Economic Recovery: Plan to sell government-owned refineries

By Sunny Chuba Nwachukwu

The strategic planning currently on, to fix the nation’s ailing economy through the sale of the four government owned refineries, as part of an ongoing economic recovery programme, is not going to be that easy because, to rebuild is always more difficult and expensive than to destroy, (which is a statement of fact). However, with determination, and if those in authority will sincerely lend a listening ear, and become transparent and dedicated servants from the various arms and units, or the agencies of the government, the nation shall take advantage of the now wonderful and fantastic performances as recorded in non-oil sectors of agriculture, industries and services for 2020 with fourth quarter Gross Domestic Product (GDP) growth of 9.7% to N19.55 trillion; and leverage on the opportunities therein!

That alone is full proof of the inherent potentials and stuff the economy is made of (as against the otherwise speculative expectations of the World Bank and International Monetary Fund). The performance did not just pull the economy out of a recession, but came with a better growth rate than those of the super economies of Japan, China, USA and the lesser power, Columbia (within the period in view). This signals better economic future and gives a ray of hope for the nation.

All that is required in the planning on the economic recovery, with specific and special reference to the downstream of the nation’s oil industry that is strategic in the economy, is carefully mapped out strategies on how to rebuild and reposition the downstream better, like never before. This process sincerely demands diligence, financial transparency and prudence in management. The programme to sell off the refineries is going to be purely, a clearly mapped out process with procedures towards every step taken by the government to manifest profit oriented results, based on well calculated business models. The prospective investors, of course, should be recognised big-time players in the oil industry, who should be given right of first offer of refusal among bidders, before going international for other investors.

It is humbly expected that if the government and the NNPC want to get it right, a sincere note of professional advice offered must be adhered to. This is because humongous amounts are usually required for setting up refineries; and secondly, the ease with meeting up funding such a time-bound scheduled refurbishing must be given priority, before the four refineries are sold out to private investors and operators. Once we get these two critical responsibilities right (which must be solely and specifically funded by the Federal Government from a “dedicated account”) for sure, the nation’s economy shall be as good as fixed (futuristically)! It is after this that the private investors that will operate and manage them, will definitely, automatically experience a healthy deregulated, competitive pump pricing regime amongst them (petroleum products manufacturers) in the country.

Also, in the manufacturing sector, other economic deliverables that are likely to be observed will be due to high productivity injected into the system; the cumulative GDP growth shall steadily be on the increase, especially in the light of a sudden eruption of massive job creation and job opportunities that are bound to occur. This also shall rub off positively on the reduction of crime rate in the society; and foster an improved standard of living, resulting from better disposable incomes amongst the citizens (the employable group of youths in the country).

These advantages emanating from this singular economic sector that has roundly sustained the economy for decades, from an angle of a practical macroeconomic context in foreign exchange earnings (when considered along the added socio-political attractiveness, also calculated in arithmetic terms, in Naira and Kobo for the economy) is indeed enormous and overwhelming! But, that shall be a topic for another day.

Be that as it may, Nigerians primarily, ought to be served and treated well, to befit their richly endowed natural resources of hydrocarbon for crude oil business. The economy, as a “hydrocarbon hub” within sub-Saharan Africa, should clearly map out for her citizens special services/pump pricing as their immediate benefits because, good governance truly needs to be felt by the masses, being their inherited dividends from a democratically elected government. Not the kind of harsh treatment ordinary Nigerians experience daily in the streets of the country. Nigerians are not expected to be paying for refined products like citizens of other nations that don’t produce crude oil. No matter what the price of crude at the international oil market, the locally refined products should have no business with the prevailing price of crude rather, the  refined products’ pump pricing should be determined by the annual budget’s oil benchmark.

This is a template the Federal Government needs to design and develop now. It is very bankable, easy to develop and implement. All that is needed is that all the local refineries in the country (the Dangote’s 650,000 barrels/day, the four federal government-owned 445,000 barrels/day refineries being refurbished and sold out to private investors to operate and manage; and all the privately owned modular plants), are completely operational at full capacity utilization. Once they meet up daily demands (cumulatively from a fraction of their respective outputs) and satisfy the daily domestic consumption of about 40 million litres (for PMS for example); definitely, the productivity trajectory that shall shoot up the foreign reserves of the nation’s current account is obviously near achievable, which shall limit further stress on FX for such imports on refined products! This alone shall force the weakened exchange rate of our local currency up at the FX market, and strengthen the Naira, for an annually expected savings surplus in our balance sheet.

Nigeria does not need a daily offtake of more than 600,000 barrels, locally refined specifically for the nation’s daily needs/daily domestic consumption. The excess refined locally shall be for export, to attract and generate more foreign exchange into the economy. Let there be a forum arranged to brainstorm on this proposed template, uniquely designed for Nigeria’s economy, in the oil industry.

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Nwachukwu, a graduate of pure and applied chemistry with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce.

Sunny Chuba Nwachukwu (FICCON, LS)

Onitsha, +2348033182105