NNPC-JIAXING DANCE IN THE DARK

JOSHUA J. OMOJUWA argues that the choice of Chinese firms for the revival of the refineries is flawed

Back when I was in secondary school, our classroom walls carried this inscription: Apartheid is a crime against humanity. It was Nigeria’s daily reminder of its commitment to the fight against apartheid in South Africa. I have a similar idea, different purpose. A deal that cannot survive sunlight at inception will not survive scrutiny in operation should be on the walls of every Ministry and Agency in Abuja. Nigeria has tested that sentence across too many sectors to count. The refineries are where we have tested it most expensively.

Let us begin with the verdict. The government should not be running any refinery. Successive administrations have poured money into Port Harcourt, Warri and Kaduna with the consistency of a man feeding a furnace with no chimney. More than $3.5 billion has reportedly been spent rehabilitating those three refineries without delivering consistent, sustainable operations. Some estimates place total rehabilitation expenditure across Nigeria’s state refineries at over $27 billion since the 1990s. For context, one private citizen built a 650,000-barrel-per-day refinery for roughly $20 billion. He built it once. It works.

That is the difference between a country and a charity for connected contractors.

Anyone still arguing that the next round of turnaround maintenance will finally crack the code is not making an argument. They are performing a ritual. Billions of dollars in TAM that have not worked will not suddenly start working because someone changed the typeface on the press release. Anyone who does not understand this by now was not built to understand it.

Privatisation in Nigeria has a track record. Some of it is genuinely transformational. Some of it is the laundering of national assets through opaque rooms into private pockets. The difference between the two is not the policy. It is the process.

A clean privatisation has three features and they are not negotiable. Transparency at every stage. That is from valuation to bidding to award. Genuine competition, real bidders with real money and real technical credentials, not proxies fronting for foreign capital. And a clear preference for Nigerian capability where it exists, and where it does not yet exist, structured partnerships that build it deliberately.

That last point is where our conversations reliably collapse into bad faith. Preference for local players is not protectionism. It is what every serious country in the world practises when its own strategic assets are on the table. China would not prioritise a Nigerian company over its own. We should not be the only country in the room confused about whose interests come first. Far too many times, some Nigerians sell out the country so cheaply for their own gain. The P&ID legal battle is a case in point.

We do not have to imagine what bad-faith privatisation looks like. We lived it. In the dying days of the Obasanjo administration, a 51 percent stake in the Port Harcourt refinery was sold to Bluestar Oil for $561 million on May 17, 2007. Eleven days later, 51 percent of the Kaduna refinery went to the same Bluestar Oil for $160 million. Bluestar was a consortium of Dangote Oil, Zenon Oil and Transcorp. Obasanjo reportedly held shares in Transcorp through a blind trust. Both sales drew fierce opposition from NUPENG and PENGASSAN on grounds of conflict of interest and absent of due process. This triggered a four-day strike that nearly paralysed the economy, and were subsequently cancelled by President Yar’Adua after investigation.

Read that sequence carefully, because it is the whole argument in one paragraph. The buyers were not foreign upstarts. They included some of the most credible domestic operators in the country, among them the man who has since built the largest refinery on the continent. And still the deal was reversed, because the process was bent.

It is worth reflecting on what that reversal cost Nigeria. The man whose consortium was turned away went on to build a 650,000-barrel facility from the ground up. Nigeria kept the public refineries and kept feeding them. We chose the politically convenient option over the nationally productive one, and we have paid for that choice every year since.

That story should be in front of every official who walks into a refinery negotiation. If a Nigerian-led consortium of that pedigree could not survive scrutiny because of how the deal was structured, no foreign consortium with weaker credentials and a more opaque process should be waved through.

Which brings us to Jiaxing City, April 30.

NNPC signed a memorandum of understanding with two Chinese industrial firms to revive two government-owned refineries that have collectively consumed more than $2.4 billion in public funds without producing a meaningful barrel of refined fuel. The partners are Sanjiang Chemical Company — primarily a manufacturer of household chemicals and cosmetics ingredients — and Xinganchen (Fuzhou) Industrial Park Operation and Management Co. Ltd., for whom limited public information exists.

Household chemicals and cosmetics ingredients. An industrial park operator. These are the technical partners selected for the rehabilitation of two complex hydrocarbon assets. Perhaps there is a compelling explanation for this pairing. If there is, NNPC has not offered it. Civil society groups have already called for the GCEO’s resignation. He has played into their hands with this one.

Bad foundations do not improve under pressure. They collapse with more witnesses. If the Jiaxing deal is sound, sunlight will not harm it. NNPC can publish the technical credentials of the chosen partners, the competing bidders considered and rejected, the equity terms, the exit mechanisms, the performance milestones, the cost ceiling, and the extent of Nigerian participation in every component of the work.

If the deal cannot survive that disclosure, then the deal is the problem. Not the questions.

Whatever is worth doing is worth doing properly. Our local players must take precedence over upstarts from wherever else. It is the minimum standard of national self-respect. The Yar’Adua reversal showed that even credible Nigerian buyers can be turned away when the process is wrong. The Jiaxing arrangement, by every public indication, has neither the process nor the partners to clear that bar.

 Omojuwa is chief strategist, Alpha Reach/BGX Publishing