Buhari Runs Refineries With ₦154.37 Billion Loss as Social Infrastructure Suffer

As calls persist for the privatisation of refineries, President Muhammadu Buhari continues to spend public funds to run the loss-making firm.

According to the 2018 audited financial report, the three refineries of the NNPC  incurred a total loss of ₦154.37. Nevertheless,  President Buhari, who appointed himself as the Minister of Petroleum keeps the refineries running without adequate revenue to measure up.

Over the years, the financials of the corporation were not audited and always kept in secret. Mele Kyari, the NNPC GMD, said the audited financial statement was to ensure transparency and accountability. The then GMD, late Dr. Maikanti Baru, led the operation of the NNPC in 2018.

In a report, the Nigeria Natural Resource Charter (NNRC) described the operational cost of refineries as one of the world’s highest. With less than 10 per cent contribution to GDP, the combined effect of the poor state of the refineries are massive losses, depleted reserves, and low growth.

Upshoot in Staff Strength and SalariesFor Top Directors

Dataphyte’s analysis of the financial statement showed that 210 directors at the Kaduna Refinery received over 15 million each as salaries in 2018. The figures represent more than ₦3 billion despite the non-functionality of the refinery. It is also an increase from 127 directors that received above ₦15 million in 2017. 

The sharp increase puts forward transparency and accountability issues in the recruitment process. The inclusion of 80 high paid directors to the refinery’s account posed a shocker on the fiscal responsibility of the government. In total, salaries, wages, and other benefits gulped ₦13.85 billion from the Kaduna Refinery alone.

For Warri Refinery, salaries, wages, and other allowances gulped ₦20.99 billion. Port Harcourt refinery spent ₦18.79 billion on the same expenses.

Corruption Still Headache for Nigeria’s Refinery Business

Corruption is a big issue in the oil sector. Others include lack of maintenance, pipeline vandals, and oil theft.

The release of the financial statement is to bring openness, but most of the sectoral activities are still shrouded in secrecy. Other shortcomings are on mismanagement of public funds, overburdened costs, personnel expenses, and recurrent spendings.

In 2015, Kaduna State governor, Nasir El-Rufai called for the privatisation of the nation’s refineries. His argued that was the most realistic option open to the country, and that NNPC has constituted itself as a parallel government.

₦154.37 billion Lost, ₦160.13 billion Incurred Expenses, a Shame On Capital Expenditure For Education, Agric, and Health

Juxtaposing the losses to allocations in critical development sectors shows a shameful act on the government’s focus and spending. For example, President Buhari’s budgetary allocation to the agriculture sector was ₦135.6 billion, ₦203 billion, and ₦137.9 billion in 2017, 2018, and 2019. Agric is one of the lifelines of Nigeria’s GDP, contributing 20 percent to 21 percent per year.

In the last five years, the Ministry of Agriculture received the sum of ₦592.9 billion. “If Nigeria had spent trillions of naira earmarked for the refineries on road infrastructure, there would have been a great impact on human lives. If you share the accumulated losses from these refineries over the years to households, each person should be getting above 20,000 in a poverty-laden nation,” Atiku Samuel, a policy analyst told Dataphyte on the phone.

Mr. Atiku queried how long President Muhammadu Buhari-led government will continue in this unsustainable path. “For how long can the Nigerian government continue on this unsustainable path? We all know these are the issues, why not sell-off or hand them over to investors to make a turnaround and make them viable.

“This will also allow us to save trillions of naira pumped to the NNPC yearly.”

He said, “the refineries are rotten pipes and need sell-off. It became a heavy load on public funds. Imagine using 99 percent of government revenue to service debt and the entire salary of staff is from borrowings.

According to the NNRC report, the refineries gulped ₦276.872 as operating expenses in 3 years. The amount can build 10,000 libraries (at a cost between ₦10 million to ₦20 million each) across the country.

Checks by Dataphyte also show that the amount would have also built almost 10,000 health centres across the 109 Senatorial Districts. Also, the ₦15 billion salaries of 210 Directors at the non-functional Kaduna Refinery would have built more than one health centres across Senatorial Districts in Nigeria’s 36 states.

Nigeria’s Post-COVID-19’s Bouncing Back Policy

But none will happen if the government continues to place emphasis on oil above other key economic drivers. In its bouncing back policy (Nigeria Economic Sustainability Plan), the government says it will deregulate the price of refined petroleum products. Establish a framework for maintaining the national strategic stock. It also wants the NNPC to rationalise deductions from oil sector revenue to maximise payments to the Federation Account. All these are not enough without a good implementation policy in place, total removal of oil subsidy by allowing market forces to determine the prices.

Suggesting a way forward, Mr. Atiku tells NNPC to reform and refocus its energy on fresh revenue streams. “To be able to be competitive in the energy-sovereign market, NNPC should do away with assets that are not useful. “The world is moving away from PMS, what does that portray for Nigeria. For instance, instead of capitalising on refineries, why not look into renewable energy. We have a huge gap in gas supply. We have pipes to lay and other works yet undone. These would create a viable market for the sector and not build hospitals. NNPC cannot turn into a government when there are thousands of things to do and make money for Nigeria.

“If a family spent its entire salary to pay a debt, of course, they are going into bankruptcy immediately. Look at those viable subsidiaries, invest in the gas pipelines, logistics. It is better NNPC re-invest before we head to a big rock, and as usual, it is the poor people that will suffer the most,” he added.