It’s time to sell off the refineries

The essence of business process reengineering in corporate domain is simply to improve results and quality while reducing costs subsequently incurred. It typically involves proper analysis of the workflows of business entities to identify processes that are sub-par or inefficient and get rid of them. The pertinent questions now are: Why has Nigeria refused to reengineer the refineries? When will Nigeria understand the economic folly in holding on to unproductive refineries?

Following from a recent operational report of the Nigerian National Petroleum Corporation (NNPC) which showed again that its refineries in Kaduna, Port Harcourt and Warri are huge loss-making factories, it should be a no-brainer to reengineer them. The NNPC, according to the report, has spent N81.4 billion on the refineries so far in 2020 and only earned N6.5 billion from their operations. Between January and August, the refineries were also unable to process any drop of crude oil while they equally recorded a zero per cent capacity utilisation and simply remained idle. Of what use is a refinery that refines no oil in almost a year? The only business of refineries is to refine oil and when they are not doing that, they are useless except if they are on routine maintenance.

The NNPC’s refineries are not known to be on any routine maintenance, they are shuttered because they are unable to work efficiently. Cumulatively, the NNPC reported that financially the Kaduna, Port Harcourt and Warri refineries posted N132.844 billion in deficit between August 2019 and August 2020. The refineries remain a significant drainpipe in the corporation’s operations and should be stopped now. Additionally, experts posit that the minimum capacity utilisation allowed for a refinery to be considered profitable is 50 per cent; NNPC’s refineries are on zero. What then is the obsession in keeping the derelict refineries?

Clearly, the fact that the refineries are inoperable meant that the NNPC between August 2019 and August 2020, imported 20 billion litres of petrol and 435 million litres of diesel into Nigeria for sale. By this, the NNPC consistently ships desirable jobs away from Nigerians to foreign destinations.

Nigeria has for several years imported the bulk of its refined petroleum products because the refineries are unable to refine crude oil produced in the Niger Delta. Even though the refineries are daily allocated about 445,000 barrels of oil to refine, they are of no utility value since the corporation sends them abroad to be refined. Recently, the country stated its intention to start importing petroleum products from a neighbouring country, Niger Republic!

We consider it unfair and unacceptable to continue to spend scarce public funds on unproductive ventures and companies. Ventures that have yielded zero return to the country’s purse in more than a year should not enjoy such lavish attention. We also think that it is long overdue to end this phony game and diligently hand over the refineries to people who can profitably operate them.

Gladly, NNPC’s head, Malam Mele Kyari, agrees with this position. He recently told the House of Representatives Committee on Petroleum Upstream that the corporation deliberately shut down the refineries because they no longer made sense to be operated. He cited the NNPC’s inability to supply crude oil to the refineries as one of the challenges.

Fixing the refineries or handing them over to people to repair and run should not be a difficult task to do. But from precedent, we figure that it probably would be best to hand them over to business concerns with proven capacity and interests to repair and run them on mutually agreed terms. We urge Kyari to take a decisive action on the refineries.