Thursday, July 10, 2003

Memo to the Honourable Minister Of Petroleum Resources

By Aliyu Maigari Mamman

Consequent upon the end of a seven day second paralytic mass strike action against the Nigerian state in protest of your recent unilateral decision to raise the price of fuel by 53%, I humbly seek your kind permission in forwarding to you the following observations marking your historic 5th fuel price increment as head of the Nigerian state.

That one Mr Kombo Maison Braide, a Port Harcourt based energy consultant had on the 21st day of April 2003 written an article posted on the portal and published in that day’s Monday column of the Daily Trust newspaper with the caption: "The mechanics and dynamics of fuel scarcity in Nigeria." In that article sir, Mr Maison-Braide aptly analysed and brilliantly demonstrated like no other writer in my recent memory, the crux of the matter in Nigeria’s cancerous downstream petroleum sector. It is worthwhile sir, for you to read that article verbatim, as it is an informed instruction in the matter of petroleum product refining, pricing and marketing. Dr Lukman and Engr. Obaseki or no Dr Lukman and Engr. Obaseki sir, I urge you and your newly named ‘dream team’, to devour and commit to memory this article like you would a nursery school rhyme.

That Nigeria’s renown social crusader Alhaji Gani Fawehinmi (san) in an interview in the July 7th, 2003 edition of the Insider magazine, robustly rendered graphical albeit chilling details of the voodoo game behind petrol price increment from a sweet n0.08 (8 kobo) per litre in 1974 to a bitter N40 (4,000 kobo) per litre in July 2003, representing a stupendous and mind boggling increment of 50,000 per cent in a span of 29 years. In these years sir, you have been both head of state and president for eight years (1976-1979,1999-2003) heading towards your twelve year (2003-2007). As at date, you have been singularly responsible for five price increments. In fact from may 29th 1999 through July 2003, you hiked petrol price from N15 per litre to N40 per litre (representing a 266 per cent increment) in your 1st term and 5 weeks as a civilian president.

Sir, as a human being whom they say has been through the ‘valleys of the shadow of death’, I know you don’t have any personal reason to be wicked to the people of Nigeria, other than eternal thanks for their support for you in 1999. The problem sir, is just that your approach to critical issues of survival of the common Nigerian is painting your attitude and tenure on black canvas and red paint.

Sir, from (a and b) above and from recent international events in the Middle East to which we are umblically tied to by oil, I have drawn further conclusions for your indepth reflection vis-à-vis your government’s tenacious believe that only the establishment of private refineries and/or the importation of petroleum products and resale of same at the ‘correct’ free market price of N40 per litre now N34 is the solution to the fuel scarcity albatross.

As improvished, traumatized and indebted as I am myself, one in millions of victims of poor economic management of the Nigerian state resources, I still wish you well hoping and praying that for the resourceful statesman and nationalist status you have built for your self over the years, you do not end up in the dustbin of history on or before May 29th, 2007, at an advanced age impossible to regain your image, if (God forbid) this country’s economy collapses under your presidency like a pack of cards!

June 12th, the die is cast. Sir, as significant as this date is to Nigerians, on June 12th 2003, the ‘United States Colony Of Iraq’ (apologies to the proud Arabs of Iraq) signed a quantum 9 million barrels per day Iraqi crude oil term lifting contract with Chevron Texaco (5million bpd) and other British and U.S ally firms (4million bpd). This singular event will not only change the course of Nigeria’s economy but, that of all other OPEC member and dependent countries of the developing world. The 60% sales proceed of Nigeria’s 2 million barrels per day crude oil hitherto bought by the USA, will dry up in about 180 days from now. The world oil price will slide to between $15 - $20 per barrel and sir, sad enough you will not find the forex to purchase imported petroleum products again, against pressing and competing recurrent costs of salaries and overheads, national food, water, medical and state security exigencies. Capital spending sir, will grind to a gradual halt.

At this point honourable minister sir, only fully operational, commercialised and brand new government built and privately managed refineries will save Nigeria from an eminent economic collapse. This is more so because the very channel of domestic economic recovery and growth is premised on local production and export of real sector goods, which in turn have PMS petrol, AGO diesel, DPK kerosene, Low and High Pour Fuel Oils as the arteries of life in the process of industrial production.

Honourable minister of petroleum resources sir, the following constitute my humble argument for brand new refineries before the close of year 2006.

Going by the expounded mechanics and dynamics of crude oil refining, pricing, marketing and distribution locally and internationally, coupled with your continuous importation policy as demonstrated by Mr. Maison-Braide in his article, your government will have to raise the price of petrol to about N120 (One Hundred And Twenty Naira!) per litre to find temporary solace as it were, before in my opinion, a creeping and crippling uncontrolled triple digit inflation sets in by the close of year 2007.

That about $900 million (N121 billion) has been pumped into revamping of the four refineries (between 1999 and 2003) with a resultant combined average capacity utilization of less than 25 per cent (150,000 bpd), is curiously amazing and says everything about officially condoned and stage managed corruption and NNPC policy myopia. It is a well-known fact that the same amount of money could have built a 150,000 bpd world-class modern refinery in say Eket or Lokoja.

In furtherance sir, I am certain you have heard that Iran built five refineries less than seven years after its war with Iraq and, today Iran is a leading exporter of refined petroleum products.

I therefore beg to posit that 3 (three) new refineries taken up as urgent national priority projects between now and July 2006, refining about 300,000 to 450,000 barrels per day of our 530,000 bpd domestic crude oil demand, will do the magic. These refineries sir, can only be built by government and made efficient with a 100% absolute private sector management.

The fact that over 15 licenses for private refineries were recently issued means absolutely nothing to the improvised Nigerian citizens today. The government should know more than any day dreaming Nigerian investor or speculator that no single investor or group of investors can today place the necessary guarantees for even a $500 million foreign finance investment in our "okada and pure water" economy, where a 10 year standing university graduate with an average family of five, finds it almost impossible to raise $5 (N675) per day for feeding his family legitimately.

Sir, the matter I place before you is really grave. All the so called Nigerian banks put together can not secure a 1st class guarantee through any G7 economy bank in order to facilitate a $1 billion private investment financing for a single 150,000 bpd refinery. The argument for small private refineries of less than 100.000 bpd as a way out, does not hold against the logic of economies of scale.

You would of course expect Shell Dutch a company tapping the cheapest oil sector labour on planet earth and exploiting our oil for over 49 years since 1954 or even the opportunistic giant Chevron Texaco to build domestic and export refineries by now. For obvious reasons that need no over flogging, they never will.

Sir, you ought to know by now that only the Nigerian government has the capacity now and for the next foreseeable years to place the financial, crude oil supply and security guarantees absolutely needed for new refineries. The government must face this critical socio-economic obligation of building new refineries now or pay dearly for lack of new refineries in about three years or less from now. The government must efficiently and effectively privatise the management of refineries, distribution and marketing of petroleum products.

Sir, on the matter of the 29-year and 16 year old refineries in Port Harcourt, Warri and Kaduna, your government could pursue a vigorous commercialisation and divestment programme with the government and business community of the Niger Delta states and Kaduna State. Government must establish an ownership and control policy for the benefit of all oil producing and refining states and their people, in order to guarantee and stabilize the pipeline flow of crude oil to all the existing and new refineries in say Eket, Lokoja, Shagamu and/or Owerri.

Conclusively in all honesty sir, you are faced with a herculean task in avoiding an impending economic woe. However you might have lost sight of the vital economic priorities of our country, lets for a respite put behind us the N121 billion wasted on the old refineries, the over N150 billion subsidy on petroleum products and about N 400 billion cost of importation, the N60 billion Abuja stadium, the over N30 billion National ID card project, the over N300 billion funding of roads, the over N60 billion funding of NEPA, the N700 billion funding of local governments, the over N2000 billion funding of the states and federal governments etcetera, etcetera all in a space of 4 years.

Lets be positive sir, that with your rare and in born tenacity for a cause, $3billion (N405 billion only) will build for Nigeria, three brand new, world class privately managed refineries in 3 and half years of transparent and continuous funding, creating over 5000 direct and 50,000 indirect new jobs for Nigerians.

This, sir is your last line by my modest wisdom. You can draw on our $8billion foreign reserve for a national priority project like this. This is otherwise a foreign reserve that will helplessly deplete; bowing to the forces of global economic hegemony in less than 3 years at the rate our economy is spiralling.

Assuredly, after building these new privately managed refineries, your government can boast of a stable N40 per litre of petrol even on the 29th day of may 2007 and, your tenure would have been carved in gold perhaps.

Short of the above, honourable minister of petroleum resources and commander in chief sir, get ready to announce a chilling, albeit murderous price of N120 per liter of petrol before May 29th 2007.

This, Mr president is the battle of your life. May the good Lord be with you and all Nigerians. AMEN!

Aliyu Maigari Mamman is of 4, West College Road, Kaduna