing costs) of the importers, what's the incentive for them to keep importing when the NNPC insists they must sell at N86 per liter? These are fundamental contradictions that have to be resolved as long as domestic refining remains comatose and importation is our only source of fuel. Everyone wants cheap fuel but no one wants to pay for it. Without adequate domestic refining coming to the recue, we seem to be at an impasse.

The problem, as I see it, is that Dr. Kachikwu and his principal desired the political capital and propaganda dividends of technically ending the payment of subsidies to fuel importers without preparing themselves and planning for its fallouts, which were inevitable given the volatility of crude prices and the instability in the fuel supply chain. Left unsolved was a fundamental problem that required a backup plan, a contingency arrangement, if you will. As I discussed in a previous piece, it does not seem like Kachikwu had thought about two variables. One is that, barring the four refineries returning to full production and a supplementary cast of private refineries complementing this production, fuel importation and all its familiar burdens on state revenue will persist.

The second variable is that as long as we depend on importation, if the price of crude ticks up or the cost associated with importation goes up, the pump price of fuel has to be adjusted upwards or a subsidy has to be paid to the importer, whoever that may be, to cover the difference. Otherwise, what would be the reason for importers who are in business to make a profit to continue to import fuel? I don’t know what Kachikwu was thinking.

My theory is that President Buhari, an economic populist, liked the political and fiscal sound of “end of subsidy.” It was the popular thing to do, as the subsidy regime had become a cesspool of illicit and corrupt payments. But you do not cut your nose to spite your face. And public policy is not about impulse surrender to populism. Rather, it is about thoughtful, realistic problem-solving that is preceded by forethought, debate, and the weighing of all angles and scenarios. The question of what would happen if crude prices go up and/or landing costs rise does not seem to have been given any consideration. Now, that question seems to have returned to haunt Kachikwu. He cannot now raise the pump price without being accused of having used deceptive gimmick to hold prices down at 86 Naira per liter at a time when local refining lagged far behind domestic demand and we do not yet have an alternative to importation.

Last month, Dr. Kachikwu announced triumphantly that the NNPC would now import fuel directly from overseas refineries and that a deal to that effect had been worked out. Perhaps that is the government’s backup plan to avoid the fuel importation cabal altogether and maintain its “no subsidy” policy. But two questions arise from this policy recalcitrance, if that is indeed what is going on. If the NNPC, given its record of inefficiency and corruption, proves incapable of importing refined petroleum products more cheaply than the importers, then what?

Secondly, if the NNPC, as seems to be the case, cannot import fuel efficiently, does not have the experience and logistical capability to do so, or does so more expensively than the importers, would that not simply increase NNPC’s losses and amount to a kind of subsidy payment through the backdoor? NNPC’s losses are the government’s losses and will have exactly the same impact as the payment of subsidies to private fuel importers, although the narrative may be different, as Nigerians would perceive that differently. That may be the gamble of Dr. Kachikwu; to transform the subsidy payments into losses for the NNPC and hope that Nigerians do not notice as he and his principal maintain the façade and illusion of not paying subsidy.

As I said in a previous intervention, anything short of Dangote’s refinery project beginning full operation will not save this government’s blushes. That is about two years away, however. In the meantime, unless the announced NNPC importation deal pans out, the government has to eat crow and humbly work out a deal with the fuel importers to incentivize them to continue to import fuel until Dangote’s production and hopefully our revamped refineries save the day.

At least Kachikwu is now coming clean, walking back all the big boasts and empty assertions he made in the first few months of his tenure. This is a classic case of over-promising and under-delivering. In some respects, I compare him to Charles Soludo, the garrulous former CBN governor. Both of them like to hide behind polished grammar and industry jargons to confuse and deceive Nigerians.

The case of Dr. Kachikwu is particularly pathetic because in nine months of superintending the oil industry, local refining has remained where it was before he took over and fuel shortages have persisted, even worsened.

Whatever he is doing is not working. In fact it is clearly making things worse. Insulting Nigerians with glib comments about not being a magician only compounds his predicament. Even more painful is his failure to explain why the current fuel shortages will persist for another two months. What is causing the shortage? He will not say. How will that causative factor be overcome in two months? He will not say either. So, the sleek deception continues and is now bookended by arrogance.

At the beginning of his tenure as GMD of NNPC, the minister was either being clever or naive. Either way, he created the impression that he is capable of "magically" solving the problems of the oil sector within a very short time. That's on him, not on Nigerians. In Nigeria, it is better to under-promise and over-deliver than to over-promise and under-deliver. Hopefully he has learnt a lesson from his folly.

The author can be reached at [email protected]

Oil Politics