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Investors’ interest in Nigerian refineries drag on FG’s stringent conditions

Several global investors who have shown interest in investing in the rehabilitation and even building of refineries in Nigeria have been shut out on the back of the Federal Government’s firm stance on securitisation of the funding options for the would-be investors.

‎The Federal Government is seeking a guarantee and securitisation of funding options of would-be investors to ensure its prized assets are properly secured, a condition which some of the intending investors consider as stringent.

“‎Nigeria has stringent conditions, such as sovereign investment guarantee which ensures investors commit to terms of payments from the bank that is facilitating their investment to provide payment guarantee and assurance to the government, to ensure complexities that come with such investments are properly streamlined,” Rabiu Suleiman, an engineer and senior technical adviser to the minister of state for petroleum resources on refineries and downstream infrastructure, told BusinessDay.

Suleiman noted, however, that the Federal Government is discussing as well as exploring other funding options that could provide some measure of comfort to the investors‎ to invest in the refineries’ upgrade.

“The government is discussing other funding options with relevant government agencies concerned, such as the Federal Ministry of Finance, the Central Bank of Nigeria (CBN), the Debt Management Office, in a bid to explore options that could attract investors and lessen the burden of internal turnaround maintenance option being currently borne by the NNPC,” Suleiman said.

“The president feels ashamed that during his time as federal minister of petroleum, Kaduna and Warri refineries were

built. However, now he is the president, he is putting everybody to task to ensure that the refinery plants are brought back on stream for optimal performance,” he said.

‎Nigeria main refineries consisting of Warri, Port Harcourt and Kaduna are performing sub-optimally, which had seen the NNPC become the sole importer of a product which nature and providence have given the nation without charge.

‎To worsen the concern, Nigeria’s refineries made cumulative loss of N114.3 billion in the first 11 months of 2018.

Figures obtained from NNPC showed that within the first 11 months of 2018, the Kaduna Refining and Petrochemical Company made a loss of N31.62 billion, Port Harcourt recorded a N44.2 billion loss, while Warri Refinery lost N38.5 billion.

Despite the much-acclaimed turnaround maintenance, the refineries have not performed above 15 percent since the NNPC confirmed going on with the programme.

Adeola Adenikinju, a professor of Energy Economics, told BusinessDay that the Federal Government must ensure it uses all available options to attract investment into the downstream sector, considering its huge economic impact.

“If we get the investors ready, let the government also ensure that the value chains of the petroleum sub-sector are harvested for wealth creation as has been done by the Gulf countries who have diversified their revenue base away from oil,” Adeniknju said.

Austin Onuoha, a research analyst in the petroleum sector, said the Federal Government must be able to encourage local investors to invest in Nigeria’s refineries by ensuring they are attracted with various incentives.

“The funds can be sourced at home for refinery investments. Can we find a way and reach out to deep pocket investors in Nigeria even if it means giving them some measure of concession and tax rebate while using that to repair our refineries which is long overdue? The pension fund is also there, can’t we explore that option?” he stated.

Speaking further, Suleiman said the Federal Government has, however, recorded some appreciable feats in the modular refineries.

“When we started, it was only about 23 refineries that had been registered for several years. We expanded the registration of modular refineries to about 44, both modular and large-scale refineries. Out of the 44, 16 have reached an advanced stage – to a level of what we call authority to establish. The process has been simplified since the engagement with the Niger Delta stakeholders,‎” Suleiman said.

“We made it that once you secured the land, ‎the frontage engineering is reduced, and within two weeks you will be granted licence to establish. The process is totally simplified and uploaded in DPRS website.

“From licence to establish and licence to construct, you carry out the detail engineering – in terms of size, location, technology to be deployed, where is the crude oil market. Once you satisfy this, you are given the licenced to‎ construct. I can confirm to you that two refineries are ready for commissioning,” he said.

Experts are further worried that the amount spent by the Federal Government on the importation of petrol rose nearly by 50 percent to N2.95 trillion last year.

Data from the National Bureau of Statistics show that the country spent N1.97 trillion on petrol imports in 2017, N1.63 trillion in 2016, and N1.14 trillion in 2015.

Most notably, petrol imports accounted for 22.4 percent of Nigeria’s total imports in 2018, up from 20.6 percent in 2017, 18.4 percent in 2016, and 17 percent in 2015.

‎Industry watchers say the Federal Government must explore all available options in attracting the needed investment to get the refineries back on track, which would address concerns of petroleum import and over bloated subsidy payments.