He explained that the facilities consumed crude oil worth more than the value of the refined products they produced.
Festus Osifo, the President of the Trade Union Congress (TUC), has said Nigeria’s refineries were shut because they were operating at a loss.
He explained that the facilities consumed crude oil worth more than the value of the refined products they produced.
“When you feed crude that costs 10 million dollars into the refinery and end up with products worth about 9.5 million dollars, it means you are running at a loss. That was exactly what happened, not that the refineries were not working,” he said.
Osifo, who featured on Channels Television’s Politics Today on Tuesday, also pointed to material balance problems as another reason for the shutdown.
He disclosed that during a visit to the Group Chief Executive Officer of NNPC Limited, the union was told the shutdown was due to “material balance”.
“The material you feed into the refinery and what you are getting out was reduced in terms of value. So that was why they shut it down to restructure the strategy,” Osifo said.
Rejecting claims that the refineries never worked, Osifo insisted they were functional but inefficient.
“I’m an engineer of over 20 years standing, and I understand how mechanics work. So I know a system that is working, and I know a system that doesn’t work. I listened to a programme that said the refinery never worked. It’s not correct, the refinery worked,” he said.
He explained the difference as follows: “There is a difference between a piece of equipment working and a piece of equipment working efficiently. In engineering, these are two different things,” he added.
Osifo also blamed government’s short-sighted approach to technology. “When those refineries were working 15 to 20 years ago, the old refinery was feeding products into the new one.
The new refinery would then refine, for example, PMS, to the right specification. But the government wanted a quick fix by separating both units, which created a material balance challenge,” he said.
He called for structural reforms and urged government to hand majority control to private investors.
“What we have advised, and what we have advocated for in the last 20 years, is that the government should give private investors a 51 per cent stake in the refineries. Once they become the largest shareholders, they will be able to run them efficiently,” he said.
Nigeria’s four state-owned refineries in Port Harcourt, Warri and Kaduna have long suffered from poor maintenance, inefficiency and pipeline vandalism.
Though Port Harcourt and Warri recently restarted after rehabilitation, they are running at partial capacity, overshadowed by the Dangote Refinery’s expansion in Lagos.