Thursday, 20 August 2015


The recent announcement by the Bureau of Public Enterprises (BPE) that the Federal Government wished to privatise Nigeria’s four state-owned refineries is welcome news, but there is a history of legislative inertia, union opposition and repeated delay to overcome before it can become reality.

The logic behind the push for privatisation is impeccable. For at least two decades, the country has been a living contradiction of an oil-rich country due to its heavy dependence on imported petroleum products. This paradox stemmed from the decline in the output of its four refineries based in Port Harcourt, Warri and Kaduna. In spite of the apparent interventions of successive military and civilian regimes, the country has been unable to get them to work at optimum capacity until recently.

The huge import bill led to the creation of a subsidy regime which has been riddled with poor regulatory oversight and corruption, especially after its dramatic increase during the tenure of former President Goodluck Jonathan, when it allegedly rose from N300 billion to N1.9 trillion in the first six months of his administration.

Privatisation would create several benefits. It would take the management of refineries out of the hands of a discredited Nigerian National Petroleum Corporation (NNPC) and put it in the hands of established corporations whose main aim would be developing the reliability that is vital to sustained profit. It would progressively reduce the country’s dependence on imported petroleum products, and thereby help to end the corrupt subsidy regime that is based on it. The long-neglected downstream sector of the oil industry would expand as new players come in to take advantage of increased opportunities. That, in turn, would accelerate the growth of manufacturing, as the by-products of refineries become more widely available locally.

Before these benefits can be attained, however, several obstacles must be overcome. Perhaps the most prominent is the long-delayed Petroleum Industry Bill (PIB). First sent to the National Assembly in July 2012, the bill is meant to formally define institutions, relationships and responsibilities within the oil sector with the aim of ensuring faster growth and increased local participation and ownership. It has suffered repeated delays due to the supposed opposition of multinational oil companies, the emergence of fake versions, and an inexplicable legislative apathy.

The BPE claims that the passage of the PIB is vital to the implementation of the privatisation process. Even if it were not, it is difficult to see how such a significant policy could go through in the absence of the updated legal and regulatory framework provided by the PIB.

Then there is the problem of oil worker hostility. Both the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG) have consistently expressed their opposition to the privatisation of state-owned refineries. They argue that the focus should be on increasing local capacity and disparage privatisation merely as an attempt to sell the nation’s patrimony to well-connected cronies at give-away prices.

Given the blatant lack of transparency that has characterised previous privatisation schemes in the recent past, the unions certainly have a point. However, even they must accept that the current situation is simply too unsustainable to continue. Government control of the telecommunications industry did not result in efficiency or cost-effectiveness; the entry of privately-owned telecommunications companies has turned Nigeria into one of the fastest-growing performers in the world.

The logic behind the push for privatisation is impeccable. For at least two decades, the country has been a living contradiction of an oil-rich country due to its heavy dependence on imported petroleum products

Government, too, must get over the unwarranted indecision which has only served to further complicate things. Former President Umaru Yar’Adua cancelled the sale of refineries in 2007, after it had been approved by his predecessor, former President Olusegun Obasanjo. The Jonathan administration initiated a process of refinery privatisation in December 2013, but it went nowhere. It is to be hoped that the Buhari administration will succeed where its predecessors have failed.