Why Buhari, Kachikwu must keep the refineries working

No doubt the appointments of Dora Akunyili (OBM) and Nasir El Rufai as NAFDAC and FCT Chief Executives respectively, stood out as two of the most purposeful appointments of the Obasanjo administration. The recent appointment of Dr. Ibe Kachikwu as the new helmsman at the Nigeria National Petroleum Corporation (NNPC) holds out the same potential.

Indeed what may be different when prognostic postulations are attempted in respect of Kachikwu is that while Akunyili and El Rufai may have been Obasanjo’s gambles of sorts, Kachikwu is clearly a well rounded peg in a round hole. While the earlier two successes showed excellence in academics and administration respectively, before their appointments, Kachikwu has shown excellence of uncommon measures in both academics and administration.

For the latter, the PhD holder from the Harvard Law School and a first class UNN Law graduate has over 30 years experience in administration. This, before the new appointment, peaked at the position of Vice President in the blue chip ExxonMobil Company and the most senior African in any multinational oil company operating in Africa.

These flying-colours credentials, more than anything else, arguably suggest the enormity of expectation placed on the shoulders of the new NNPC boss. Little wonder it has been reported that Kachikwu’s initial reluctance to accept the job was informed by the “fear” of denting his impeccable credentials with the possibility of failing to solve the larger-than-life problems of Nigeria’s sick golden-egg goose; the NNPC.

It is in the light of the above that we must appreciate the six-point frame of reference handed over to the new NNPC boss by President Buhari. These include ridding the NNPC of corrupt elements; to recover all stolen crude oil funds with the help of the Economic and Financial Crimes Commission (EFCC) and the Directorate of State Service (DSS). Others are a review of the structure of the NNPC with a view to making it compete globally; giving targets to all subsidiaries and put in place performance benchmarks, and lastly fixing all refineries, which must work at optimal levels.

So far in Nigeria, regime after regime, getting the refineries to work has been like making the corpse walk. Yet this must be the most priority not just for any NNPC boss, but for any well focused federal government. The price of petroleum products particularly the PMS remains the single strongest underpinning fabric for general price trends in the economy and to this extent inflationary pressures, due to its domino dynamics. It is this latter factor that justifies the subsidy regime which aims at putting petroleum products at sufficiently low levels. The idea is to stem the heavy impact on inflation open-market-determined prices would have occasioned.

Analyzing the impact of high petroleum products prices on the macro economy will unduly detain us here. It suffices to say however that petroleum products, due to a huge dearth of public and economic infrastructure, play an undue excessive role in driving the entire system. However, as it turned out most of the country’s refined products are imported and to this extent prices are governed by the exigencies of the international market and trade.

Now the factor of “importation” had opened an easy window for monumental fraud in the name of oil subsidy such that sustaining subsidy under the hitherto “importation” structure would certainly break the country’s back. Said in other words Nigeria will simply be slaving for a few persons in and out of government who are euphemistically referred to as the subsidy cabal.

Put very simply the subsidy scam works as follows: an oil marketer / importer shows evidence of importing X volume of products that qualify for subsidy, majorly petrol and kerosene. The naira value of reaching the consumer plus normal profit per litre is higher than the controlled price. Then with the evidence of importing that X volume and getting the products to the market, the marketer / importer is paid the difference by the Ministry of Finance based on certification by the Petroleum Products Prices Regulatory Agency (PPPRA).

Such evidence would include, inter alia, the Form “M” that covers the particular consignment, evidence of funds transfer to foreign sellers of the products, the bill of lading covering same, evidence of inspection and certification by the PPRA, and hard evidence – precisely bank statement – showing evidence of purchase by retailers who must be firms registered with the Corporate Affairs Commission. As tight as these requirements may have been, the cabal which comprises gangs of marketers and government officials, perhaps with the connivance of intermediaries including banks, has managed to raise “papers” in evidence for products never imported. They would then collect the money, which have so far run into hundreds of billions of naira.

That said, it is clear that the best way to completely deal with the oil subsidy scam is to get the refineries to work. If at all subsidy must be provided for – which is doubtful – it would then only cover products emanating from the local refineries. As this will automatically make imports unprofitable, it would naturally stop the importation of refined products, or at least make it easier for the NNPC to be the only authorized importer by law.

But then there is a very big task up hill. For many years, the cabal has beaten government after government that has tried to work the refineries which would have taken them off business. So the stakes are sky high both for the cabal and for the federal government. It requires a lot of attention in terms of funding, courage on the part of the new NNPC management and political will on the part of President Buhari. But the issue of refineries coming as the lowest rung in Kachikwu’s frame of reference, one wonders what position this is in the President’s list of priorities vis-a-vis the other burning issues threatening to consume the NNPC. Now that the refineries have opened for business, one indeed wonders for how long.

Chuba Keshi