-By Joseph Oyediran (JO)
We have witnessed the face-off between Dangote and the NNPC in the last few days.
Dangote Refinery isn’t the only private refinery operating in Nigeria. We have other refineries such as Walter Smith (5,000 bpd), Ogbele Refinery (11,000 bpd), owned and operated by Aradel Holdings, formerly Niger Delta E&P) although they are smaller than Dangote Refinery. BUA refinery is currently under construction and Walter Smith refinery was expanding their phase 2 refinery operations about 2 years ago into 50,000 bpd. These are all local refineries and competition will exist. Hence, Dangote hasn’t stopped anyone to build their own refinery if they have the capital to do so.
However, local refiners must be protected (by FGN and provided with enabling environment to operate and thrive due to the huge investment capital they have invested in their ventures).
In addition, FGN must give them incentives and also encourage them to operate smoothly regardless of the size of their refinery operation since local refineries will refine crude oil locally and also sell their petroleum products locally to Nigerians via petrol stations. These local refineries create jobs for Nigerians and they are also tax payers.
The elephant in the room is the “ importation of refined petroleum products by some greedy vested interests groups who are profiting abnormally at the expense of Nigerians and they DO NOT want importation of refined petroleum products to STOP when local refineries are working and producing refined petroleum products.
Unfortunately, importation of petroleum products MUST STOP because we have no business importing refined petroleum products as a major oil producing nation when we have local refineries that are working and refining crude oil locally. It doesn’t make economic sense!
We believe FGN will save several millions of U.S. dollars in foreign exchange by favouring local refineries to refine locally instead of allocating scarce foreign exchange resources (US dollars) to petroleum products importation which is currently benefiting some vested interest groups working in alliance with the NNPC. (Note: Alhaji Dangote has let the cat out of the bag through his recent interview when he said “some traders and NNPC officials have blending plants in some locations off Malta for blending petroleum products before they are shipped to Nigeria).
The issue is NOT about Alhaji Dangote nor his refinery but the crux of the matter is the illegal dealings and the economic sabotage these vested interests’ groups are unleashing on the Nigerian economy which is at the expense of Nigerians and the local economy. Nigerians are paying dearly for it through expensive imported petrol that are substandard in quality as reported by Alhaji Dangote in his recent interview on Cable newspaper and also on Channels TV three days ago.
Furthermore, importation of refined petroleum products is also causing high petroleum product costs locally due to our exchange rate, logistics costs, product margins as well as its effects on locally-made goods and services thereby causing high inflation.
The knock-on effects of importation of refined petroleum products is they are expensive in nature and they indirectly affect the production of goods and services made locally to be expensive since energy is an important tool in the production process. Thus, Nigeria will continue to experience expensive locally made goods & services due to importation of refined petroleum products thereby making Nigeria’s economy uncompetitive for producing goods and services on a large-scale for the major global markets of the world due to high production costs (as a result of the high cost of labour, goods and services affected by costly imported petroleum products).
The negative effects on the Nigerian economy will be huge and CBN will struggle to tame inflation even if the CBN keeps raising interest rates.
How will inflation come down when we keep importing refined petroleum products?
How will the value of the Naira appreciate in economic value when FGN continues to support importation of refined petroleum products at the expense of local refiners and local jobs that are meant for Nigerian youths?
How will FGN grow her US dollar reserve base if the nation’s U.S. dollar reserves keeps depleting due to the importation of refined petroleum products?
Is the vested interests’ groups persistent importation of refined petroleum products not the elephant in the room? Haven’t we seen the damage it is doing to the Nigerian economy? Of course we have!
The Nigerian economy will only grow when the government subsidises local production of made in Nigeria goods & services and also when we export what we produce locally to earn foreign exchange (US dollars etc) in other markets of the world.
Dangote Refinery and all other refineries in Nigeria should be seen collectively as a Nigerian project by the FGN, all Nigerians and stakeholders since these groups of refinery ventures are designed to STOP the expensive importation of refined petroleum products which is depleting the scarce foreign exchange meant for the Nigerian economy.
We should all become patriotic and support our own local achievements such as the Dangote Refinery instead of castigating Alhaji Dangote as a monopolist for building a world-class refinery that so many people tried to build but failed to do so.
To mitigate monopolies operating in the petroleum downstream subsector, Port Harcourt & Warri Refineries should be privatised or perhaps given to private sector companies to operate on a PPP basis because the NNPCL lacks the capacity to operate nor manage a commercial entity such as a petroleum refinery. The evidence is there based on the audit reports of three NNPCL refineries (Port Harcourt, Warri & Kaduna) that have been producing losses for over 20 years.
Kaduna Refinery should be scrapped. It doesn’t make any economic sense operating Kaduna Refinery because it is old, dilapidated with old technology and it is beyond its useful economic life since the economics to operate it doesn’t add up and neither will any Return on Investment (ROI) accrue to any investor that operates it as a dilapidated old refinery with low operational efficiency.
It is unpatriotic, unethical and unprofessional for a government officer to speak on national television and de-market a local refiner such as Dangote Refinery that is producing refined petroleum products for Nigerians. That singular act by that official warrants an immediate sack since he didn’t back up his untruthful claims with any empirical evidence.
In addition to the above, Dangote Refinery must be protected at all costs by the FGN in order to send a strong signal to foreign investors that their investments will be safe and protected by FGN if they ever invest in Nigeria.
Dangote Refinery which costs a colossal US$19 billion is the current benchmark by which foreign investors will judge FGN in assessing if FGN is serious about protecting local investors and foreign investors when FGN pitches for FDI to foreign investors.
If FGN can’t protect Dangote Refinery and the US$19 billion investment therein, how do they expect foreign investor to believe that their investments will be incentivised, safe, and protected?
Foreign investors are watching us and the FGN. They are watching how the FGN is handling high profile investments in the Nigerian economy.
We haven’t forgotten Landmark Resorts so soon which came under the FGN hammer via a demolition notice when no EIA report nor any feasibility study report had been conducted to assess the environmental impact, economic merits and viability of the Lagos-Calabar coastal project estimated as costing over US$10 billion.
Foreign investors are watching us and they aren’t foolish with their capital.
If FGN can’t protect its own local investors such as Dangote and others, how do they expect foreign investors to believe them?
Finally, I pray Mr President dismantles these greedy vested interest groups that are destroying the Nigerian economy with their binge for importation of refined petroleum products.
These greedy vested interests’ groups are the chief destroyers of the Nigerian economy because they DO NOT want to STOP the importation of refined petroleum products that is earning them abnormal profits at the expense of hardworking Nigerians (who are paying dearly for refined petroleum products) and also the local refineries who have no trade protection from FGN against imported refined petroleum products.
****Joseph Oyediran (JO), B.ChEng.(Hons.), MA Finance, CBMBA, MCBI, Chartered Banker
