For most oil-producing countries, the business of refining crude oil is not only a means for reducing capital flight but also for improving economic performance, but in the case of Africa’s largest oil producer, refineries are more of a drainpipe and a means of enriching few individuals at the detriment of over 200 million people.
If Nigeria’s largest refineries were owned by investors or shareholders, they would have been liquated or disposed of as most investors have zero tolerance for gross inefficiency and wastefulness. They believe every naira spent on a company should generate higher returns in form of bumper dividend and share appreciation.
However, the government is not a good manager as it is spending taxpayers’ money in maintaining and training staff at refineries that are moribund and recording hundreds of billions of losses.
For the year ended December 2018, Nigeria’s refineries under the management of the Nigerian National Petroleum Corporation (NNPC) recorded combined losses of N154.64bn despite having staffs under huge salaries and wages.
To assess a company’s efficiency with its employees, most companies use Net Income Per Employee (NIPE) ratio. NIPE is a company’s net income divided by the number of employees. Theoretically, the higher the net income per employee, the better.
For NNPC, rather than having Net Income Per Employee, the state behemoth recorded loss per employee.
Nigeria’s three largest refineries – Port Harcourt Refining Company Limited, Warri Refining and Petrochemical Company Limited, and Kaduna Refining and Petrochemical Limited – recorded average cumulative loss per employee of N94.18 million as at December 2018.
Perhaps more worrisome is that workers at the refineries are surplus to requirements as wage costs are higher than revenues, compounding the woes of businesses that have become a wildcat.
The refineries employed 1,639 staff and had a combined total personnel cost of N46.26 billion, leaving their cost per employee at N28.83 million. This means on average a worker earns N28.83 million in refineries that have not produced a drop of refined product in eight months.
They also incurred a total expense of N160.14 billion as at December 2018, which is 110 times revenue.
For proper context, analysis of the financial statement showed that 210 directors at the Kaduna Refinery received over N15 million each as salaries in 2018, which translates to a total of N3 billion, despite the non-functionality of the refinery. It is also an increase from 127 directors that received above N15 million each in 2017.
The report showed that the four directors earned between N10 million and N20 million in both 2017 and 2018, with the highest-paid director earning N33 million in 2018 and N27 million in 2017. The four directors, according to the report, include the managing director, Ladenegan Solomon; executive director (operations), Tsavnande Atghir; executive director (finance & accounts), Chinwe Eunice, and executive director (services), Abdullahi Idris.
The sharp increase puts forward transparency and accountability issues in the recruitment process. The inclusion of 80 highly paid directors to the Kaduna refinery’s account poses a shocker on the fiscal responsibility of the government. In total, N23.3 billion was spent on salaries and wages.
Despite having zero revenue, Kaduna refinery recorded staff training expenses of N447.8 million, local and international travels of N662.2 million, security expenses of N230.5 million, communication expenses of N37.3 million, and consultancy fees of N843 million, according to the audited 2018 account.
For Warri Refinery, its audited account by Oguobi & Co and Ijebor+Ijebor, Chartered Accountants, showed salaries, wages, and other allowances gulped N20.99 billion while operating expenses stood at N34.6 billion in 2018. Details of the operating losses revealed the bulk of the expenses were on the welfare of the staff and remuneration of the directors.
About N270.1 million and N353 million were spent on the directors’ remunerations in 2018 and 2017, respectively, while workers’ salaries, wages and allowances took N13.8 billion in 2018 and N12.9 billion in 2017. The directors include managing director, M. Abali; executive director (finance) A. E. Bisong; executive director (services), F. I.Ololo, and executive director (operations), A. Ariaga.
Other expenses included staff pension of N876.1 million in 2018 and N917.2 million in 2017; staff welfare – N275.1 million in 2018 and N73.2 million in 2017; staff training – N275.98 million in 2018 and N60.5 million in 2017; periodic benefit expenses – N2.7 billion in 2018 and N10.5 billion in 2017, and travel and hotels – N758.9 million in 2018 and N471.8 billion in 2017.
Port Harcourt refinery spent N18.79 billion on salaries, wages, and other allowances while administrative expenses stood at N24 billion in 2018.
The chairman of the board and other senior directors at Port Harcourt refinery received emoluments of about N58.8 million each for 2018, while the four other directors received a minimum of N12 million and above every year.
The directors include the former NNPC GMD, Maikanti Baru, as chairman; managing director, Abbar Bukar; executive director (finance & accounts), Aramide Ekundayo; executive director (services), Ngini Nwakaife, and executive director (operations), Ganiyu Owolabi.
