Opposing Refinery Sale is Self-serving – Adedayo Thomas


I have never been an advocate of government operation but an advocate of liberal practices for economic development. I am equally sure that labour unions are not set out to be watchdogs to government actions, which hinders developmental plans and invariably affects their workers. It is on this note that I want to pitch my tent with the Nigeria's Bureau of Public Enterprise (BPE) on the sale of Nigerian refineries.


Recently the Nigerian federal government announced plans to privatize the four national refineries by 2014. The planned sale came about due to the sub-optimal performance of the four refineries for a long time. While the combined capacity of the refineries is up to 445,000 barrel per day, the four refineries have failed to meet their production capacity, thereby worsening the situation of local consumption. In fact, recent data shows it has only being able to produce 25% of the total installed capacity. The failure of the refineries to operate maximally is a key reason why the importation of petrol for local consumption is the order of the day.


By planning to sell the refineries, the government has yielded to sound and practical judgment. The refineries have been a colossal waste of government funds and a waste of human resources. Between 1999 and 2000 alone, not less than $1 billion have been spent on the so-called Turn Around Maintenance (TAM). Lack of maintenance and other locational difficulties have prevented the refinery to operate optimally for more than two decades. The reality now is that it is cheaper to import refined product than to rely on the four refineries.


The government has consistently failed to allow economic and rational thinking to govern its decision on the refineries. It was simply being maintained because of the fear of its impact on politics. The refineries have not been producing maximally for years, yet yearly expenses are being incurred for running, maintenance and administrative activities. It seems refinery workers simply go to their offices every day to play and chat.  If that is not the case they should explain what they have been doing for the past 10 years. There is simply no rational reason why government should retain the refineries.


Unsurprisingly, the two labour unions in the sector are voicing their opposition to the sale. The Petroleum and Natural Gas Senior Staff Association (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) have vowed to resist the sale. They are arguing that government should simply pump in more money to make the refinery work.


The union position is self-serving, self-seeking and a vote for continuation of corruption. There ought to be no opposition to the sale in view of the state of the refineries and their failure. If the staff members of the refineries worked in a privately owned organization, which had been failing to operate efficiently and optimally for more than a decade, the company would have surely gone under. Despite the known failure, salaries of refinery staff are being paid and staff members are being promoted for producing nothing. What a waste. If disengaged from this service, their creative energy could be utilized in other jobs. Why do they fear the “unknown”?


This brings to mind the 5th law of sound public policy as postulated by Lawrence Reed in his seminal work titled Seven Principles of Sound Public Policy. It says, “nobody spends other peoples money the way they will spend their own.” Would the officials of the union keep spending on a failing or collapsing organization if they were spending their own money? Encouraging or forcing government to continue to pay salaries and maintaining bureaucratic structure is wasteful and no individual would spend his or her personal money like that without being bankrupt soon.


Obviously, the key interest of the unions is the effect of the sale on their members and membership dues. They have failed to see that no waste can go on indefinitely and it is in the interest of their members for it to stop now. A good union will always consider their members interest holistically. For not producing maximally, their members have missed out from capacity building and know-how they would have acquired over time. These are some of the qualities that private owner would bring on board.


Thinking that the refinery could be made to produce maximally under the present arrangement is illusionary. The political setting is poorly structured to run any profitable business even if well set up.  Governments don’t have business in businesses, period. The hierarchical and bureaucratic arrangements has made the minister of petroleum and the chairman of NNPC the overall boss to whomever is at the helm of affairs at the respective refineries which has not augured well for the refineries. A single approval must go through a myriad of bureaucratic steps whereas the private sector understands that effect of speediness in the bottom line.


Most importantly, the philosophical underpinnings of government owning businesses have been eroded by the known failure of the socialist ideology. Various experiences across the world have shown that governments often do a poor job of running a business. It is often wasteful, allowing corruption to fester and produce substandard products. Can anyone point to any functioning public structure/business in Nigeria since independence? I am sure you will all agree with me that the only successful department since 1960 is the “Corruption Department” which exists in all government structures at all levels.


At least for once, lets support this government plan (if genuine) despite millions of monumental failures since inception. I am sure the Unions are happy with the Telecommunication industry and to an extent the aviation industry in Nigeria. Nothing in developmental plans of any country works better than free market operations.


The best time to private the refineries is now. There have been efforts in the past to sell these refineries but they failed due to lack of political will to see it through. One could only imagine the amount of money that is wasted yearly on them. What should be paramount now is the need to ensure that the refineries are offloaded transparently and openly. This should be the focus of everybody. Let us support the sales and watch out, the better it will be for us.


Adedayo Thomas is the Director of Outreach/Publisher of African Liberty Organization for Development in Nigeria

[photo credit: Kaduna Refinery, Nigeria via Ventures Africa]

Adedayo Thomas offers the way forward as Nigeria dilly-dallies on the sale of refineries