There’s symbolism and significance in Port Harcourt Refinery relaunch

About two decades after the Port Harcourt Refining Company (PHRC) went moribund, and billions of dollars sunk into its repairs, the company got re-started by the federal government last week. In a statement issued by the Nigeria National Petroleum Company Limited (NNPCL) on Tuesday, November 26, 2024, the government made the restart of the company public, assuring that the refinery has commenced at 70 percent of installed capacity.

This development (hopefully) puts an end to a seemingly endless prevarication, doublespeak and failed promises by officials of the federal government as to the restart or relaunch timeline of the refinery. For countless times the chief executive officer of NNPCL, Mr. Mele Kyari and/or minister of state, petroleum resources (oil), Mr. Heineken Lokpobiri, had made pronouncements as to the date that the refinery would recommence production. All turned empty!

The government’s latest statement says: “Today marks a monumental achievement for Nigeria as the Port Harcourt Refinery officially commences crude oil processing. This groundbreaking milestone signifies a new era of energy independence and economic growth for our nation.”

Truly, it takes a high pitch of patriotism to accept that the series of failed deadlines for the commencement of production at the refinery has come to an end. Indeed, if anything had weakened public trust and confidence in the Bola Ahmed Tinubu-led administration, it has been the failed promises of officials of the government regarding the relaunch of the moribund public-owned refineries in the country.

The collapse of the government-owned refineries (PHRC, Warri Refinery and Kaduna Refinery) remains one of the root causes of the economic challenges besetting the country. Although it seems unbelievable, the country has for over a decade wholly depended on the importation of refined petroleum products because of its moribund refineries. Not even one of the four giant refineries remained functional.

The ‘death’ of these refineries and the total dependence on imported fuel (especially, Premium Motor Spirit, PMS) has caused a drain on the foreign exchange (FX) resources of the country. Coupled with the opaque fuel subsidy regime (up until May 29, 2023) and lingering FX challenge, PMS importation has kept plunging the Nigerian economy into the abyss. Some cabal have continued to fritter away a huge chunk of the nation’s scarce FX. 

Unfortunately, part of the government’s fuel subsidy removal policy on May 29, 2023 was the licensing of more PMS importers, rather than expedited local refining strategy. And thus, the more these importers appropriated FX to import, the more the pressure on the Naira in the forex market; and the more the depreciation of the local currency.

So, the eventual relaunch of the PHRC properly signals a turning point in Nigeria’s ‘journey to nowhere’— in the quest for a meaningful economic turnaround. Incidentally, the federal government has reaffirmed its commitment to resuscitating its other refineries in Kaduna and Warri in no time.

With this projection, coupled with the Dangote Refinery that has since early this year been in operation, the journey to tackling Nigerians’ economic hardship would have commenced. This is because the key triggers of the prostrate state of the Nigerian economy today were the sudden removal of fuel subsidy and its kindred policies.

The pronouncement of this singular policy on May 29, 2023 by President Bola Ahmed Tinubu pushed PMS pump prices to unprecedented heights: from below N200/litre to N700/litre. And as the fuel importation spree continued, gulping so much FX, the pump price of the commodity has kept rising. Today, it is clearly over N1000/litre practically everywhere around the country.

The commencement of PMS production and supply by the Dangote Refinery a few months ago, and the controversies it generated injected more uncertainty into the fuel market. An assortment of vested interests represented by PMS importers and distributors as well as NNPCL came up with all manner of arcane or bizarre propositions. So much brouhaha; so much noise!

Interests against Dangote Refinery threw the confusion that the refinery (Dangote) was pushing to become a monopoly in the PMS business into the public space. This propaganda in no small measure, further fouled public sentiment. This was even as the NNPCL named itself as the sole off-taker of Dangote PMS for the local market.

However, now that the NNPCL will be reactivating the government-owned refineries (starting with the PHRC) to join in the production and supply of PMS to the local market, the ‘ghost’ of any monopoly would be laid to rest. It signals that the full liberalisation of the downstream segment of Nigeria’s oil sector has commenced.

This development will demand that NNPCL relinquishes the ownership and running of the PHRC and others. As of today, the NNPCL is yet to fully wear the toga of a privatised business. It still functions as a regulator on one hand, and an operator on the other. NNPCL’s activities are proof of “government having no business in business.”

Now is most auspicious to pull through the aborted full privatisation of the government-owned refineries. This calls for the expeditious turnaround maintenance (TAM) of the Port Harcourt, Warri and Kaduna refineries. It also requires the demonstration of political will to do just the needful to jumpstart Nigeria’s economy and put it on the path to sustainable recovery and growth.

Full liberalisation of the downstream oil sector will entail the removal of government controls, allowing market forces to dictate prices and supply of the commodity. This would encourage the entry of more private companies into the sector; thus, increasing efficiency and competition.

Today, although there are about ten refineries (nominally) in the country, most of them are being stifled by the role of the government and its agencies in the sector. Truth is that apart from Dangote Refinery, there are others, including: Edo Refinery and Petrochemical Company, Duport Midstream, Walter Smith Refinery, OPAC Refinery (Delta State), Niger Delta Petroleum Refinery (Aradel).

These, plus the four government-owned refineries (PHRC — Old & New, Kaduna and Warri) should be primed, and given the enabling environment to thrive. The Dangote Refinery (by a pyrrhic victory) has proven that as of today, the PMS business is infested with sharks, and only behemoths like it (Dangote) can weather the man-made storms in the oil business terrain. The industry is dominated by cabal and buccaneers.

Now that the federal government has commenced the journey to ‘freeing’ the PMS market by the relaunch of the PHRC, the commitment should be sustained to attain a ‘free market’ reign. The persisting economic hardship in the land can be hugely alleviated through meaningful decline in the prices of PMS and other products. The federal government must prove wrong the doubting public that the restarting of the PHRC is not a fluke nor a mere gambit.

It is a significant milestone that the PHRC is re-streamed after many years of lying moribund, but it is more important to prove that the step is a harbinger to a fully liberalised PMS market. Government must wean itself off every vested interest (overt or covert) in the fuel business. Its regulatory roles are already clearly spelt out in the relevant books. It is time to ‘let Nigerians breathe’!

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