Refineries As A Cesspit Of Graft

Again, the House of Representatives has resolved to investigate the over $18 billion reportedly spent on rehabilitating Nigeria’s state-owned refineries. To many watchers of Nigeria’s oil sector, it is a well-worn monumental scandal that does not deserve serious attention. But it needs revisiting. It’s worth reopening not because anyone’s wrist will be slapped or any head will be knocked for participating in the mind-boggling and unconscionable malfeasance. But it needs to be re-examined because it may offer President Bola Ahmed Tinubu the requisite opportunity and courage to seal off the cesspit of corruption called state-owned refineries that have assaulted our collective sensibility and assailed our national integrity for decades. If the House is ever serious, its findings should be made public to restore public trust and accountability in the oil sector.

Recently, a fresh searchlight has been on the oil sector. In March, the Senate conducted a hearing on the state of the refineries.  According to the Daily Trust report,  the over $18 billion reportedly spent on rehabilitating the four Nigerian state-owned refineries did not achieve any tangible results. Consequently, the report stated that the House had set up an ad-hoc committee drawn from the Committees on Petroleum Resources (Upstream and Downstream), Public Accounts, Anti-Corruption, Finance, and Legislative Compliance to probe the funds appropriated and disbursed for the rehabilitation of the refineries between 2010 and 2024.

This is a huge amount of money. If you add $18 billion to the other Turn-Around-Maintenance costs before 2010,  you will surpass the claimed  $20 billion cost of the state-of-the-art Dangote Refinery.  This is also half of  Nigeria’s gross foreign reserves of $41.31 billion. No doubt, $20 billion could have gone a long way to construct another power grid that would have alleviated Nigeria’s epileptic electricity supply.

But this is not a huge surprise.  Even with this stunning revelation, it is improbable that any Nigerian will be shocked. Corruption news is not new to us. We live by and with it daily. Indeed, we have lost count of the probes specifically set up to unravel the rot in the oil sector. Apart from the series of the National Assembly’s sabber rattling, a particularly disturbing one was set up by President Goodluck Jonathan in 2012 when he appointed Nuhu Ribadu, a no-nonsense anti-graft Czar,  to head a special task force to look into the rot in the Nigerian oil industry. There was plenty of rot to be found. As the staggering scale of the skulduggery emerged, Ribadu’s report implicated ministers, parastatals and oil majors in mismanagement and dodgy practices that are conservatively estimated to have cost Nigeria $35-billion over a decade, or more than an entire year’s government spending then. Put another way, at least 10 per cent of Nigeria’s annual budget could have been squandered into private bank accounts and fat corporate profit margins over the period.

Some of the highlights the report include: the state oil firm selling oil to itself at ridiculously low prices, short-changing the treasury to the tune of $5-billion; failing to collect royalties from the likes of Shell and Sinopec, creating a $3-billion black hole in accounts; “losing” hundreds of millions of dollars owed to the government as signatures bonuses on new deals; and allowing oil ministers to award contracts at their own discretion, without even an attempt at a tender process.

The task force noted that the refineries had not been efficiently and safely operated and maintained for more than 15 years. It said changes in the ownership structure and business model of the refineries were necessary in order to turn them around.

The $18 billion TAM fraud is, therefore,  just another stark example of mismanagement and potential corruption in the country’s oil sector. It persists because no one ever gets punished. It endures because the itchy fingerprints of the highs and the powerful are quite discernible in the honey pot.  No one was ever punished.

But compare the Ribadu probe with Brazil’s Petrobras scandal of  2015. As Forbes magazine captured it, the original Car Wash (Operação Lava Jato) scandal uncovered systematic corruption in Petrobras and among high-level politicians and contractors. Over time, as the investigations widened, the locus of damage spread well beyond Brazil’s border: global investors, multinational supply chains, and brand reputations all reeled. The links between the worlds of business and politics also surfaced. The scandal, which centred around $5 billion in bribery,  implicated leading businessmen, federal congressmen, senators, state governors, federal government ministers, and former presidents Collor, Temer and Lula. Companies and individuals accused of involvement agreed to pay 25 billion reais in fines and restitution of embezzled public funds.

But Brazil is not Nigeria. NNPCL is the state and the state is NNPCL. If you could unravel the secrets of the petroleum sector, you would unravel the secrets of the Nigerian state. Why is it that some Nigerian presidents since 1999 appropriated the juicy petroleum ministry to themselves?  President Olusegun Obasanjo initiated the jaundiced tradition and Muhammadu Buhari justified it by saying he took the job to right the wrongs in the oil industry. Tinubu, too, serves as his own petroleum minister.  And one of President Yar Adua’s retrogressive actions was the reversal of two of the refineries’ privatisation deals in 2007.

So what shall we tell the President? Nigeria’s oil sector has been plagued by profiteering, theft and under-investment. President Tinubu should break the jinx. Like the fuel subsidy regime, the TAM of the refineries has always been a monumental fraud; it is unsustainable and should be sold. One report calculated that the four refineries (PH is actually two) with a combined 445,000bpd installed capacity have gulped over $25 billion over three decades. NNPCL once shot itself in the foot by revealing that it would require $7 billion to $12 billion to build one similar to the combined nameplate capacity of Port Harcourt’s 210,000 barrels of crude per day. It means at least three refineries would have been built from the wasted money

Though the House’s probe into the $18 billion expenditure is a step in the right direction, it is not enough. Tinubu should immediately take steps to privatise the refineries as advocated by some stakeholders, including the NNPCL’s Group Chief Executive Officer, Bayo Ojulari. After all, Ribadu, who once closely smelled the rot, is now the National Security Adviser to the President. He should brief Mr. President on what he saw then. But more than anything else, President Tinubu now has a real opportunity to sell off the refineries in one go.

– Adediran writes via [email protected]