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Federal Government’s proposed N1trillion fuel subsidy expenditure in 2015, at a time Nigerians anticipate substantial increase in domestic refining capacity, has raised fresh doubts over President Goodluck Jonathan’s commitment to ending the fraudulent subsidy regime that he admitted has left the country and its hapless citizens at the mercy of ubiquitous oil marketers and corrupt officials, writes Olisemeka Obeche.


If the statistics in the 2015-2017 Medium Term Expenditure Framework and Fiscal Strategy (MTEF) document before the National Assembly for approval is to be relied upon, Nigeria would spend well over N1trillion on fuel importation subsidy in 2015. According to a breakdown of the document, the sum of N971 billion and N250 billion would be spent by the federal government to subsidize the supply of petrol and kerosene respectively in 2015, while an additional N260 million would be doled out for Subsidy Reinvestment Programme (SURE-P) intervention in various development agencies.

Although President Goodluck Jonathan had in the letter addressed to the leadership of the National Assembly admitted that the oil sector had witness stalled investments due to uncertainty occasioned by the non-passage of the Petroleum Industry Bill (PIB); he failed to provide enough reasons the country has not made progress in its quest to wean itself from fuel importation.

The Presidency is proposing N1trillion subsidy budget despite its public admission of the flaws in implementation of the programme. Recently, President Jonathan regretted the abuse of fuel subsidy programme and his government’s helplessness in reversing the fraudulent activities while launching the national identity card scheme.  “If you take the issue of subsidy, what we do is subsidizing hydrocarbon (fuel), it does not go to the ordinary people. Government spends billions of Naira every year in the budget. Sometimes it is controversial subsidizing kerosene; yet it is not, it is going very high in the market, subsidizing the PMS (petrol) and so on. And those who make the money will use that money to induce the people suffering to riot against government,” the president claimed.

Petroleum Resources Minister, Mrs. Diezani Alison-Madueke delivered a similar refrain last March while speaking at the Nigeria Oil and Gas Conference in Abuja.“The subsidy policy cannot be sustained any longer. This is because the subsidy payment did not benefit the poor it was targeting, but rather it is benefiting the rich,” she declared.

While the government had made unsuccessful attempts to scrap the petroleum subsidy programme since January 2012 amidst its claims that its funding was ‘unsustainable’, it has provided no clear answers on why it has remained impossible to successfully prosecute those sabotaging the scheme or implement several reports aimed at sanitizing the regime.

Many analysts insist that the subsidy removal palaver could have easily been dealt with if government had taken a decisive action to stop the massive thieving in the petroleum sector and used the savings to build refineries to achieve self-sufficiency in petroleum production. “We are asking the government to stop the illegal bunkering activities and theft of oil in the Niger Delta, and to use the savings from stopping widespread corruption in the industry to fix old refineries and build new ones,” declared Mr. Innocent Chukwuma, Executive Director of CLEEN Foundation, a non-governmental organisation.


Unfulfilled promise of building new refineries

As Jonathan heads for a crucial second term election next February, his opponents and critics would surely feast on a litany of his government’s unfulfilled promises. Among the many promises Jonathan has not been able to fulfill since the last three and half years is the construction of petroleum refineries to help Nigeria attain self-sufficiency in fuel refining.

President Jonathan, it would be recalled, promised in his transformation agenda among other things that, in a bid to achieve a balanced national economic development, he would focus on increasing oil production and refining capacity.“This will stimulate local value-addition and strategically position the nation to meet the domestic demand for the refined products and take advantage of a new market niche – export of refined products,” he argued.

The Ministry of Petroleum Resources later explained that in line with the President’s transformation agenda, it would develop a comprehensive framework to increase the production of crude oil to 4 million bpd, end long queues and price fluctuations in the filling stations, ensure the review of the petroleum industry law as captured in the Petroleum Industry Bill (PIB) and develop the gas sector by focusing on meeting domestic demand for gas and construct new as well as rehabilitate aging pipelines. It also announced government’s intention to establish world-class petro-chemical and fertilizer companies.

While the government has failed to meet most of the targets, including the projected 4 million bpd as the country currently produces below 2.5 million bpd, its inability to make appreciable progress on the three refinery projects initiated by the Umaru Musa Yar’Adua administration puts a sour taste in the mouth.

The Federal Government had signed an agreement with China State Engineering Corporation (CSCEC) on May 13, 2010, for the construction of green field refineries projects in Lagos, Bayelsa and Kogi states at a cost of $23 billion, equivalent of N3.7 trillion, with a completion period of five years.

Based on the terms, 80 percent of the cost  was  to be funded with a loan provided by China Export Credit Insurance Corporation (CECIC) and a consortium of Chinese banks, led by the Industrial and Commercial Bank of China (ICBC), while the Nigerian National Petroleum Corporation (NNPC) was to provide 20 percent of the funding as equity contribution.The Lagos Greenfield refinery has a proposed installed production capacity of 200,000 barrels per day, while that of Kogi and Bayelsa have 100,000 barrels per day production capacities each.

While the feasibility studies on the sites were reportedly completed in 2011, not much progress was made on the projects until President Jonathan was forced to pledge its completion at the height of the fuel subsidy removal protests in January 2012.

In a statement issued through the Minister of Works, Mr. Mike Onolememen, Jonathan had expressed his commitment to the projects and ending fuel importation in the country. “I want Nigerians to know that when these new refineries are completed, we will be a net exporter of petroleum products and prices will begin to come down, just as we are witnessing in the telecommunications sector with the GSM regime. That is my message to Nigerians. Let us support the government,” he pledged.

Four years after the projects were kick-started and more than two years after the promise was made, which forced Nigerians to accept a petrol pump price increase from N65 to N97 per liter, construction work at the refineries are yet to make appreciable progress.  Nigerians are still at a loss why the desired progress has not been made on joint venture projects just like many other proposed private refinery projects across the country are yet to take off. The only reason President Jonathan gave for his inability to fulfill his promise of building new refineries is that private investors were not interested in building refineries in Nigeria because of the fuel subsidy regime. “Why is it that people are not building refineries in Nigeria despite the fact that it is big business? It is because of the policy of subsidy, and that is why we want to get out of it. Who will build refineries and end importation of petroleum products? Subsidy must go,” declared the President.


Turn Around Maintenance quagmire

Besides promising to build three new refineries in conjunction with the private sector, the Jonathan administration also pledged to undertake a comprehensive Turn Around Maintenance (TAM) and rehabilitation of all the refineries to operate at their optimum capacity as part of its bid to curb fuel importation. President Jonathan, according to his Special Adviser on Media and Publicity, Dr Reuben Abati, set March, 2013 as deadline for the completion of the Turn Around Maintenance (TAM) and complete rehabilitation of three refineries in Kaduna, Port Harcourt and Warri.“The president’s conviction is that if you keep importing refined products, you are creating jobs for other people in other economies. The meeting agreed to take care of the Turn Around Maintenance of the refineries in the immediate term and the target is that this short term intervention will be completed by March, 2013. But the determination is even to go beyond that to also engage in the rehabilitation of the refineries,” Abati quipped. He added that Jonathan’s administration was desperate to ensure that “Nigeria stops the importation of fuel.”

Although the four national refineries have made a remarkable recovery from their previous state of incapacities, the fact that none of the refineries has started producing at full capacity after the comprehensive repair has earned the administration criticisms in certain quarters.

Former FCT Minister and All Progressives Congress (APC) chieftain, Mallam Nasir el Rufai insists the government’s inability to pursue the Greenfield refinery projects with vigour shows that it is not committed to tackling the country’s fuel importation crisis. “It would have been an easy feat to achieve considering that he inherited a plan to build three more refineries in Lagos, Kogi and Bayelsa states from the Yar’Adua administration. Today, not only is none of the existing refineries working at full capacity, but there is nothing to show that even a single new one will be nearing completion by 2014,” el-Rufai  said.

Mr. Augustine Chukwudum, President of Ndigbo Unity Forum (NUF) also criticized President Jonathan over his government’s failure to build the promised new refineries.“In 2011, Jonathan promised to build three oil refineries and where are the refineries now? The prices of petrol and kerosene have risen beyond the reach of the ordinary citizens,” Chukwudum said.


Legislative Probe

Having waited for the Presidency to take desired steps towards constructing the long-awaited Greenfields refineries in Bayelsa, Kogi and Lagos states to no avail, the House of Representatives in late October commenced a legislative investigation into the N3.7 trillion projects. The House launched the latest probe on the petroleum downstream sector following a motion raised by Abbas Tajudeen, PDP lawmaker from Kogi State.

While presenting the motion tagged ‘Need for urgent explanation of the failure to construct the N3.7 trillion Green Field Refineries at Lagos, Bayelsa and Kogi states four years after the award of the contract’, Tajudeen reminded the House that five years is enough for the project to have been completed while no tangible progress has been made four years on. “No tangible work has been executed at any of the three project sites with just a year to the end of the project period for completion of the refineries, even though the Minister of Petroleum Resources had assured the public of the commitment of NNPC to pursue the projects as soon as the White Paper on the report of the 22-member task force headed by former Finance Minister, Kalu Idika Kalu, was released. We are amazed that despite a favourable recommendation by the task force for the Lagos refinery, there is no evidence of plan to construct a refinery at the Lekki site by year 2015.”

While the outcome of the latest legislative scrutiny into the affairs of the Ministry of Petroleum may not likely provide quick solution to the stalled refinery projects,   the gig-saw puzzle is why the federal government appears not to be addressing the issue of fuel subsidy and ending the costly fuel importation as soon as possible.

“From all indications, the same forces benefitting from the fuel subsidy regime are frustrating the efforts to build more refineries so as to end fuel importation in this country; and the government is helpless in this situation because these are the same people that are bankrolling the president’s re-election bid,” Mr. Kingsley Efughi, an energy analyst said.


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