Refineries N141b losses surpass allocations to critical sectors
•Stakeholders insist on assets commercialisation
Refineries operated by the Nigeria National Petroleum Corporation (NNPC), recorded deficits running into N141billion within 13 months, between January 2018 and January 2019.
Indeed, the sum is capable of addressing capital projects in critical sectors of the economy as captured in the 2019 Budget.
A breakdown showed that the losses are capable of funding projects worth N80.29billion, which are expected to drive the agriculture sector in order to address food insecurity and set the economic diversification drive of the current administration on track.
Without borrowing, the current losses would have taken care of practically all capital allocations for health, education, as well as the Niger Delta region in the 2019 budget
President Muhammadu Buhari recently assented to the 2019 budget of N8.916trillion, with the hope of borrowing to the make the projections a reality.
In the 2019 fiscal spending plan, the Federal Government proposed to execute capital projects worth N47.29billion in the health sector, N39.4billion in the Niger Delta, and N50.15billion in the education sector. This brings the total cost of projects in these sectors to N136billion.
While the spate of insecurity in Nigeria remains a burden with obvious funding gaps, losses by the refineries, (which have already gulped over $396.33million on Turn Around Maintenance), and continued payment of subsidy, would have equally funded a substantial part of the N158.11billion demanded by the Ministry of Defence to fund capital projects.
In January 2018, the refineries lost N13.586billion, and later reduced to N8.055billion in February; but rose again to N11.889billion in March, and further to N20.081billion in May, before settling at N14.510billion in June.
The losses continued to N10.449billion in July; N10.793billion in August; N6.972billion in September; N9.32billion in October; N9.58billion in November, and soared to N17.317billion in December, but reduced dramatically to N8.362billion in January 2019.
The losses were recorded in the face of very poor capacity utilisation, which was mainly zero in most of the months under review.
While the Warri Refinery performed relatively fair within this period, the Kaduna Refinery was largely down throughout the year.
The refineries however recorded profit only in April 2018.
A former Director-General, West African Institute for Financial and Economic Management (WAIFEM), and professor of Economics and Public Policy, University of Uyo, Akpan Ekpo, said the refineries must be commercialised, stressing that the poor performance of the assets is a national disgrace, and a setback to Nigeria’s development.
According to him, the Buhari administration must call for a deep discussion aimed at ensuring the immediate blockage of all the leakages coming from the facilities.
“So much money has gone into the refineries, and this has been a long-standing problem. The entire oil sector has to be revamped. The losses are real. So, we should commercialise all the refineries as we cannot continue this way,” Ekpo said.
Chief Executive Officer, Mudiame International Limited, and Mudiame Welding Institute Limited, Sunny Eromosele, also argued that leaving the assets in private hands remained a viable solution for the refineries.
Eromosele, who noted that the lingering challenge was solvable, added that keeping the assets in government’s care would limit the need to diversify the economy from the oil sector, adding that the continuous NNPC interest in the refineries was an indication that the Corporation is using them to divert public funds into private pockets.
“We need to privatise the refineries. Those refineries are only a way of funnelling money into private pockets. We need to channel the money into economic diversification,” he said.
The Chairman/CEO, International Energy Services (IES) Ltd., Dr. Diran Fawibe, had equally expressed concern over perennial losses from the refineries, insisting that it was worrisome to keep an asset that perpetually fails to perform.
Similarly, Professor of Petroleum Economics and Policy Research, Omowumi Iledare, bemoaned the development, saying the prevailing situation leaves a lot to be desired, as Nigeria must move beyond corruption, tribalism funding and sundry mundane factors to addressing the poor state of her refineries.
The Chairman, Tricontinental Group and the immediate past President of the Nigerian-American Chamber of Commerce, Chief Olabintan Famutimi, told The Guardian that it was unnecessary for the government to stake so much money in the oil sector, despite the global economic realities.