Comatose refineries: Laying down structures to eliminate constraints of refined products importation
The Nigerian oil and gas sector is riddled with frailties. From the upstream, the mainstream to the downstream, deficiencies have seen the sector underperforming in its yieldings, though it has been maintained as the honey pot of the Country. Phenomena of several glitches have, in their dimensions, formed subject matters of keen discourse. Challenges of oil theft, vandalism, subsidy, oil spill, scarcity, environmental pollution, to mention but a few, have been associated with the sector at varying degrees of gripping force.
Of these, among others, the subject of scarcity with its associated deficiencies borne by architectural deficits has been resounding. Within the scale of structural deficiencies, have been the deficits of refineries to process crude products in the Country.
It is lamentable that with the enormity of petroleum resources in the Country and the decade of exploration of same, the deficits of refineries have been a thick blow in the sector. Not until recently when stakeholders began to look into the prospect of growing possibilities from privately led refinery underway, it is practically sour to distaste that the subject of exportation of crude and the importation of refined products has been a rigmarole which reflects nothing, but insensitive posture on the part of the government as a body meant to drive through the pathway of development in a sector that has remained its honey pot. The problems associated with importation of refined products have been too deep seated that the docility of the government towards driving the process of local production in sufficiency for local demands, can no less be described as insensitivity. Problems associated with subsidy, bridging gap, scarcity of products, oil theft and the likes which have, over decades, put the Country incessantly in chaos as problems associated with exportation of crude products and importation of refined products, have persisted too long for the government not to have fixed the shortcomings of the architectural deficits for local production. It appears the four refineries in the Country, if not for the private architecture much awaited in Lagos, have largely been comatose, not only deficient to cater for local needs, needless of foreign trade for exportation.
Maintenance of the four existing government managed refineries have only generated grievances over controversies of allocation and reallocation of funds to manage them, without any substance of productivity in efficiency for local demands. The government reportedly spent N10.23 billion in June 2020 on three refineries that processed zero crude. Also in 2021, the government approved $1.5 billion (about N600 billion) to repair the Port Harcourt refinery. Irreconcilable to the huge funds, the refineries are largely still comatose, as scarcity of refined products have left the stage with its harshness. Disturbed by the irreconcilable differences between funds allocated for same and their ineffective productivity, the Socio-Economic Rights and Accountability Project (SERAP) has recently filed a lawsuit against President Muhammadu Buhari over what it held as “his failure to probe allegations that over N1.48 trillion reportedly spent on maintaining the country’s four refineries between 2015 and 2020 may have been stolen, mismanaged or diverted into private pockets.” In the suit number FHC/L/CS/806/2022 filed in May, at the Federal High Court, Lagos, SERAP is seeking “an order of mandamus to direct and compel President Buhari to investigate the spending on Nigeria’s refineries, and alleged mismanagement of public funds budgeted for maintaining the refineries since 1999.” SERAP is also seeking “an order of mandamus to compel President Buhari to ensure the prosecution of anyone suspected to be responsible for the importation and distribution of dirty fuel into Nigeria, and to identify and ensure access to justice and effective remedies to affected victims.” SERAP in the suit argued that, “It is in the public interest to ensure justice and accountability for alleged corruption and mismanagement in the oil sector, which has resulted in the importation and distribution of dirty fuel and protracted fuel scarcity in the country.” In the suit which joined Mr Abubakar Malami, SAN, Attorney General of the Federation and Minister of Justice as Respondent, SERAP is also seeking “an order of mandamus to direct and compel President Buhari to instruct appropriate anti-corruption agencies to jointly track and monitor the spending of public funds to rehabilitate, operate, and maintain Nigeria’s refineries.”
“Nigerian Constitution 1999 [as amended], and international standards impose clear obligations on the Buhari administration to take effective accountability measures to weed out, expose, and punish allegations of corruption in the oil sector, and to ensure effective remedies for victims.
“Ensuring justice and accountability in the spending of public funds on refineries would improve the availability of petrol and the enjoyment by Nigerians of their right to natural wealth and resources. Impunity for alleged corruption in the oil sector has contributed to the importation and distribution of bad fuel, violatingthe human rights of many users, including to a safe, clean, healthy and sustainable environment. The Buhari administration has legal obligations under Section 15(5) of the Nigerian Constitution to abolish all corrupt practices and abuse of power, and article 26 of the UN Convention against Corruption to ensure effective prosecution of allegations of corruption.
“Alleged corruption and mismanagement in the oil sector and the importation and distribution of dirty fuel have continued to deprive Nigerians of economic opportunities, subjecting them to cruel and degrading treatment,” SERAP argued.
The suit filed on behalf of SERAP by its lawyers Kolawole Oluwadare and Ms Adelanke Aremo, read in part: “Nigeria has made legally binding commitments under the UN Convention against Corruption to ensure accountability in the management of public resources. These commitments ought to be fully upheld and respected. Directing and compelling President Buhari to probe allegations of corruption and mismanagement of the money meant to repair the country’s refineries would advance the rights of victims of corruption to restitution, compensation and guarantee of non-repetition. Combating the corruption epidemic in the oil sector would alleviate poverty, improve access of Nigerians to basic public goods and services, and enhance the ability of the government to meet its human rights and anti-corruption obligations.
“Despite the country’s enormous oil wealth, ordinary Nigerians have derived very little benefit from their own natural wealth and resources, primarily because of widespread grand corruption, and the impunity of perpetrators. High-ranking public officials, including officers of the Nigerian National Petroleum Company Limited suspected of complicity in the allegations of corruption and mismanagement in the oil sector, and the importation and distribution of adulterated fuel have continued to enjoy impunity. Under Section 16(1) of the Constitution, the government has a responsibility to ‘secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity.’ Section 16(2) further provides that, ‘the material resources of the nation are harnessed and distributed as best as possible to serve the common good.’
“Under article 24 of the African Charter on Human and Peoples’ Rights, Nigerians have the ‘right to a general satisfactory environment favourable to their development.’ According to reports, petroleum products with methanol quantities above Nigeria’s specification were recently imported into the country. The Nigerian National Petroleum Corporation (NNPC) reportedly stated that the methanol-blended petrol was imported into the country by a few suppliers through four premium motor spirit cargoes under its Direct Sales Direct Purchase (DSDP) arrangement. According to reports, for every 200 litres of the adulterated product, 800 litres of petrol with good quality would be required for the blending to be done. According to reports, the government spends over N264 billion annually to operate and maintain the country’s refineries.
“Successive governments have reportedly spent trillions of Naira to rehabilitate, operate and maintain the refineries that have produced little or no fuel. The government reportedly spent $396 million for maintenance of the country’s refineries between 2015 and 2020 alone. Despite this huge spending, millions of Nigerians continue to lack access to full and unhindered supply of fuel. About N82.82 billion was reportedly spent in 2015; N78.95 billion in 2016; N604.127 billion in 2017; N426.66 billion in 2019; N218.18 billion in 2019, and N64.534 billion expenditure was recorded from January to June 2020.”
The architecture deficits have only left sour narratives for the Country’s reserves with frowning reflections, not only on the profile of foreign exchange, but at large, the economy has been challenged by crude exportation and subsequent importation. Problems of subsidy, bridging gap, scarcity of products, oil theft and the likes, associated with refinery deficits have left imprint of recurring defaults of deficient factors which have left the economy in shambles, as against the prospect of development which the sector would have recorded for the Country, were the architecture had been fixed in order of rationality in systemic patterns that complements a full working architecture of structures with value chains perfectly framed with forward and backward linkage parameters.
Maintenance funds channeled into maintaining the existing refineries, which have remained imbecilic, have only continued to appear wasteful with the profile of refineries remaining insignificant in productivity to local needs, and never in any way near the sight of exportation. The economy has been challenged and shortchanged. The impacts have been felt by Nigerians, who against enjoying the abundance of homeland blessedness of oil resources, have begun to pay out of their nose, with the economy dealing hard blows on many.
The necessity for the government to retrace its attention towards the fabrics of refining products in the Country, with full blown sensitivity to the rationality of a well established structure for the working of refineries in the Country, is of necessity. Although, a private structure underway has been largely awaited with juicy taste, it behooves the government to go beyond the superficial expectations to drive a working framework for refining architecture within the oil sector. This is essential to save the Country from the prevailing waste, strains and cheat associated with exportation of crude and the importation of refined products.
