TheCable

The call for the sale of Nigeria’s refineries has received support from economic and oil experts, who believe the plants will perform better under the management of the private sector.

On Tuesday, Taiwo Oyedele, the chairman of the presidential committee on fiscal policy and tax reforms, urged Nigerians to demand that the refineries be sold.

Oyedele said N10 trillion has been spent to maintain the refineries even though they are still moribund.

In 2021, the Nigerian National Petroleum Company (NNPC) Limited employed the services of Maire Tecnimont SpA, an Italian company, to rehabilitate two refineries in Port Harcourt at the cost of $1 billion, with a view to beginning production at full capacity by 2025.

Also, Daewoo Engineering & Construction Company, a South Korean firm, was contracted to revamp the Kaduna refinery and restore 60 percent capacity by the end of 2024 — the deal was valued at $741 million, according to Bloomberg.

‘REFINERIES WILL PERFORM BETTER UNDER PRIVATE-SECTOR MANAGERS’

Speaking on the subject, Muda Yusuf, the founder and chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said timing is key in taking such a decision.

Yusuf said it is better for the government to continue with the revamp since it has already invested heavily in rehabilitation.

Still, the economist suggested that a framework for private sector participation should be drafted simultaneously for the medium term.

“So let them (keep) rehabilitating those that are under rehabilitation and let us come up with a framework even if we are not selling immediately,” he said.

Yusuf told TheCable that he is in support of bringing in the private sector, with the government owning only a minority stake that will allow private investors to take charge of the management of the refineries.

“We should have a framework where we get some investors to buy into it or we sell part of the shares to investors and we come up with a framework where the government will be a minority shareholder just like what you have with NLNG,” he said.

Yusuf said the problem with the refineries is that it is managed by bureaucrats and politicians.

He explained that the management of the facilities is fraught with a corporate governance problem that private sector participation will solve.

The CPPE chief said the government has already dealt with the issue of the policy environment by deregulating the market.

“If it (refinery) is in the hands of the private sector and (the) government is the minority shareholder, I think that will work,” he said.

‘REFINERIES ARE DYING ACROSS THE WORLD’

On his part, Clement Isong, the chief executive officer (CEO) of the Major Oil Marketers Association of Nigeria (MOMAN), echoed Yusuf’s sentiments.

He said the suggestion to sell might not be politically palatable to Nigerians, but it is the best decision for the refineries.

Isong said it is extremely difficult to manage a refinery, admitting the need for specialised efficient management to keep them operational.

“Only refineries servicing niche markets or mega refineries which enjoy economies of scale are thriving, particularly those producing euro5 or Afri6 specifications which our refineries are not,” he said.

“Managing the refinery is a very peculiar competence. All over the world, refineries are dying because people are struggling to manage them efficiently.

“There’s (a) need for a specialised efficient management to keep them going. And even then, the direction the world economy is going, it doesn’t bode well for them.”

He added that there are persons who have the management skills and competence in Nigeria’s private sector to manage the refineries.