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Revoking idle refinery licenses

With the worst over between the Federal Government and organised Labour over the recent steep hike in petrol prices,  Minister of State for Petroleum Resources, Dr Ibe Kachikwu, has served notice that the FG would soon revoke the refinery licenses that are not ready to set up shop.

Between 2002 and 2014, about 25 licences were issued to private investors to capitalise on the high volume of consumption in the Nigerian market and establish a variety of refineries. However, despite the series of price hikes on petroleum products which have taken place since the beginning of the liberalisation of the downstream sector of the petroleum industry some fifteen years ago, only one venture – the Dangote refinery – appears to be aggressively on course.

The argument of the prospective investors has always been that unless the sector is deregulated to enable the forces of demand and supply  determine the true market values of refined products, it will be impossible to risk private capital on the venture. They imply that mere price hikes will not give the necessary assurances.

Since government has demonstrated over the past thirty years that it is no longer able to manage its refineries and provide steady flow of petroleum products, we have always been of the strong view that nothing short of total deregulation would bring lasting solutions to this problem.

While we agree with Kachikwu that the licence holders who are clearly unserious or have no financial or technical capacity to deliver on their licences should be made to give them up, we also advise that liberalisation alone may not suffice.

The Federal Government should consult and dialogue with stakeholders in the sector (including the license-holders) to ascertain, first hand, other issues militating against the start-up of private refineries in Nigeria. We are sure that the challenge of security and stability in the sector will be a strong factor.

The frequent militancy and disruptions in the oil-producing areas must be permanently addressed through dialogue and social contracts among the Federal Government, oil producing states, communities and investors. Everyone must be brought on the same page before people will feel free to risk their capital.

The Petroleum Industry Bill (PIB) which is being repackaged by the Buhari administration must also address all the concerns of the stakeholders. It should no longer be a victim of inter-regional politics, whereby groups outside the oil-producing zones see themselves as the “owners” of the oil resources in other people’s communal territories.

The cheering news about the sector is that due to our large market, refineries will be among the most lucrative investment opportunities ever ceded to the private sector in Nigeria when the conducive atmosphere and policies are provided.

 


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