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ECONOMY-NIGERIA: Refineries That Aren’t Worth the Name

Toye Olori

LAGOS, Aug 17 2004 (IPS) - It has been dubbed the "paradox of plenty". Although Nigeria is the sixth-largest oil producer in the world, fuel shortages have become a common feature of life in the West African country over the past two decades.

Corruption in the oil sector is typically blamed for these shortages. In particular, analysts point to mismanagement of the country’s four refineries, run by the Nigerian National Petroleum Corporation (NNPC).

The refineries, built over a period of almost 25 years (from 1965 to 1989) have a combined capacity for processing 445,000 barrels of oil a day, to produce two-thirds of the fuel needed by Nigeria daily (20 million litres of fuel). However, the facilities work below capacity for most of the time, and have even been shut down on occasion because they are not properly maintained.

An overhaul of the refineries – something analysts refer to as "turn around maintenance" (TAM) – should be done every two years. However, some of the facilities have operated for more than five years at a stretch without TAM.

"During military rule, bogus contracts were given for turn around maintenance…which were not properly supervised. With the usual heavy kickbacks received by government functionaries, nobody questioned contractors who did not fulfill their obligations," says Frank Kokori, former secretary-general of the National Union of Petroleum and Natural Gas workers, and now a petroleum sector consultant in Nigeria’s economic hub, Lagos.

"That was the beginning of the rot of the refineries," he told IPS.

Ironically, Nigeria is now obliged to import refined fuel from other countries, such as Ghana and the Ivory Coast.

"I have seen older refineries around the world. I have seen the one in Cote d’Ivoire, and Ghana, (which are) working very efficiently," says Kokori. "Nigerian refineries were built with an enormous amount of money, but it is the maintenance culture that has resulted in most of the problems."

When Nigeria reverted to civilian rule in 1999, the new government tried to tackle the problems that have dogged the four refineries. But, difficulties remain.

"We thought that in this new dispensation under democracy there will be checks and balances, and that the National Assembly committees concerned should be able to call the government to order – to question why so much is spent without results," Kokori says. "(But) these were not there, so the old system of making cheap money through importation continues."

Efforts to find out what the Committee on Petroleum Resources of the House of Representatives in Abuja had done to investigate the situation at Nigeria’s refineries were fruitless.

Ishola Williams, a retired general and member of the Nigerian chapter of Transparency International, the Berlin-based anti-corruption watchdog, believes that instances of alleged graft in the oil sector would be probed with greater efficiency if more resources were devoted to the Independent Corrupt Practices and Other Related Offences Commission (ICPC).

This body was set up in June 2000 to investigate persons believed to be involved in corrupt practices. At present, it works with the police when conducting inquiries.

"The ICPC should have their own investigators," says Williams, adding that government should also set up special tribunals to hear corruption cases. At present, these cases are dealt with by regular courts, where proceedings are often delayed.

"The commission could recoup money spent investigating and prosecuting arrested culprits from stolen money recovered from such people, by retaining a percentage of the amount while the balance is paid into government coffers," noted Williams.

The notion of privatizing the refineries has also been floated as another way of ensuring that these facilities begin operating more efficiently.

Williams – even Kokori, a former labour leader – believe this would go a long way to resolving maintenance problems at the refineries.

But, environmentalist Austin Monday fears the same coterie of officials who profited from corruption in other parts of the oil sector could somehow reap benefits from a privatization programme.

"We are worried that the refineries will be hijacked by the same top government officials who have the money stolen from public coffers. It is a shame that an oil-producing nation like ours is in this mess because of corruption," he said.

In addition, government has also attempted to increase fuel availability by deregulating the import and sale of refined products earlier this year. Previously, this was the monopoly of the NNPC.

But, although availability has increased, so have prices – sparking protests by workers.

In June, the fuel price rose to about 40 cents a litre, leading to a three-day strike. Any increase in the price of fuel has serious implications for a country where, according to the 2004 Human Development Report of the United Nations Development Programme, up to 70 percent of people live below the poverty line of a dollar a day.

Femi Fanikayode, presidential assistant on public affairs, rejects the view that little has improved in the petroleum sector since President Olusegun Obasanjo came to power five years ago.

"Nigerians should not because of the problems they are experiencing presently ask government to go back to the past, when we had fuel scarcity because of a monopoly," he said. "It will take time for us to get used to liberalization, but we must give it a chance."

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