Barring a last-minute change of plan, which may be informed by political expediency in the buildup to 2023 general election, the All-Progressive Congress (APC) government is likely to do away with the controversial policy of subsidising petroleum products. The persistent argument is that the subsidy regime, which is mired in corruption and other sharp practices, is not sustainable.
Subsidising petroleum products with transparency and accountability would been acceptable to a limited extent. But the real headache is that the nation’s four major refineries are moribund. Consequently, all the refined fuel consumed in the country are imported with its foreign exchange implications. To that extent, therefore, it is inevitable that the contrived expenditure on subsidy is undesirably burdensome.
Records indicate that from 2006 to 2018, not less than N10 trillion was spent on petroleum subsidies by the Nigerian government; about N3trillion was spent on subsidies in 2019 and 2020 and in 2021, fuel subsidies gulped N1.15 trillion of government expenditure.
Clearly, the growing expenditure on fuel subsidy, if actually there is subsidy, or what the government would rather call under-recovery, has contributed, unarguably, to a dearth of funds for other critical sectors such as health, education, infrastructure and security even as it is at the heart of why the nation continues to borrow with the current concerns about debt overhang. Fundamentally, the nation’s expenditure claims on subsidies are huge because of endemic corruption in the oil and gas sector and the fact that fuel consumed in the country is wholly imported.
Perhaps to encourage local production and ultimately address the issue of illegal refining of petroleum products with its attendant consequences, there are sustained calls for the establishment of modular refineries.
Only recently, the Federal Government said it was working to establish three modular refineries in each of the oil producing states, particularly in the Niger Delta region. If implemented, there would be at least 18 of such refineries as there are six major oil-producing states in the Niger Delta.
The Government noted that the decision to establish the modular refineries was to halt the illegal artisanal refining activities going on in oil producing areas and its impact on residents in the affected locations.
“In a bid to find alternative sources of livelihood for artisanal refiners and to encourage them to disengage completely from their illegal activities, the federal ministry of Environment in collaboration with the Office of the Senior Special Adviser to the President on Niger Delta Affairs and other critical stakeholders, are working on the establishment of three modular refineries per state in the oil producing areas as a pilot scheme to engage them (artisanal refiners)” Sharon Ikeazor, Environment minister, said in a statement.
Interestingly, Ikeazor said agencies like the Niger Delta Development Commission, Petroleum Technology Development Fund, Nigerian Content Development and Management Board, and the National Agency for Science and Engineering Infrastructure would support the project so as to ensure that the refineries are designed and built in Nigeria using local expertise.
The House of Representatives, in one of its sessions, directed the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to grant licences for the establishment of modular refineries. The lawmakers also called for a review of the existing 52 licences to enable either the cancellation or granting of additional licences.
As a newspaper, we believe that the move to focus on modular refineries is very apt at this time as doing so would provide an avenue for those participating in illegal/artisanal oil refining the opportunity to run a legitimate business under proper technical, commercial and environmental regulation.
The activities of illegal refineries, which have continued to endanger the environment, also constitute security and economic threats to the nation. It is partly responsible for the soot currently experienced in Rivers State and other parts of the Niger Delta Region.
But the irony is that illegal refining activities will be hard to phase out, may be over time. The reason is simple: those engaged in it have made good money from it that they will find it economically unattractive to return to paid employment that modular refineries will offer. However, we feel persuaded to encourage government to actualise that policy regardless of the distractions of a few non state actors.
We, as a newspaper, recall that this is not the first time the government will promise to construct modular refineries. Will this be the last time, since the government has previously promised and failed to deliver?
As the clamour for the removal of fuel subsidy continues to gain traction, the government more than ever before, must remain committed to its pledge of establishing modular refineries as that will support local refining and help cut costs associated with importation of refined products.