Only private refineries will solve Nigeria’s fuel crisis – Ronke Onadeko

Ronke-Onadeko-4A

Ronke Onadeko, energy and power consultant to the government of Ogun State, is also member Expert Advisory Panel (EAP) of the Nigeria Natural Resource Chater (NNRC). She is equally an accomplished entrepreneur with business interests in oil and gas, finance, telecommunications, food and agriculture, among others. Onadeko, who had acted in the capacity of the Supervising Commissioner for the Ogun State Ministry of Agriculture, is also the principal consultant at DRNL Consult Limited, UK and Delt-R Company Limited, Nigeria. In addition, she had served as Country Director and In-country Representative for BNP Paribas in Nigeria. Over the years, she has been at the forefront of Women in Management, Business and Public Service (WIMBIZ), a Nigeria-based non-profit organisation.

An alumnus of the University of Rhode Island, Durham University and Lagos Business School , she obtained a post-graduate training at the Oxford University’s College of Petroleum and Energy Studies and has participated in executive education courses at the Said Business School, University of Oxford, England. It is remarkable that in the area of oil and gas, her skills span operations, trading as well as marketing and management. In this interview, Onadeko speaks to TheEconomy’s Osaze Omoragbon on Nigeria’s recurring energy crisis, the Petroleum Industry Bill and why the economic empowerment of women is critical. Excerpts:

Ronke-Onadeko-4AAs an experienced player in the energy sector, what is your take on the recurring energy crises?
The fuel crises we have been experiencing for some time now should not be happening to us due to the fact that Nigeria is an oil producing nation. The problem is that we don’t have enough refining capacity within the country and the fact that fuel consumption has increased. Worse still, the refining capacity of the existing refineries is seriously degraded such that we cannot produce fuel to match the previous level of consumption coupled with the fact that we have not expanded these capacities.

The issue of fuel subsidy has been a recurring problem for some time now. We have been going back and forth on whether to subsidize or not to subsidize. Two years ago, we stopped seeing the subsidy line item on the budget and President Muhammadu Buhari also stopped oil subsidy. However, another word is now being used in place of subsidy. It is called under-recovery. Not much has been said about under-recovery and the Nigerian National Petroleum Corporation (NNPC) is not forthcoming about it. What I know about it as an industry person is that when crude oil is sold, the joint venture contribution that goes into the NNPC account is supposed to be used to fund the Federation Account as well as the cash-call joint venture account. These funds reside within the NNPC and the corporation is dipping into that account. That is where they get funds to subsidize fuel.

So, there is no subsidy line item in the budget but there is a deficit that should be recouped from the money that goes into the Federation Account. That in itself is abnormal and Nigerians should understand that close to N1billion daily is taken out of what should be used for infrastructure development, education, health and other developmental projects.

Is this the cause of the fuel scarcity?
On the fuel scarcity issue, there is dual-pricing structure that influences the importation of Premium Motor Spirit (PMS). There is a summer price and a winter price. In summer, all countries use the same type of PMS, but in winter there are grades that are used in the Northern Hemisphere which most refineries abroad prioritise its production ahead of the type we use all year round. This makes the PMS we use here in Nigeria not readily available and if you want it you have to pay a premium for it. So, we tend to pay higher. From September till March, the price of PMS increases. However, the Petroleum Products Price Regulatory Authority (PPPRA) template doesn’t change during these months. So, it doesn’t make sense for marketers to import fuel at a premium for which they would not be compensated. Therefore, they hands-off and the NNPC becomes the sole importer of fuel during these months.

Meanwhile, the NNPC doesn’t have the structure or efficiency and capacity to supply the entire country. That is why we have these recurring fuel crises, not because they are not able to bring in the cargoes. Of course, loads of cargoes are waiting to discharge at the ports. Some of these ports have draft restrictions such that big vessels cannot come in, so they resort to smaller vessels to shuttle in a ship-to-ship arrangement to bring them to the depots to discharge. The pipes that are being used to discharge are too small and there is a limited amount of fuel that can go through it at a time. More so, the pumps are not efficient and, at times, it takes up to a week or more to discharge a vessel. Indeed, there are vessels at the shores ready to come in to discharge but we lack the adequate capacity, and for this reason we pay heavy in demurrage of up to $20,000 per tonne on each vessel. When you multiply this by the number of cargoes, you know we are talking about huge money.

The problems are many. First we don’t have the right infrastructure to handle the vessels, we don’t have enough depots to take in the volumes and when they are discharged at the depots, we use trucks to move them out. So, fuel supply is only as fast as the trucks. In the days when there were pipelines from Atlas Cove straight to Mosimi in Ogun State and Ejigbo in Lagos, things were working because consumption was still small. There was efficiency. Certainly, if we were producing in Nigeria and refining here, we won’t have these problems. We need more depots inland and private refineries to get government out of the way.

Several solutions have been proffered including building more refineries, licensing importers and revamping moribund refineries. These solutions are always coming up whenever there is fuel scarcity. What is the most realistic solution?
These issues will always come up as long as people disobey presidential order on subsidy. It is almost a treasonable offence to disobey the president. Except you want to lose your job. Of course, people don’t want to lose their job especially in the oil industry. We are in a state of deception where people who know what is going on don’t want to speak up because if you are an importer or marketer and you speak up, you would be sidelined and your business will take a hit. So, who would bell the cat and ready to damn all consequences? Who will speak up and say really, there is subsidy and it is costing Nigerians a lot? There is a 5 to 1 ratio on what is spent on both subsidy and intervention in the budget. The subsidy bills can double health, education and transportation bills.

There could be tremendous amount of what we can do in a year with what we spend on subsidy. If we can spend subsidy amount on rails, generating power, education, primary healthcare, housing and other social services, Nigeria will be far better. So, I don’t know why everyone is in denial. Most political leaders are afraid of removing subsidy and deregulation because they are afraid of losing elections. Until a government admits that there is subsidy and we cannot afford it as a country, that is when I know that we have a government.

Given the distortion in uniform pricing caused by the fuel scarcity, what is the role of the Petroleum Equalisation Fund?
That is another place we have a leakage. One major role of the NNPC is to ensure there is sufficient fuel, good quality fuel across the country and at a uniform price. One of the challenges is that we don’t have enough fuel and even if we have the right quality, it is not evenly distributed across the country to make prices homogenous. Of the four major things the NNPC is supposed to achieve, I can only score it above average in one. That tells us that something has to happen in the NNPC because the basic things it was set up to do, it is failing at it. We should ask why the NNPC was created and see if it is achieving its goals and then we can move forward.

What is your take on the Petroleum Industry Governance Bill?
Finally, the House of Representatives has passed the other half of the bill and the House has also harmonised with the Senate. There is a stalemate between the Executive and the Legislature and nothing is being passed or the Presidency is withholding assent to passed bills. Even the budget is hanging just as some appointments in agencies and parastatals are yet to be ratified. Of what good is the fact that they have passed the PIGB that may not get Presidential assent because they are at each other’s throat?

Interestingly, the PIGB is just one part and it is not the most important part of the bill. The most important part is the fiscal terms which tell investors how to balance their finances. If investors are not guaranteed profit from their business, they will take it elsewhere and that is what has been happening to us. Nigeria is losing oil and gas investments to other jurisdictions in Africa and emerging markets. Until the executive and the lawmakers sort out their differences, I don’t really see how we are going forward.

In essence, we are losing investments due to the delay in the passage of the PIB?
We have lost a lot of investments to East Africa, Angola and even Ghana. Also, we are not the cheapest producers of crude oil but we already have a lot of oil and gas multinationals on ground. It is easy for them to continue investing in the country. However, they will not continue to operate in this opaque system where they don’t know what is going to happen in terms of remuneration, taxes, levies, and how to structure production sharing contract, among other issues. If these issues are not addressed, investors will not take us seriously.

What about the hot-button issues of host communities rights?
Host community issues, insurgencies, disturbances, vandalism all revolves around cost of doing business to these oil majors. These issues are hindrances to companies who will have to spend huge sums to protect staff and facilities. In addition to undefined fiscal terms, these are huge obstacles to investments. It is a 17-year old problem and successive governments have done nothing significant to address these issues through the PIB. The immediate past Senate President took it upon himself to work on a bill even if the Executive does not submit one, and they have now passed one part of it. But that is not good enough.

They should fast-track the remaining three parts even if they have to get three different committees to work on them simultaneously. They don’t have to wait for the current one to get signed before they commence work on the others.

The Nigerian Natural Resource Charter (NNRC) is making efforts to get stakeholders to buy into the precepts for the Oil & Gas industry. How best do you think they should go about their advocacy?
One of the things that plague oil and gas discussions is that it is not an “interesting” topic. It is not something of interest to bloggers that could help to push it into people’s consciousness. Unlike entertainment, fashion, sports and politics among others, oil and gas is quite technical and boring. Oil and gas topics are full of jargons, acronyms, and terminologies. Reading a report on oil and gas is an exercise in endurance and you jump hurdles of terminologies, indices and measurements. From first page you see measurements in barrels, then next page, they are in metric tonnes and next they are litres. So, it is not really easy to grasp these details especially the lay person.

We need to break things down using the media especially social media to educate Nigerians and develop their interests. Without that we won’t be able to do much with advocacy. The likes of us and industry people can talk oil and gas jargons, compile conference and seminar papers and reports, but those reading it will be just us. We in the industry know the problems and the solutions. But most of these people are afraid of speaking up. There are a lot of papers and documents that address the challenges in the oil and gas sector that we don’t need new advocacy or research work done. The basics that could turn the industry are known such as liberalisation and deregulation, pulling government out of running commercial entities because they are not efficient, investing more in Infrastructure, making it conducive for investors to invest including local investors.

Unfortunately, oil is the largest revenue line item under Nigeria’s revenue drive. So, politicians are probably benefiting from the sector and perhaps that is what they use to run their politics. Politicians don’t want us to speak and if you do, you get into trouble. So, we are just going round in circles when we actually have what we need to move forward. Everything boils down to leadership. Of course, if the much-needed leadership is lacking everything collapses. The 2019 general elections are around the corner and the question Nigerians should ask themselves is: are we going to be deceived once again? We need politicians that would be steadfast and do the right things. That is important and all other things we aim at will fall in line.

Development of local content in the oil and gas sector is billed as one of the ways Nigeria can wean itself of excessive dependence on foreign expertise. Are you satisfied with the level of content development so far?
I am not so involved in upstream and downstream sectors to know much about level of content development. However, not much has been achieved given the drive for local companies to participate in the sectors. The question is: do these companies have the capacity and the funding to take advantage of this, because oil and gas sector is capital intensive? I know that NNPC and the government owe oil marketers about N800billion over the last two to three years. The marketers borrowed this money from the banks and without paying the marketers, it impacts on investment. The banks will be hampered to lend to the industry because there is a limit they are allowed to lend to a particular sector as well as specific companies. It will be difficult to develop local content in the sector even if there are regulations in place to ensure that.

At the end of the day, you give a contract to a local firm to execute because it cannot access the funds; it now has to go abroad in search of partners that can handle the job. That is not local content. That is just adding another middle man who is interested in rent and that rent affects productivity and adds to the cost of doing business. If you give me a job and I take the contract abroad to be executed, I also want my own cut. So, a job that is supposed to be executed for say N10 I bid and get it for N12 of which N2 is my cut. That is not local content. I don’t know how serious we are about local content.

Your experience traverses the private and public sectors. How would you compare work ethics and expectations in both sectors?
Currently, I am a public servant. We often hear stories of inefficiencies and ignorance in the public service and the need to bring in the private sector. But for me, the public sector has the capacity. Perhaps, some public servants don’t have the enabling environment to operate efficiently. While others have ulterior motives and conflicts of interests that clouds their judgment and performance. They don’t get good pay like in the private sector and some engage in other businesses to augment their salary. In the process, some have less time to do their official assignments or deliberately display inefficiency so that a particular job can be contracted to an external consultant of which one of them may end up being the external consultant. This results in conflict of interest.

So, I don’t think work ethics is that bad. If people are compensated adequately, if they are appreciated, if capacity is built and there is appreciation of intrinsic knowledge in government and it is tapped, I believe all will be well. For example, are those about to retire from public service mentoring others? Are they passing the required information to others? So that when you retire you don’t hoard information and when a situation crops up they have to call you back as a consultant. Consequently, there will be conflict of interest. But if that person is well paid and have good pension, I don’t see why such thing would happen.

Government should institute mentorship programmes and insist that residual knowledge remains within the public service before anybody leaves. Until someone can do whatever you can do, then you can be allowed to leave. I don’t know how the Civil Service Commission can bring about mentorship. But these are some of the things that we should take note of instead of the general perception of whether civil servants are bad or good. There are both good and bad people in the public sector. Likewise, there are good and bad people in private sector.

In the ministry where I worked, there is the capacity but we could do more. The remuneration is poor and the way knowledge is taken out of public service is not being checked. These are what we should take cognizance of. You are as good as your weakest link whether in the private or public sector. This is important so that we don’t overstate the value of the private sector coming into the public sector.

You are a leading member of Women in Business (WIMBIZ). In what ways has the organisation helped mentor budding female entrepreneurs?
One of the things that have been highlighted in the last few years is STEM — Science, Technology, Engineering and Mathematics. I think it is phenomenal that people now understand that it is not when girls get into colleges that we start thinking of retaining them in these areas of expertise. Now, people go to primary and secondary schools to excite girls in STEM because we have more girls staying in schools than boys. But if those girls that take up the chunk of admission into tertiary schools are not in STEM, then you continue to get less. Currently, we are trying to make sure we build the best of women in education. To get girls in STEM we need to get them excited and let them know the opportunities out there and the versatility of the type of careers that they can have in future.

WIMBIZ as an organisation focuses on women in business, management. Interestingly too, we have added women in public service. Now we are making headway with women in politics. Women in politics come into this discussion because if they are at the helms of ministries at all levels of government, they will understand what they need to do to change the mindset of government. We haven’t had an elected female governor in Nigeria, I hope that 2019 elections will bring about the change. Until we have more women occupy sensitive positions in cabinet, we won’t be able to bring about change. Governors in Nigeria are men and as chief visionary of their states, they can only express their vision from a male perspective. But if you have more women in good positions in cabinet, perhaps, they can make the governor look through the female lens. So, we hope to see more women heading ministries, education sector, politics, businesses, among others. Without this, we are not likely to see the changes that we desire.

So WIMBIZ is acting as a catalyst to inspire, empower and educate women from management level down to those still in school. To achieve this, we have consistently engage girls in the universities in our programme called ‘Winning Without Compromise’. We let young girls know that as a woman there are ways to get through life in the university without compromise. We show them examples and build capacity. We mentor them and build their confidence to let them know the world is their oyster; they can be whoever they want to be. Today, more girls have realised that the limitations they thought they had are just in their head. We let them know they can have work, family and social life. We are made to believe that as a woman if you pursue your career too much you would have to give up family. Yes, you do make sacrifices but you can position yourself to score above average and have a good balance. So, we are going out of our way to ensure that women know this and even those at the height of their careers were raised in very traditional settings where they were told they have to give up either their families in pursuit of their career. But their rise shows that is not the case. Interestingly too, we are having more women to showcase that it is not the case.

In Africa, we are doing a lot better than our female counterparts. We have female bank CEOs, chief justices, and women heading large corporate organisations. The gap is in letting these children know that those things exist. If you ask a young girl in Nigeria if she wants to be a pilot, the vision of a pilot in her head is that of a man because she probably has not seen a female pilot. So, one of the things WIMBIZ does is to showcase women who are successful in different careers and as diverse as possible. This is just to encourage girls and women. We are also teaching them how to leverage contacts, relationships and networks to achieve great things.

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