For a long time, I have advocated for the Federal Government to privatize the oil and gas sector, which has been tightly controlled since oil was first discovered in commercial quantities in 1956 in Oloibiri, now in Bayelsa State.
I reiterated this point in my column, last Tuesday, August 27, in an article titled, ‘Understanding The Toxic International Petrol Politics In Nigeria,’ where I shared the following perspective: “Currently, there are five fully operational modular refineries: Aradel in Port Harcourt, WalterSmith in Imo State, Edo Refinery and Duport Midstream in Edo State, and OPAC in Delta State, with a combined processing capacity of less than 20,000 barrels per day.”
I further noted: “These smaller refineries are expected to benefit from President Bola Tinubu’s recent directive to sell the 445,000 barrels per day of crude oil, previously reserved for local refining in naira. This crude oil reserve was intended to supply the four NNPCL refineries, which have been non-functional for over a decade despite consuming over $25 billion in turnaround maintenance without producing even a single liter of petrol.”
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I concluded my appeal with advice that the refineries should be transferred to the private sector, as NNPCL lacks the capability and efficiency to operate them profitably: “Hopefully, the current administration will recognize the wisdom in my advocacy for selling the struggling government-owned refineries to private sector players who can operate them more efficiently, as I have argued in numerous media interventions over the past decade.”
I have consistently argued that the government has no business-in-running- businesses. Following the commissioning of the Dangote Refinery by former President Muhammadu Buhari on May 22 of last year, I wrote an article advocating the sale of the struggling NNPCL-owned refineries. The article, titled, ‘Tinubunomics: Time To Sell The Petroleum Refineries,’ was published on August 15, 2023, and directly addresses the current situation.
If NNPC Ltd had fully committed to selling its controlling interest to private investors, it would demonstrate that the nation’s leadership is serious about truly opening up the oil and gas sector. Beyond that, the move would have alleviated the burden on ordinary Nigerians who have long suffered from fuel shortages, a crisis that has plagued the sector since its inception and even to date that queues have returned to petrol stations again causing avoidable anguish on motorists.
In the piece, I made the case as follows:
“The universal principle that government has no business in business is crucial in solving the current energy crisis affecting both our leadership and citizens. It’s unnecessary to reiterate that government operations are inherently inefficient due to the bureaucratic hurdles typical of public sector governance. Such complex processes are ill-suited for running the business of refining petroleum products, a task that requires the intricate coordination of human expertise and advanced technology.”
I further argued:
“Operating an oil refinery demands a high level of agility and quick decision-making to achieve optimal outcomes. In addition to the government’s inability to act swiftly, which hampers progress, there’s the fundamental difference in the objectives of government operations versus business operations.”
I also pointed out:
“The primary role of government is to organize and protect its citizens for progress and prosperity. It achieves this by ensuring compliance with the rule of law, which both leaders and the governed must respect. This adherence to the rule of law is essential for establishing and maintaining law and order, benefiting all members of society and legitimizing the government.
“What this means is that the government is not driven by efficiency or speed but by its capacity to provide equity and justice for citizens, as well as uphold governance principles and ethics for the greater good of the society.”
To support my argument with an ideological foundation, I referenced a well-known philosopher:
“As John Locke stated, the purpose of government is ‘to secure and protect the God-given inalienable natural rights of the people.’”
I further reinforced my point by explaining the appropriate role of government in a market-driven capitalist economy like ours:
“Among other responsibilities, the government essentially provides the legal and social framework within which the economy operates. This means that the government is not meant to be a business operator but rather to ensure a level playing field for businesses to compete.”
Expanding on the issue, I contrasted the ideal scenario I was advocating with the reality at the time the original piece was written about a year ago:
“Unlike the forces that drive business, where companies thrive on competition with similar service providers to gain a market advantage and thereby add value to society, the situation in Nigeria was quite different. The government had been the sole investor in oil and gas refining since oil was discovered in Oloibiri, modern-day Bayelsa, in 1956, creating a monopoly that stifled value creation.”
I then reflected on the situation:
“That was the unfortunate state of affairs in Nigeria until the Petroleum Industry Act (PIA) came into effect last year. This was followed by President Tinubu’s inauguration speech on May 29, which marked the end of the petrol subsidy.”
Additionally, I noted:
“Before these changes, the Federal Government’s monopoly in the oil and gas sector was like an albatross hanging over it. Unlike the goals of government, the primary objective of any business is to meet the needs and wants of society while generating profit.”
After having firmly opposed the idea of government involvement in business just a year ago, it was a remarkable and welcome surprise that our nation’s oil giant, the Nigerian National Petroleum Corporation Ltd (NNPC Ltd), has now recognized the merit of the argument. On Friday, August 30, NNPC Ltd announced that it is inviting private sector operators to bid for the management and operation of the Kaduna and Warri refineries.
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This announcement, made by the Chief Corporate Communications Officer of NNPC Ltd, Mr. Olufemi Soneye, stated that the company is seeking both short- and long-term Operations and Maintenance (O&M) contracts for the Warri Refining and Petrochemical Company (WRPC) and the Kaduna Refining and Petrochemical Company (KRPC).
Elaborating on the initiative, he outlined the scope of work for the O&M contracts, which will include but not be limited to:
– Long-term and short-term production/ operations planning
– Production and operations execution
– Monitoring, reporting, and optimization of operations
– Maintenance planning (short-term)
– Maintenance execution
– Reliability and inspection
– Process and control engineering
– Quality Control, Quality Assurance, and Laboratory
– Specialist engineering
– Health and Safety
– Environmental management
– Turnaround maintenance planning and execution
– Minor projects
– Non-hydrocarbon Procurement
– Sub-contractor management
– Inventory and warehouse management
The NNPC Ltd spokesperson further mentioned that the company’s goal is to enhance the refining process to ensure quality by utilizing the latest technology, including Computerized Maintenance Management Software (CMMS) and Warehousing Management Systems (WMS).
While this move falls short of the complete or partial sale of the refineries, which I have been advocating for and was initially implemented by former President Olusegun Obasanjo in 2007 before being reversed by his successor, the late President Umar Yar’Adua, this new initiative is still a positive step. As the saying goes, “Half a loaf is better than none.”
The basis for my argument that existing oil refineries should be sold to private investors stems from the widespread belief among Nigerians that the government’s business is- nobody’s- business. In other words, government-owned businesses are often neglected or mismanaged. The poor performance of government-owned enterprises in Nigeria further supports the idea that, in a market-driven capitalist economy, the government should not be involved in business—a principle widely accepted in management theory.
There are exceptions to this rule, such as in monarchical systems like Saudi Arabia, where ARAMCO, a state-owned company, remains highly profitable, generating $100 billion in 2023. This success can be attributed to the unique nature of a monarchy, where loyalty to the king means that the government’s business is effectively the king’s business, as the king embodies the state.
Moreover, other state-owned oil companies in market-driven economies, such as Petrobras in Brazil ($25 billion profit), Sonatrach in Algeria ($5.5 billion), and Petronas in Malaysia ($19 billion) have also shown significant profitability. The concerns about NNPCL’s underperformance are heightened when compared to these companies, especially since NNPCL, operating in a similar market-driven environment, reported a profit of N2.297 trillion ($3.3 billion) in its 2023 annual report. Given that Nigeria is OPEC’s sixth-largest oil producer, NNPCL has the potential to perform much better and is currently underachieving.
Similarly, government involvement in business is mandatory in China due to its communist orientation, which represents another exception to the general rule that governments should not engage in business. Unfortunately, in Nigeria, the belief that “government business is nobody’s business” has become ingrained among public servants, leading to significant negative impacts on the profitability of publicly owned organizations.
