‘Why building of private refineries has stalled’
NLC denies endorsing subsidy removal
THE decision by the Federal Government to offer, for a fee, operational licences to private sector businesses that showed interest in building refineries as well as non-provision of a conducive environment are factors stalling the take-off of private refineries, the Nigerian Association of Energy Economics (NAEE) has said.
Speaking in Abuja on factors militating against a vibrant energy sector, 58 years after the discovery of crude oil in commercial quantity in Nigeria, the President of NAEE, Prof. Wumi Iledare explained that government ought to have issued ‘permit’ to business community as an incentive for speedy building of the refineries.
This comes as the Nigeria Labour Congress (NLC) denied having any consultation with President Muhammadu Buhari’s transition committee at any level over the proposed removal of fuel subsidy.
Also, former Deputy National President of the National Union of Petroleum and Natural gas Workers (NUPENG), Eddy Ossai, yesterday cautioned Buhari on the racket in the oil sector if he would succeed in his desire to purge that sector of endemic corruption.
Specifically, Iledare argued that the opportunities the private sector would bring to Nigeria as a result of new refineries are massive and could manifest in multidimensional layers to the Nigerian economy.
His words: “Government should not give licence for building of refineries; what government should give is permit to people that want to build refineries that is based on environmental impact assessment, technical capabilities and financial resources. Those that should evaluate the claims and award should be tender boards constituted for that purpose.
It is important too that Nigerian people know the owners of the planned refineries. Above all, there must be consistency in policy by the Federal Government.”
He added that to avoid policy somersault, the Federal Government must spell out what it actually wants to do with the refineries for effective business decision-making by the private sector.
“Why were those who got the licences given? They were given licence because government said it was selling off the refineries and efforts were on to remove the subsidy, which was an incentive for the private sector to move in and take advantage of the liberalised environment. But halfway, government reversed itself on the sale of the refineries.
The people who had obtained licences were left with licences that felt like ‘heavy rocks’ in their hands as the licences became useless to them,’’ he noted.
Iledare insisted that it was morally wrong on the part of government to make money from those who are willing to provide jobs and contribute meaningfully to the economic development of Nigeria without creating for them the enabling environment to do so.
“Why would government want to make money from those who want to establish refineries? They are going to contribute to the development of the economy and also pay tax.
They are going to add value, expand the economy. The standard of living in the location of the refineries will rise higher than elsewhere in the country,” he explained. He also declared that the focus of subsidy was being wrongfully interpreted and implemented in Nigeria. His argument: “The Nigerian economy is basically focusing on subsidising consumption and not production.
That is where the problem is. In countries where subsidy works, they actually focus on production. It is only when production is on-going that competition and economic activities are generated that can aid economic development.
The poor can be well protected through other means of income redistribution.” He submitted that the implementation of subsidy regime has not shown that the poor have benefitted and that their economic predicament has been helped by subsidy.
“We must understand the purpose of government interventions. Interventions by government are meant to achieve two things, which are to create efficiency in the market and equity? The market cannot provide equity and the purpose of subsidy is to ensure income redistribution in respect to the poor.
Looking at the Nigeria situation, is the poor benefiting from subsidy? The second point is that, is subsidy minimising economic loss? Subsidy on petroleum products has not benefitted the poor and it has also not reduced the economic loss to the nation.
These distortions are responsible for government’s inability to finance critical sectors like education, health and physical infrastructure.” As the Eighth National Assembly begins to settle down to legislative business and the possibility of re-examination of the Petroleum Industry Bill (PIB) is an option, Iledare called for empowerment of institutions to effectively re-engineer the oil and gas sector for optimal economic gain.
“What Nigeria needs at this point is institutional empowerment where institutions that are tasked with certain functions are allowed and given the freewill to exercise their powers within their areas of jurisdictions,” he said. Meanwhile, the NLC has stated unequivocally that it has not been consulted over removal of fuel subsidy.
A statement signed by the President of Congress, Ayuba Wabba in Abuja yesterday said NLC’s opposition to removal of fuel subsidy remains unwavering.
“We recognise the corruption in the downstream sector of the petroleum industry orchestrated by government agencies in collusion with big-time business persons together with whom they have formed a cartel. We hold the view that in order to be able to deal with this situation effectively, government needs to break up this cabal by opening up the downstream sector of the petroleum industry to fair competition governed by ethics,” it said.
Congress, therefore, urged Buhari to muster the necessary political will by not only opening up the sector to fair competition but by ensuring diligent prosecution of all the persons that have been indicted in the subsidy scam, saying, “we remain convinced that the real solution to the crisis in the sector lies in ensuring that domestic refining is promoted.”
Speaking to journalists in Benin City yesterday, the factional state chairman of the NLC also called on the Federal Government to look at other sectors like payment of appropriate import and export duties being overseen by the Nigerian Customs Service (NSC).
‘‘If Nigerians, for instance, pay the appropriate import and export duties, how much is Nigerian Customs Service making? There should be a better biometric payment process to retrieve most of these monies being lost; I will suggest that more will not be leaking while Buhari is trying to recover what was lost.
“I pray they don’t lure him into the oil racket so that things will work in the oil and gas sector. If our pipelines work today, there will be products everywhere. In the network under the Petroleum Pipelines Marketing Company (PPMC), we have Warri refinery and there are depots attached to it. We have Benin, Suleja and Kaduna depots fed through different pipelines and routes.
If these pipelines are working and there are no vandals, things will change. It is not possible to separate the cartel from activities of vandals.
The former is behind the vandals who they tell what to do so the pipelines do not work. If I see the vandals, I see the cartel is still at work; go and do this and that, so that these lines will not work.”
On oil subsidy, Ossai lamented that the nation has been shortchanged for too long. “Look at the issue of subsidy where our crude oil is taken away, refined and diesel, petrol or kerosene are brought back to us.
What happens to the other by-products of the refining process? If those by-products are not here where are they going to? Have they been accounted for, will they not help take our jobless Nigerians out of the labour market? So there are so many issues which I think President Buhari should look into.”