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CHIKWEM FRANCIS CHINWE
PG/Ph.D/10/58130
POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999
FACULTY OF SOCIAL SC
DEPARTMENT OF POLITICAL SCIENCE
Paul Okeke
Digitally Signed by
DN : CN = Webmaster’s name
O= University of Nigeri
OU = Innovation Centre
CHIKWEM FRANCIS CHINWE
POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999 -2013
CIENCE
DEPARTMENT OF POLITICAL SCIENCE
Digitally Signed by: Content manager’s Name
Webmaster’s name
O= University of Nigeria, Nsukka
OU = Innovation Centre
ii
POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013
BY
CHIKWEM FRANCIS CHINWE PG/Ph.D/10/58130
DEPARTMENT OF POLITICAL SCIENCE, FACULTY OF SOCIAL SCIENCES,
UNIVERSITY OF NIGERIA, NSUKKA.
DECEMBER, 2014.
i
POLITICAL ECONOMY OF FUEL IMPORTATION AND DEVELOPMENT OF REFINERIES IN NIGERIA, 1999-2013
BY
CHIKWEM FRANCIS CHINWE PG/Ph.D/10/58130
A THESIS PRESENTED TO THE DEPARTMENT OF POLITICAL S CIENCE, UNIVERSITY OF NIGERIA, NSUKKA IN PARTIAL FULFILLMEN T OF THE REQUIREMENTS FOR THE AWARD OF THE DOCTOR OF PHILOSO PHY
(Ph.D) IN POLITICAL SCIENCE (INTERNATIONAL RELATION S)
SUPERVISOR: PROF. KEN IFESINACHI
DECEMBER, 2014.
ii
APPROVAL PAGE
This thesis written by Chikwem Francis Chinwe (PG/Ph.D/10/58130) has been approved for the Department of Political Science, University of Nigeria, Nsukka.
By _______________________ _________________ Prof. Ken Ifesinachi Date Supervisor
_______________________ _________________ Prof. Jonah Onuoha Date Head of Department
_______________________ _________________ External Examiner Date _______________________ _________________
Prof. I.A. Madu Date Dean, Faculty of Social Sciences
iii
DEDICATION
Alma Redemptoris Mater
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ACKNOWLEDGEMENTS
While I take full responsibility for weaknesses or strengths evident in this work, I
would nonetheless like to appreciate with thanks God’s gratuitous gift of sustenance,
care, provision and life. His inspiration and love urges me on.
I am also grateful to my Local Ordinary, most Rev. Dr. S. Amatu, the Catholic
Bishop of Okigwe Diocese, who encouraged me to undertake this course of study.
Thanks also to my Late Bishop, Anthony Ilonu, whose far reaching decisions on every
step of my vocation to priesthood has fortified and strengthened me for God’s future
work. “Nna anyi, ka mkpuru obi gi zuo ike na udo”.
I remember also my late mother, Mrs. Bridget Chikwem. She taught me how to
cherish and embrace the virtues of hard work, diligence and excellence in academic life.
May her Soul rest in perfect peace. My father, Mr. Boniface Chikwem and my Uncles
Mr. Silvanus Chikwem and Mr. Jude Onwuzuruike deserve tremendous praises for their
moral encouragement which served as a critical pillars in support of my academic
pursuit. My brothers, Barnabas, Uchenna, Sunny and Chijioke as well as my five sisters,
Ngozi, Ifeyinwa, Onyinyechi, Ijeoma, Nneka and their husbands proved exceptionally
helpful when it comes to encouragement for me to continue my doctoral programme.
Lofty’s prayers and prophetic declaration manifested as the Lord had directed. To God be
the glory!
My profound gratitude also goes to my supervisor, Prof. Ken Ifesinachi, who
conscientiously “fathered” this research work. He painstakingly read, corrected and made
useful in-puts and suggestions at every stage of this study. It is gratifying to acknowledge
that I enjoyed working with him. I remain eternally grateful to you Sir, and may God
bless you and your family. I wish to also appreciate the academic contributions of
Professors Aloysius-Michaels Okolie, Obasi Igwe, Jonah Onuoha and all the lecturers in
the Department of Political Science for their support during my doctoral studies at the
University of Nigeria, Nsukka.
I specifically acknowledge, with a great depth of gratitude the support and
encouragement of Dr. Ezirim Gerald Ekenedirichukwu, Rev. Fr. B. Ochiagha, Nnaemeka
Azom and Raymond Adibe towards the successful completion of this study. May God
reward all of you.
Next in the list of my creditors are my friends at the University of Benin
(UNIBEN). In particular, I would like to thank Profs. O.J. Offiong, A. Ikelegbe and
v
Musa Abutudu. I also benefited and learned a lot from Dr. Emmanuel Okonmah, who
always prepared me on the ethics of paper language and methods of presentation before
any of my defence. His academic arguments, as an advice, whenever I am about to seat
for my doctoral defences, were quite encouraging “Dr. Ya Gazie o o”.
Finally, I deeply appreciate the contributions of all the librarians that were helpful
to me in the course of my research and those who posted and uploaded useful materials
for this study either through e-mails, text messages, or direct telephone calls. Particular
mentions are librarians of Institute of International affairs Lagos, NNPC in Benin and
University of Benin. I also appreciate the contributions of Former Chairman, Nigeria
Union of Petroleum and Natural Gas Worker (NUPENG) in Warri, Mr. Pemu Shola and
Chief Emiko, who is Petroleum and Natural Gas Senior Staff Association of Nigeria
(PENGASSAN) boss in Warri during my field work. They helped in contacts with other
agencies during my field work. Sirs, I remain grateful. May God bless you.
Francis, September 2014.
vi
TABLE OF CONTENTS
Title page - - - - - - - - - - i
Approval page - - - - - - - - - - ii
Dedication - - - - - - - - - - iii
Acknowledgments- - - - - - - - - - iv
Table of Contents - - - - - - - - - - vi
List of Tables, Figures and Abbreviations - - - - - - - ix-xiii
Abstract - - - - - - - - - - xvi
CHAPTER ONE: INTRODUCTION - - - - - - - 1
1.1 Background of the Study - - - - - - - 1
1.2 Statement of the Problem - - - - - - - - 7
1.3 Objectives of the study- - - - - - - - - 15
1.4 Significance of the Study - - - - - - - 15
CHAPTER TWO: LITERATURE REVIEW - - - - - - 17
2.1 Did the allocation of fuel import licenses to independent marketers discourage investors in the development of new refineries in Nigeria between 1999 and 2013?- 17
2.2 Did fuel importation probes fail to adequately define the challenges hindering the development of new refineries in Nigeria between 1999 and 2013?- 26
2.2.1 Fuel subsidy Debate - - - - - - - - 26
2.2.2 Fuel subsidy probes - - - - - - - - 41
2.3 Did expatriates dominance of fuel importation and distribution undermine the integration of Research and Development (R&D) in Nigeria’s Petroleum Technology Development? - - - - - - - - - 50
vii
CHAPTER THREE: METHODOLOGY - - - - - - 64
3.1 Theoretical Framework - - - - - - - - 64
3.2 Hypotheses- - - - - - - - - - 80
3.3 Research Design- - - - - - - - - - 80
3.4 Methods of Data Collection- - - - - - - - 86
3.5 Method of Data Analysis- - - - - - - - - 92
3.6 Logical Data Framework (LDF)- - - - - -- - - 94
CHAPTER FOUR: FUEL IMPORTATION AND DEVELOPMENT OF N EW
REFINERIES IN NIGERIA - - - - - 103
4.0 Introduction - - - - - - - - - - 103
4.1 Investors in the development of refineries and the Nigerian State, 1999-2013 - - 103
4.2 Fuel Allocation: The Requirement in Nigeria - - - - - - 129
4.3 Prebendal Politics and Allocation of fuel import licenses in Nigeria- - - 145
4.4 Fuel importers and lack of storage facilities. - - - - - 155
CHAPTER FIVE: FUEL IMPORTATION PROBES AND THE CHALL ENGES OF REFINERY DEVELOPMENT - - - - - 162 5.0 Introduction - - - - - - - - - - 162
5.1 Nature and Dimensions of Fuel Importation probes in Nigeria, 1999-2013- - - 162
5.2 Law enforcement agencies and prosecution of oil marketers/companies on fuel fraud - - 165
5.3 The fuel importation probes and identified challenges - - - - - 176
5.4 The fuel importation probes and structural challenges - - - - - 182
CHAPTER SIX: RESEARCH AND DEVELOPMENT (R&D) IN OIL SECTOR AND
NIGERIA’S PETROLEUM TECHNOLOGY DEVELOPMENT - - 193
6.0 Introduction - - - - - - - - 193
6.1 The state and supply of fuel to NNPC by Multinational Oil Corporations in Nigeria - 194
viii
6.2 Supply of fuel to independent marketers by foreign manpower in Nigeria- - - 200
6.3 Control of largest distribution of fuel in Nigeria by foreign oil companies - - - 213
6.4 Dominance of expatriates and the challenges of integration of R&D in Nigeria’s Petroleum
Technology development, 1999 – 2013. - - - - - - - 226
CHAPTER SEVEN: SUMMARY, CONCLUSION AND RECOMMENDATIONS - 242
7.1 Summary - - - - - - - - - - 242
7.2 Conclusion - - - - - - - - - 247
7.3 Recommendations- - - - - - - - - 248
Bibliography - - - - - - - - - 252
Appendix I- - - - - - - - - - 267
Appendix II - - - - - - - - - 268
Appendix III - - - - - - - - - 269
Appendix IV - - - - - - - - - 278
ix
LIST OF TABLES
3.1 Logical Data Framework (LDF) - 94 4.1 History of Refineries in Nigeria - - - - - - 105 4.2 Refineries Average Annual Capacity Utilization, 1999-2011 (%) 4.3 Domestic Crude Oil Refining by Local Refineries, 1999-2011 (in barrels) - - - - - - - - 4.4 Domestic Crude Oil Refining by Local Refineries in 2011- -
- 107 - 107 - 108
4.5 Domestic consumption of petroleum products from 2006-2010. - 109 4.6 Blocs offered to the ANOCs on RFR Terms, 2005 -2007 - 117 4.7 Total Assets of the ANOCs in chronological order NOC Date Blocs
Comment (2005- 2007) - 118
4.8 Summary of Strategic Deals with ANOC - 119 4.9 Local oil companies that secured licenses to build refineries in 2004 - 123 4.10 Petroleum Support Fund (PSF) Proposed Payment Schedule - 140 4.11 Checklist For Import Document - 141 4.12 Marketers not registered with PPPRA before they got first allocation
for product supplies. - 149
4.13 Marketers that did not make first application to PPPRA for supplies before they got their first allocation
- 151
4.14 Marketers that never applied to PPPRA at all but were given allocation to supply products.
- 152
4.15 Marketers that did not obtain forex but claimed to have imported petroleum products based on which they have collected subsidy.
- 152
4.16 Those who obtained Forex but did not import petroleum products - 154 4.17 Marketers with no Tank-Farm, no through-put Agreement with any
depot but claimed to have discharged products. - 157
4.18 Marketers with no Tank-Farm, had through –put Agreement but not confirmed to have utilized same yet claimed to have supplied products
- 158
5.1 Fuel importers and amount to be refunded - - - - - 166 6.1 2006 PMS payments summary- - - - - - - 196 6.2 2007 PMS payments summary - - - - - - 197 6.3 2008 PMS payments summary - - - - - - 198 6.4 2010 PMS payments summary - - - - - - - 199 6.5 Holding Capacity of NNPC Depots in Nigeria - - - - - 202 6.6 Volumes imported by NNPC/independent marketers based on source
(summary in 2010) - 207
6.7 PMS Country of Origin in Nigeria and Other Transactions from 2009 – 2012
- 208
x
6.8 Major and Independent Marketers Outlined by PPPRA in the First Quarter of 2013.
- 211
6.9 Multinational Oil companies and retail outlets in 1980. - 214 6.10 Distribution of petroleum products by companies in first quarter of
2009 - - - - - - - - - 217
6.11 Market share of local deliveries/sales by marketers groups (litres and Percentage)- - - - - - - -
- 219
6.12 Nationwide retail outlets 2006 census summary of distribution by zone- - - - - - - - -
- 220
6.13 Nationwide retail outlets 2006 census summary of distribution by state - - - - - - - - -
- 221
6.14 Major Players Retail Facilities - - - - - - - 223 6.15 Basic information on major players- - - - - - 224 6.16 PTDF programme: Oversea scholarship scheme (OSS) and local
scholarship scheme from 2002-2010. - - - - - - 233
6.17 PTDF local scholarship scheme from 2002-2010. - - - - 234
xi
LIST OF FIGURES
4.1 Domestic Consumption of Petroleum in Products- - - - 109
4.2 Trends in consumption of petroleum products 1985-2006 in thousand liters per day. - - - - - - 110
4.3 Petroleum Support Fund- Institutional Linkages - - - 152
6.1 The Oil and Gas downstream value chain- - - - - 201
6.2 Market share of total sales in 2008- - - - - - 215
6.3 Market share of total sales in 2009- - - - - - 216
6.4 R&D Spending of Major MNOCs from 2003-2009 - - - 238
6.5 R&D Spending of Major MNOCs from 2003-2009 - - 239
6.6 R&D of Nigeria by character of work. - - - - - 240
xii
LIST OF ABBREVIATIONS/ACRONYMS
AGO Automotive Gas Oil ANOCs Asian National Oil Companies Bpd Barrels Per Day CBN Central Bank of Nigeria CNOOC China National Offshore Oil Corporation CNPC China National Petroleum Corporation DAPMAN Depot and Petroleum Marketers Association of Nigeria DPR Department of Petroleum Resources FO Fuel Oil FOB Free on Board GDP Gross Domestic Product GMD Group Managing Director of NNPC HHK House Hold Kerosene HRACR House of Representatives Ad-hoc Committee Report IOC International Oil Company IPMAN Independent Petroleum Marketers Association of Nigeria ISAN Indigenous Ship Owners Association of Nigeria JEPTFON Jetties and Petroleum Tank Farm Owners of Nigeria JV Joint Venture KPMG KPMG Professional Services KRPC Kaduna Refining and Petrochemical Company LPG Liquefied Petroleum Gas MLPD Million Litre Per Day MOMAN Major Marketers Association of Nigeria NEITI Nigerian Extractive Industries Transparency Initiative NIMASA Nigeria Maritime Administration and Safety Agency NLC Nigeria Labour Congress NNOC Nigeria National Oil Company NNPC Nigeria National Petroleum Corporation NRSTF National Refineries Special Task Force NPA Nigeria Ports Authority OAGF Office of the Accountant-General of the Federation OMC'sTC's Oil Marketing Trading Companies Automotive Gas Oil OMEL ONGG Mittal Energy Ltd ONGC Oil and Natural Gas Corporation OPEC Organization of the Petroleum Exporting Countries PEF Petroleum Equalization Fund PEF(M)B Petroleum Equalization Fund Management Board PENGASSAN Petroleum and Natural Gas Senior Staff Association of Nigeria
xiii
PMS Premium Motor Spirit PPMC Pipeline Products Marketing Company PPPRA Petroleum Product Pricing Regulatory Authority PTF Petroleum Trust Fund PSF Petroleum Support Fund R&D Research and Development SPDC Shell Petroleum Development Company SSA S.S. Afemikhe and Co. STS Ship to Ship TAM Turn Around Maintenance TUC Trade Union Congress
xiv
ABSTRACT
The contradictions of importing over US$10 billion fuel annually for domestic consumption, in the midst of abundant oil endowment, has attracted attention and concern from researchers and investigators. This study, therefore, set out to evaluate the effects of the political economy of fuel importation on the development of refineries in Nigeria between 1999 and 2013. It set as its objectives the task of interrogating the nexus between allocation of fuel import licenses to independent marketers and investors in the development of new refineries in Nigeria; the connections between fuel importation probes and the challenges hindering the development of new refineries in Nigeria; and the relationship between expatriates’ dominance of fuel importation and distribution, and the integration of Research and Development (R&D) in Nigeria’s petroleum technology development. The study adopted the political economy theoretical framework of analysis. Data were generated through the qualitative descriptive methodology and the ex-post-facto research design. The study highlighted the interplay of class interest and power relations on fuel importation to the neglect of building new refineries, in ways that enriched the dominant class coalitions and their political loyalists in the fuel-import dependent economy. This manifested specifically in the allocation of fuel import licenses to independent marketers through favouritism, prebendalism and clientelism that discouraged investors in the development of new refineries in Nigeria; fuel importation probes that failed to adequately expose the challenges hindering the development of new refineries in Nigeria; and expatriates’ dominance of fuel importation and distribution that undermined the integration of R&D in Nigeria’s Petroleum Technology Development. The study recommended, among others, that the government should increase R&D funding from the current 0.2% to at least, up to the required UNESCO approved 1% of the Federal Government Gross Domestic Product (GDP). Also, that the Nigerian government, should as a matter of urgency, advance policies that will lead to private sector-led development of the refineries in Nigeria’s downstream oil sector (as in Canada) where the 16 functional refineries are privately owned.
1
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Nigeria is Africa’s largest oil producer and fifth supplier to the United States. She
is rated among the 12 biggest oil producers in the Organization of Petroleum Exporting
Countries, (OPEC), contributing about 2.5 million barrels per day (bpd) to the OPEC
basket. She is the sixth largest oil exporter, “with a total of 173 oil blocks in operation,
according to the Department of Petroleum Resources (DPR)” (Eboh, 2013:1). The
OPEC’s Annual Statistical Bulletin 2012 shows that Nigeria has proven crude oil reserves
of 37.2 billion barrels, while proven natural gas reserves stands at 5.154 million cubic
metres, making it the eighth in the world gas reserves and first in Africa. Yet the country
depends on fuel importation to meet local demands of petroleum products.
Crude oil production and export commenced in Nigeria in 1958. It accounted for
7.1 per cent of total exports in 1961, which was dominated at that time by cocoa,
groundnut, rubber and palm oil, in that order. In 1965, oil constituted 13.5 per cent of the
nation’s export earnings, and by 1970, it had become the leading source of foreign
exchange, accounting for 63.9 per cent. By 1979, petroleum sales had completely
overshadowed non-oil exports, as it then contributed about 95 per cent of the country’s
export earnings. In 2012, oil and gas export accounted for almost 96 per cent of export
earnings. Also, in 2013, “Nigeria budget is framed on a reference oil price of $79 per
barrel, providing a wide safety margin in case of price volatility” (U.S Energy Information
Administration (EIA), 2013:1). No wonder, Central Bank of Nigeria (CBN) reported in
2010 “that petroleum accounted for approximately 96 per cent of the country’s foreign
2
exchange and 76 per cent of the total government revenue” (CBN, 2010:3). It is no
surprise then that it was observed that “total oil revenue generated into the federation
account amounted to N34.2 trillion while non-oil revenue was N7.3 trillion, representing
82.36 per cent and 17.64 per cent respectively between 2000 and 2009” (Ogbonna and
Ebimobowei, 2012:34).
However, despite the above abundant oil resources and unprecedented wealth,
“Nigeria depends eighty five (85) per cent and above on importation of petroleum
products” (Nwachuku, 2012:2), with massive infusion of subsidies, introduced in 1973 to
stabilize the price of fuel and insulate Nigerians from the wild fluctuation of global market
price. Ploch (2013:9) observed that “Nigeria imports an estimated $10 billion of fuel
annually for domestic consumption”. In 2012, “Nigeria consumed 270,000 bbl/d and in
2013, she imported slightly more than 84,000 bbl/d of petroleum products” (U.S. Energy
Information Administration (EIA), 2013:13). She imports fuel from far away countries
like United States, United Kingdom, Venezuela, Canada, Brazil, Netherlands and the
Persian Gulf countries. The more worrisome is the fact that “Nigeria imports fuel from
non-oil producing countries like Niger Republic, Cote d’Ivoire, Amsterdam, India, Korea,
Finland, Singapore, France, Israel, Portugal, Italy, Sweden, Tunisia, and many more”
(Chimezie, 2009:7).
Efforts to increase the refining capacity of the four refineries at Port-Harcourt,
Warri and Kaduna in Nigeria for the past 40 years have proved abortive as subsidy on
imported products became an avenue for patronage by successive Nigerian governments
to their relatives and cronies. For instance:
From 2006-2011, about N3.7 trillion was spent on subsidy…In 2011, N1.348 trillion was spent between January and October and it is
3
expected to reach N1.436 trillion by the end of the year. This represents 30 per cent of total Federal Government Expenditure; 118 per cent of the capital budget; and 4.18 per cent of GDP (Okonjo-Iwuala, 2011:2).
Successive civilian and military administrations in Nigeria depend mostly on the
importation of fuel. At independence in 1960, oil industry remained entirely in the hands
of International Oil Companies (IOCs), who controlled production, importation and
shipment of fuel and pay taxes and royalties to Nigerian government. As such, Nigeria
depended 100 per cent on these IOCs till 1973 for her fuel importation which is taken
from Nigeria, processed, imported, and supplied to various places in Nigeria by these
IOCs. Onimode (1983:87-90) attested to the above fact by stating that, “in road haulage,
virtually all oil tankers for petrol haulage through the country were foreign owned until
1973”. By 1971, the Nigerian government was able to import fuel through the Joint
Venture (JV) participation agreement between the IOCs and Nigerian National Petroleum
Corporation (NNPC) which represents the Nigerian government. NNPC sold its own share
of oil allocation in the international market and uses the proceeds to import petroleum
products. Nwokeji (2007:33) noted that “with the free allocation, NNPC is able to
subsidize the products”.
Currently, NNPC is allocated 445,000 barrels per day (bpd) of crude oil known as
“domestic crude allocation” and is intended to be processed by the 4 refineries to supply
about 53 per cent to the domestic market and the SWAP/offshore processing arrangement
of the balance of 47%. The above 53 per cent allocation to the NNPC is sufficient to
provide the nation with the following products: “40 Million Litres Per Day (MLPD) of
Premium Motor Spirit (PMS); 10 MLPD of kerosene House Hold Kerosene (HHK); 8.97
MLPD of Diesel Automotive Gas Oil (AGO); 0.62 MLPD of Liquefied Petroleum Gas
(LPG) and 2.31 MLPD of Fuel Oil (FO)” (House of Representatives Ad-hoc Committee
4
Reports (HRACR), 2012:9). In practice, the refineries meet at best “about 15 per cent of
domestic demand” (EIA, 2010). This implies that over 80 per cent of petroleum products
are imported. With this method, these civilian/military administration are able to sustain
Nigeria’s political economy.
However, joining the Organization of Petroleum Exporting Countries (OPEC), has
two noticeable effects on the country’s political economy. First, OPEC required member
states to nationalize the oil industry. More far-reaching than that, Nigeria, in fact, came up
with a sweeping, economy-wide nationalization program, “requiring all investment in the
economy to have a minimum of 60 per cent Nigeria equity participation” (Nwokeji,
2007:33).
Second, it gave rise to the establishment of the Nigeria National Oil Company
(NNOC) which effectively ensured direct marketing of its share of crude oil in 1971 and
also direct importation of fuel from any country of her choice. Suspicion of corruption in
importing and selling of crude oil led to the dissolution and replacement of NNOC by the
General Olusegun Obasanjo military regime (1976-79), with Nigeria National Petroleum
Corporation (NNPC) in 1977, following the recommendations of the panel set up by him
to probe the company. With the establishment of NNPC by Decree 33, the Corporation
has since then been saddled with full control of the activities covering the upstream,
midstream and downstream sectors of the petroleum industry in Nigeria.
The civilian government of Shehu Shagari (1979-1983), imported an average of
71.5 per cent (NNPC Annual Statistical Bulletin 2005 and 2006) of fuel into Nigeria. The
regime of General Buhari imported an average of 69.2 per cent (NNPC Annual Statistical
Bulletin 2005 and 2006) of fuel in Nigeria. General Babangida’s regime (1985-1993),
5
imported an average of 89.4 per cent (NNPC Annual Statistical Bulletin 2005 and 2006)
of fuel in Nigeria. He was the first President to popularize the word “subsidy” in 1987.
He announced the removal of 80 per cent of subsidy. When General Sani Abacha (1993-
98) took over in another coup in 1993, fuel importation increased in magnitude and
intensity with massive infusion of subsidies. For instance, he imported an average of 71.5
per cent (NNPC Annual Statistical Bulletin 2005 and 2006) of fuel in Nigeria. Like his
predecessors, he removed subsidy and used it to establish Petroleum Trust Fund (PTF) to
manage the extra money from the subsidy.
Nigeria returned to democracy in 1999 with Olusegun Obasanjo elected as
President ending almost 16 years of military rule. Obasanjo abolished the monopoly of
importation of fuel by NPPC and announced the take off of liberalization and deregulation
of the oil industry by September 30th 2003, followed by the setting up of Petroleum
Stabilization Fund later tagged Petroleum Support Fund (PSF) to finance subsidies. The
incessant crises in the Niger Delta region, militant attacks, blowing up of oil facilities and
hostage-taking of oil workers paralyzed the oil sector, making Nigeria to depend solely on
importation of fuel. Thus:
NNPC Group Managing Director (GMD), Mr. Funso Kupolokun, declared that Nigeria depends 100 per cent on imported petroleum products for its fuel needs….that all the nation’s four (4) refineries in Warri, Kaduna and Port Harcourt were closed and that Nigeria is importing all of its fuel because its oil refineries are not working, even though $1 billion (about 129 billion) has been spent on Turn Around Maintenance (TAM) of the plants in the last eight years...they were closed after militants fighting for local control of the Niger Delta’s oil wealth blew up the main feeder pipeline (Izere, 2006:1).
The Yar’Adua administration’s amnesty deal in the Niger Delta resulted in
minimal oil refining production in 2009. For example, “the Port-Harcourt refineries
6
operated at about 9 per cent of capacity compared with about 18 per cent in 2008.
Similarly, the Kaduna refinery operated at about 3 per cent of capacity compared to about
20 per cent in 2008. This reflected in the significant decrease in the output of refined
petroleum products that was heavily subsidized by about 90 per cent of petroleum
products needed in the country” (Mobs, 2011: np). In 2010, “the ailing refineries with a
combined capacity of producing 445,000 barrels per day could only refine a mere 80,757
metric tones of petroleum products; 19,967 of PMS, 53,223.4 of diesel and 7,567 of
liquefied petroleum gas” (Ololade, 2011:47). The balance volume of 8.1 million of
petroleum products was imported into the country.
In the early years of Jonathan’s administration (2011-2012), “the state of refineries
had considerably worsened and operated only 20 -30 per cent capacity” (Salau, 2012:46;
Agande 2012:5), and importation of petrol increased to 70 per cent and above. This era
witnessed worsened importation of petrol. The Lawan led Ad-hoc committee discovered
that in 2011:
Nigeria needs 35 million litres daily and government pays subsidy on 59 million litres daily, implying that the Federal Government was subsidizing as much as 24 million liters of petrol that Nigerians did not use daily, which lawmakers believe end up being smuggled out of the country, where some officials reap heavily at the expense of the nation... with the government paying N76 in subsidy, to lower the cost of fuel imported into the country, that translated to N1.9 billion daily, and N667 billion annually. N667 billion are wasted annually for importing petrol never consumed by Nigerians (HRACR, 2012:109).
Nigeria has subsidized fuel importation more between 1999 and 2010 than the past
35 years before 1999. Also, a parliamentary probe, in April 18th 2012, found “that graft in
the fuel subsidy scheme cost Nigeria $6.8 billion between 2009 and 2011” (Agande,
2012:5). Hence:
7
The oil sector is utilized as a conduit for patronage and cronyism, such that allocation of oil blocs and appointment as fuel importer/marketers are seen as spoils of office freely deployed by successive Nigerian governments to facilitate unbridled and mindless looting of the nation’s resources (Oluwajuyitan, 2011:2).
Through patronages, the ruling class makes huge sums of money through
importation of fuel by way of inflation of contracts, importation of substandard fuels,
underreporting of fuel import, to the neglect of building of new refineries in Nigeria.
In this light, this study investigates the relationship between the dynamics of the
political economy of importation of fuel and refineries development in Nigeria
1.2 Statement of the Problem
The upstream oil and gas sector in Nigeria, involving exploration and production
(E&P) of crude oil, condensates, natural gas or associated gas from the well, has attracted
vast competing investors around the world, and obviously become the Jewel in the
African oil crown, with the production capacity of 2.4 million to 2.85 million barrels per
day in the past five years, as a result of new production from the deep offshore-Bonga,
Erha and Abo. The seven early traditional MNOCs partners in Nigeria are: Shell-BP
Petroleum Development Company of Nigeria, Gulf (now Chevron), Mobil (now Exxon-
Mobil), Agip, Texaco and Elf (now Total). These MNOCs have been scrambling for “388
oil blocks in the Niger Delta, out of which, 173 of them have been awarded to individuals
and corporations, while 215 blocks were yet to be awarded, according to Department of
Petroleum Resources (DPR)” (Eboh, 2013:5). Of the 173 so far awarded, Nigerians owned
90 blocks while foreigners owned 83 blocks. These MNOCs pay the federal government
royalties through the Joint-Venture (JV) agreement between the federal government and
the MNOCs. However, since 1999, there is an entry of a number of Asian National Oil
8
Company (ANOCs) from China, Taiwan, India and South Korea to acquire oil blocks in
Nigeria which Vines et al (2009:7) argued “proved to be controversial but not for the
usual reasons… to entice ANOCS for their commitment to invest in downstream and
infrastructure projects”. All these MNOCs according to the data released in August 2013
by DPR “accounted for 90 per cent of Nigeria’s Total Crude Oil Production while
Indigenous Oil Companies accounted for only 10 percent” (Eboh, 2013:24).
The downstream oil and gas sector, involves refining the products from crude oil
and distribution until it reaches the final consumer. The Nigerian government recognized
the importance of the downstream sector of the petroleum industry which necessitated the
building of four state owned refineries with an installed capacity of 446,000 barrels per
day that scarcely function despite repeated investments in Turn-Around Maintenance
(TAM). Unfortunately, problems ranging from sabotage, lack of timely TAM, poor
management and endemic corruption ensured that these refineries operate far below their
capacities, at times as low as 30 per cent of installed capacity. For instance, between 1999
and 2007, Funsho Kupolokun, NNPC’s Group Managing Director (GMD) during
Obasanjo’s administration, reportedly testified to the Nigerian House of Representatives
in January 2007 that “NNPC had spent over $ 1billion on its refineries over the previous
eight years” (Isine and Nwankwo 2007:5; Daily Champion, 2007:3). Also, in “2009, $20
million was spent on TAM on Kaduna Refinery” (Nwachukwu, 2012:2). In October 2012,
Alison Madueke, current Nigerian Minister of Petroleum said “government would spend
$1.6 billion on turnaround maintenance to get the refineries operating at 90 per cent
capacity by 2014” (Agande, 2012:5). When the four refineries operate at full capacity,
they can only meet about 60 per cent of national demand for petrol. “In the past 20 years
9
or so, they have operated under 40 per cent capacity and currently supply only about 20
per cent of Nigeria’s gasoline demand” (Balouga, 2012:33). The above statement was
attested by the 2006 Nigerian Extractive Industry Transparency Initiatives (NEITI) report
which emphasized the need for strengthening the refining capacity of the 4 refineries in
Nigeria to meet domestic demand. The report, among other things, stated that “domestic
demand for premium motor spirit (PMS –petrol) has risen so much that existing refineries
cannot meet it even if they produce at full capacity” (NEITI, 2006:55). This implies that
‘‘for a considerable period into the future, Nigeria will have to import a significant
proportion of its PMS product needs’’ (NEITI, 2006:56).
Over the years, the Nigerian government tried to deregulate the downstream oil
sector to attract investors to resolve the lingering fuel scarcity. Successive civilian and
military government in the 1970s and 1980s after joining the OPEC, concentrated on
nationalizing the existing oil industry into a state-owned enterprise through the acquisition
of shares. For instance, “in the first Joint Venture (JV) participation agreement in 1973,
Federal government acquired 35 per cent equity share in the oil companies with NNOC as
its JV manager. Government equity shares increased to 55 per cent in 1974 and 60 per
cent in 1979 except in Shell –BP where the share rose to 80 per cent following the
nationalization of BP shareholding” (Adiele, 2009: 6). Nigeria was not the only country
that created state-owned enterprise. “In the 1960s and the 1970s, many of the newly
independent African countries did the same” (Okonjo-Iweala, 2012: 36). All these are,
however, followed by “corruption which escalated in intensity and magnitude, yielding
huge rewards for those connected to government” (Thurber et al, 2010:10). Babangida’s
Presidency (1985-93) opened up the upstream oil sector to private Nigerian companies
10
starting with the first public bidding for oil blocks in October 1990 without extending that
to downstream sector. “This was also the first regime to consider privatizing the refineries
as a way to resolve fuel scarcity” (Nwokeji, 2007:19).
Abacha (1993-98) had personal interest in the deregulation of the downstream oil
sector, rather than the national interest of solving the excruciating fuel scarcity during his
regime. He awarded licenses to two Private Firms-Qua Iboe Petroleum Refinery Limited
and Brass Refinery Limited, to process 200,000 and 100,000 barrels per day, bpd, of crude
oil respectively. David West, quoted in Ajanaku (2007:7) noted that “the licences abused
the privilege by lifting crude oil rather than building refineries”. The interim government
of Ernest Shonekan in 1993 pushed deregulation further, putting the refineries at the first
line of its implementation, but the government was over thrown before it settled down.
“ The Abubakar Junta favoured partial privatization of the refineries and eventually partial
privatization of all other NNPC subsidiaries and of the government’s stake in the JVs”
(Nwokeji, 2007:96). For various reasons, however, no sustained results attended these
plans of deregulation and privatization of refineries to attract investors in the development
of refineries in the downstream sector. “For the Shonekan and Abubakar interim regimes,
time was clearly a factor, but for the most part (General Obasanjo, Babangida and
Abacha) shortage of will, vested interest, and naked corruption have been among the
biggest obstacles” (Nwokeji, 2007:96).
Since 1999 change to democratic governance, little or nothing has been achieved
in the building of new refineries to resolve the fuel scarcity in Nigeria’s downstream oil
sector. The civilian regime of Olusegun Obasanjo (1999-2007) pursued substantial
reforms in the development of refineries, yet in many ways business continues as usual.
11
For instance, in 2001, following the recommendation of Special Committee On Petroleum
Supply and Distribution (SCPSD), popularly called “mantu palliative” set up by
Obasanjo, he announced the take off of liberalization and deregulation of the downstream
oil sector, the setting up of the Petroleum Stabilization Fund, later tagged the Petroleum
Support Fund (PSF), and the abolition of NNPC monopoly on importation of fuel. Yet,
instead of these policies attracting investors in the building of new refineries in Nigeria,
they succeeded in increasing the exploitative tendencies of the ruling class on the public
treasury.
Also, in May 2003, Former President Olusegun Obasanjo issued 18 licenses to
private investors to establish private refineries in the downstream sector. “Since these
companies were still to show any tangible results in 2006, the Department of Petroleum
Resources (DPR) withdrew the 18 licenses it had already issued” (Busch 2007:4). Also,
Obasanjo in an effort to attract investment in the downstream oil sector came up with an
initiative of an “oil- for- infrastructure” deal to entice Asian National Oil Companies
(ANOCs) from China, Taiwan, India, South Korea and Malaysia. The arrangements are:
“China-Core Investment in the Kaduna refinery; construction of double track, standard
gauge Lagos-Kano railway; Construction of HEP complex at Mambilla (3 gorges project).
Taiwan-core investment in Port Harcourt refinery; unspecified IPP (Power Plant). India-
build a Greenfield refinery 180,000bd capacity; build a 2000mw independent power plant;
feasibility study for a new east-west railway Lagos to Delta. South Korea-gas pipeline
from Ajaokuta to Kano via Abuja with Spur to Katsina; 2 integrated gas power stations at
Abuja and Kaduna; Construction of the Port-Harcourt –Maiduguri railway. Malaysia-2.5
ton per petrochemicals project in Delta with creation of 7000 jobs” (Wong, 2009:6).
12
However, the House of Representatives Ad-hoc Committee set up to enquire into NNPC
and its subsidiary for the period of 1999 -2007 (Obasanjo years) recommended the
cancellation of these oil blocs awarded to these Asian Companies which was obeyed by
Nigerian government on the grounds that “the deals were opaque, that the financial
arrangement were unsatisfactory and that due process had not been followed” (Wong,
2009:16). Nigerian ended up with no deal on any refinery for the past eight years of
Obasanjo’s administration (1999-2007) to complement her domestic consumption.
The incumbent President, Goodluck Jonathan, in 2011 in a widely publicized press
conference promised Nigerians three Greenfield refineries as part of his transformation
Agenda to boost the refining capacity of the downstream oil sector. In early 2012, the
Federal Government bemoaned the fact that “the three Greenfield refineries may not take
off as planned because of some challenges it encountered with foreign investors”
(Onyekpere, 2012:2). Also, another new promise was unveiled by Jonathan’s
administration through his Minister of Trade and Investment, Olusegun Aganga, on July
2012, when he celebrated the signing of a memorandum of understanding between the
Nigeria National Petroleum Corporation and a U.S. –Nigerian, Joint Venture to build six
modular refineries with a combined capacity of 180,000 barrels a day at a cost of $4.5bn
(about 700bn). “The Joint Venture Group, comprising Vulcan Energy Corp-and Petroleum
Refining and Strategic Reserve Ltd signed the MOU to build the refineries in
collaboration with state-owned NNPC. Two of the refineries were expected to be
completed within 2012” (Onyekpere, 2012:2). Up till this 2014, the company has not
moved as far as finding a site and starting construction to meet the deadline of 2012.
13
Thus, this study focuses on the relationship between the importation of fuel and
the persistent neglect of the building of new refineries to meet domestic demand in
Nigeria. Scholars on the allocation of fuel licences and investments in the building of new
refineries (NEITI, 2006; Nwokeji, 2007; Gillies, 2009; Thurber et al, 2010; KPMG
Professional Services, 2010; Oluwajuyitan, 2011; House of Representatives Ad-hoc
Committee Report, 2012; Gboyega et al, 2011; Odeh, 2011 and Sanusi, 2011) harped on
patronage allocation of fuel licenses based on private interests, corruption,
mismanagement, lack of functional refineries, and looting. However, the relationship
between allocation of importation of fuel licenses to independent marketers and
discouragement of investors in the development of new refineries, is yet to be given a
systematic treatment in Nigeria.
Scholars on fuel importation probes and the challenges to new refineries
development (Aminu, 1993; Ola, 1998; Soyede, 2001; Alexander Oil and Gas
Connections, 2004; NNPC, 2005; Otedola, 2009; Oniwon, 2009; Finlayson, 2009; KPMG
Professional Service, 2010; Odeh, 2011; PENGASSAN, 2011; Okonjo-Iweala, 2011;
Nwachukwu and Chike, 2011; Falana, 2011; Afonne, 2011; David-West, 2011;
Ishiekwene, 2011; House of Representatives Ad-hoc Report, 2012; Adejum, 2012;
Agbon, 2012; Agbedo, 2012; Igbuzor, 2012; Kolawole, 2012; Adesua, 2012;
Onwuemenyi, 2012; Ugolor, 2012; Odumakin, 2012; Aborisade, 2012 and Asobie, 2012),
allude to corruption, inefficiency, mismanagement and sabotage in the policy process as
the challenges hindering the development of new refineries in Nigeria. However, the
structural challenges hindering the development of new refineries indicated by
composition of petroleum matters board based on economic interest; lack of deregulation
14
of downstream oil sector; lack of NNPC autonomy; dominance of foreign oil companies
in the servicing and maintenance of the four(4) refineries in Nigeria and government
policy of leaving oil companies in charge of transferring technical know-how, are not
systematically explored.
Scholars on expatriates dominance and the integration of R&D in oil industry
(Turner, 1980; Onimode, 1981; Obi, 1997; Hutchful, 1998; Chima et al, 2002; Omoweh,
2005; Wilson, 2005; Obasi, 2005; UNDP, 2006; Fanimo, 2009; Adiele, 2009;
Akinyosoye, 2009; Ojo, 2010; Onyeagucha, 2010; NNPC, 2010; Joab-Peterside, 2010;
Edemhanria, 2010; Aturu, 2012 and Maihankuri, 2012) focused on Nigeria ruling elites
collaborating with MNC, Nigeria government complicity on Nigeria Content (NC) policy,
lack of political will by Nigerian government to regulate MNOCs, lack of competitive
financial capacity and oil major technological advantage and resistance. In this light, the
link between the expatriates dominance of fuel importation and distribution and the
contradiction of integration of R&D in Nigeria’s petroleum technology development, is
yet to attract systematic investigation and analysis.
Overall, scholars on the importation of fuel focus on imperative of lapses in the
policy process. However, the relationship between the dynamics of importation of fuel
and structural contradictions of Nigeria’s political economy indicated by lack of
investment, failure to adequately define the challenges hindering refineries development
and integration of R&D in Nigeria’s Petroleum Technology, are yet to be given adequate
systematic scrutiny between 1999 and 2013. This study set to investigate or evaluate this
gap in the literature based on the following questions:
15
1. Did the allocation of fuel import licenses to independent marketers discourage
investors in the development of new refineries in Nigeria?
2. Did fuel importation probes fail to adequately define the challenges hindering the
development of new refineries in Nigeria?
3. Did expatriates dominance of fuel importation and distribution undermine the
integration of Research and Development (R&D) in Nigeria’s Petroleum
Technology Development?
1.3 Objectives of the Study
The broad objective of this study is to evaluate the relationship between
importation of fuel and the political economy of refineries development in Nigerian
between 1999 and 2013. However, the specific objectives of the study are to:
1. Ascertain whether the allocation of fuel import licenses to independent marketers
discouraged investors in the development of new refineries in Nigeria.
2. Establish whether fuel importation probes failed to adequately define the
challenges hindering the development of new refineries in Nigeria.
3. Determine whether expatriates’ dominance of fuel importation and distribution
undermined the integration of Research and Development (R&D) in Nigeria’s
Petroleum Technology Development.
1.4 Significance of the Study
This study has both theoretical and practical significance. At the theoretical level,
it offers a new insight into the dynamics of importation of fuel and political economy of
refineries development in Nigeria. The extant literature on importation of fuel has largely
focused on imperative of the policy process as patronage structure, massive corruption,
16
inefficiencies and unsustainable subsidies without adequate systematic treatment of the
issue of building new refineries to meet domestic consumption in Nigeria. Similarly,
studies that have examined the issue of building new refineries in Nigeria have only
looked at it from the obstacles of deregulation of downstream oil sector, fuel subsidy and
government regulated pricing which drives away investors, without systematically
exploring how private interest rather than public interest in fuel importation account for
lack of investment opportunities, integration of R&D and adequate definition of
challenges to petroleum refineries technology development in Nigeria. This study
examined the effects of allocation of fuel importation licenses to independent marketers,
fuel importation probes and the expatriates’ dominance in fuel importation and
distribution, on investment opportunities, definition of challenges and integration of
R&D in Nigeria’s petroleum technology development. The ideas and insights generated
in this study would add to the body of knowledge on the broad subject of importation of
fuel. It will also stimulate further debate and research on the subject of political economy
of the development of refineries and its ramifications for Nigeria’s economy and national
security.
Practically, this study will provide valuable insights and strategy for policy
makers, the Nigerian National Assembly, and practitioners in formulating and
implementing practical measures that would address the problem of the development of
refineries in Nigeria. Bye and large, the study will contribute to a better understanding of
the political economy of importation of fuel, building of new refineries, fuel subsidy
fund (PSF) welfare and security of the citizens.
17
CHAPTER TWO
LITERATURE REVIEW
The aim of this chapter is to examine the review of related literature on the effects
of allocation of fuel importation licenses to independent marketers, fuel importation
probes and the expatriates’ dominance in fuel importation and distribution, on investment
opportunities, definition of challenges and integration of R&D in Nigeria’s petroleum
technology development. In this light, we examine the views of scholars on the following
research questions in order to locate the gaps in the literature:
1. Did the allocation of fuel import licenses to independent marketers discourage
investors in the development of new refineries in Nigeria?
2. Did fuel importation probes fail to adequately define the challenges hindering the
development of new refineries in Nigeria?
3. Did expatriates dominance of fuel importation and distribution undermine the
integration of Research and Development (R&D) in Nigeria’s Petroleum
Technology Development?
2.1 Did the allocation of fuel import licenses to independent marketers discourage investors in the development of new refineries in Nigeria between 1999 and 2013?
Thurber et al (2010), for instance, examined NNPC and Nigeria’s oil patronage
ecosystem. They uncover that NNPC functions well as instrument of patronage to the
ruling elites and privileged Nigerians with political connections. They contend that this
oil-based patronage ecosystem affects its organization, functioning and performance. In
relation to the flourishing oil licenses (export/import) by NNPC, Thurber et al (2010:7)
argue that:
18
NNPC’s role as distributor of licenses for export of crude oil and import of products also helps make it a locus for patronage activities. Indeed, the implicit government goal for the oil sector appears to be the maximization of patronage opportunities; government policies have been inconsistent to allow discernment of any more explicit objectives. Ever since Nigeria’s independence in 1960 the country has evolved a host of patronage mechanisms that defuse threats to power and help hold a potentially fractious republic. NNPC plays an important role in this ecosystem of patronage, though it is hardly the only institution with this function
They further observe that the gap between market prices and subsidized official
prices for both crude oil and products creates enormous profit opportunities for holders of
these licenses. NNPC officials in collaboration with politicians distribute such licenses
both for individual gain and to buy support of politicians in the legislature, who in turn
use the proceeds for patronage among their home constituencies. They further note that
Nigeria’s failure to develop operational, policymaking, and regulatory capacity reflect the
patronage equilibrium that has entrenched itself in Nigeria’s governing institutions.
Interestingly, Thurber et al’s work identified the existence of this patronage ecosystem as
responsible for the non utilization of the refineries in Nigeria.
Nwokeji (2007) also shares the view that the way oil licenses (export/import) are
allocated underpinned patronage. He notes that the Nigerian political class and senior civil
service have historically viewed the oil industry as too important a source of patronage –
sometimes conceived as and confused with national interest to be left in the hands of
independent managers. According to him:
Nigeria government has increasingly used access to oil wealth and senior petroleum administration posts to leverage geopolitical concerns. In fact, access to oil money (import/ export), patronage, fields, and contracts have been used as an instrument of politics in Nigeria since the civil war. This phenomenon has been most pronounced under Abacha and Obasanjo. When Abiola was jailed for claiming his mandate in the 1993 election, the Abacha regime cancelled his licenses. The Abacha government used the grant of oil import license for political patronage.
19
In 1998, Abacha was also reported to have offered oil-trading contracts and concessions to federal legislators and other influential figures to ensure his transformation to civilian president. Obasanjo also resorted to this method in 2005-2006, during his unsuccessful bid to amend the constitution, to allow him a third term in office (Nwokeji, 2007:76).
Nwokeji (2007) also notes that officials who sabotage the refineries to promote fuel
importation benefit in two main ways: First, funds for maintaining the refineries go into
private pockets, guaranteeing low capacity utilization or complete breakdown and
inevitable shortages. Second, heavily inflated supply term contracts and import licenses
are awarded to cronies for the importation of products from abroad. Bribes are also
collected from retailers, who then pass the cost to consumers.
In the same vein, the House of Representatives Ad-hoc Committee Report
(HRACR) (2012) supports the above view that allocation of fuel import licences were
turned to avenue of all forms of government patronage through Petroleum Product Pricing
Regulatory Authority (PPRA). They discover that PPPRA guidelines for the allocation of
fuel import licences were watered down by the Agency. They further note that some
marketers were found not to have made any application to PPPRA for supplies of
petroleum products before they got their first allocation. For a valid contract, there must be
an offer and acceptance. Marketers who were found not to have applied for supplies
contract with PPPRA, based on which PPPRA may have accepted by allocating quantities
of petroleum products to be supplied by the marketers. According to the HRACR:
The allocation process through the Petroleum Support Fund (PSF) guidelines on prequalification and monitoring completely broke down and the scheme became an avenue for all forms of patronage. The number of importers increased from an initial figure of 6 in 2006, 36 in 2007, 49 in 2009, and 140 in 2011 … the executive secretaries that served between 2009 – October 2011 created room for the violation of the processes, abuse of the procedure, and fraudulent increase in the number of importers (HRACR, 2012:75).
20
The HRACR(2012) notes that despite the noticeable non-viability of the policy of
proliferation of oil marketers and the unbearable pressure of the ensuing corrupt practices
on the economy, the PPPRA never deemed it fit to modify or reconsider its decision for
the betterment of the system. They further note that the PSF scheme became a free from all
manner of companies engaged in every conceivable business and not necessarily “oil
marketing/trading company”, as required by the PSF guidelines. Before this period, a
potential importer must have a history of oil marketing or investment in the industry (such
as storage facility of minimum of 5000 MT and 5 retail outlets).
They further observe that the guidelines of the PSF scheme, even as watered down
by the Board in 2009, could have salvaged the scheme if they were observed and enforced.
Had the staff of various agencies and government officials not compromised and colluded
with certain marketers, the level of corruption would have been minimal. The committee
concludes with serious concern and suggested measures to ensure that impunity is no
longer condoned. First, those marketers that had short-changed Nigerians were identified
and recommended to make refunds with a time-frame of three months. Secondly, civil
servants were to be sanctioned in accordance with the civil service rules as well as under
extant laws. Thirdly, management and staff and top government officials were based on
the gravity of their offences to be reprimanded, re-deployed, dismissed and, in specific
cases, prosecuted for abuse of office and fraudulent practices.
In his analysis of the implications of Nigeria’s International fuel marketers on
Nigeria’s oil industry and economy, Otedola (2009) notes that over $300 million has been
overpaid by NNPC for fuel imports, and that many leading international traders are
involved. He notes further that bills of lading were altered to reflect loading on days of
21
high market prices and those discrepancies were found when comparing dates on the bills
of lading with dates of landing in Lagos. He confirms this with an illustration of a tanker
loading fuel at a refinery in Bahrain which usually takes four weeks to arrive in Lagos, but
comparisons between the bills of lading and dates of arrival of some shipments reflected
only a four day difference, and in other cases, if taken at face value, indicated the journey
took nine months. He further notes that 73 shipments from refineries in the Persia Gulf,
England and Venezuela listed delivery times of only one day and that NNPC is attempting
to get compensation for the over-charge. In this wise, he observes that:
These traders arrange for the vandalization of crude oil feeder pipelines, which keep the refineries at Port-Harcourt, Warri and Kaduna closed or under-capacity. Those international traders generally receive at least one million dollars per ship load of fuel to Nigeria and have grown accustomed to the easy money Nigeria offers as long as its refineries remain down (Otedola, 2009:2).
This is corroborated by Oniwon (2009:3), who states unequivocally that long-
standing sweetheart deals between the NNPC and a variety of fuel traders (are) keeping
the system inefficient. That may also explain why the government of Nigeria just cannot
seem to get its refineries running even after spending a billion dollars or more on
maintenance contracts over the last four years. In the same vein, Finlayson (2009) notes
that the scandal concerns prices paid by the government for imported fuel, as international
fuel traders, taking advantage of massive corruption loopholes in Nigeria, engaged in
falsifying the dates of bills of lading to reflect particularly high market prices. By so
doing, they overcharge the Nigerian National Petroleum Corporation (NNPC) by over
$300 million.
Similarly, Gboyega et al (2011) discussing the crisis in the energy sector of the
Nigerian political economy, note that Nigerian politics have evolved directly from the
22
struggle by various interest groups to get access to oil revenue. They further argue that
Nigerian politics is all about control of the federal government, which has power to grant
access to the oil wealth. Positions in the oil ministry and NNPC which oversee the
government’s interests in the sector are next in line, and local governments. In terms of
allocation of fuel import licenses, they state as follows:
The federal government’s control over oil and gas resources was achieved when Nigeria was ruled by a military regime. This regime did not invest the revenues to create conditions for sustainable development. Instead, the oil and gas resources became instrument of politics. Successive regimes could buy political support through the award of oil blocks, crude oil lifting contracts, and licenses for imports of products. Oil has been used to promote Nigeria’s foreign policy through concessionary sales and credit arrangements to African countries, including Ghana, Kenya, Namibia and South Africa (Gboyega et al, 2011:16).
Going further, Gboyega et al (2011) note that patronage –based political power and
appointment into petroleum ministry are closely monitored politically to see which ethnic
group is gaining ascendency and at whose expense. The sensitive appointments into the
top echelons of the NNPC were highlighted in July 2009 when the government announced
dismissal of the corporation’s top management staff and their replacements. Of the 13
people dismissed, 11 were southerners, and only 2 were northerners. Of the 11 new heads
of departments announced in the reorganizaiton, 7 were northerners and 4 were
southerners.
NEITI (2006) audit of the refineries and product importation during 1999 -2004
discovered lack of transparency surrounding the allocation of fuel import licenses to
marketers. They found out that the domestic demand for PMS is growing at such a rate
that exceeds even the highest possible domestic output. The amount of PMS importation
could have been significantly reduced had there been reasonable refinery performance
23
during the period. They further noted that it is clear that for a considerable period into the
future, Nigeria will have to import a significant proportion of its PMS product needs.
According to them:
The importation process, including the tendering, contracting and procurement practices, fall short of current good practice standards, and it is questionable whether they fully protect Nigerian federal government interests… In many areas of the process, there was a lack of written procedures. Discretionary management decision making on the allocation of importation contracts appears unnecessarily wide. The general manager of NNPC, PPMC and Commercial Department who plays a central role in products importation impenitently disregarded DPR’s statutory right to grant licenses to importers (NEITI, 2006:69-70).
KPMG Professional Services (2010:26) audit report of NNPC corroborates this
point when they state that “the process of selecting suppliers for importation of products
is documented but the documented procedures are not adhered to. They note that the
Evaluation Committee only recommends prices for the importation of petroleum
products while actual allocation of importation contracts (especially volumes) appears to
be at management’s discretion”. They further point out the implications of the above as:
firstly, “the risk exists that the product importation process could be prone to abuse, and
secondly that the limited role of the committee in the contracting bid process for products
import hampers the transparency and objectivity of the process”. They conclude by
recommending that the management needs to empower evaluation committee to evaluate,
determine and shortlist for approval based on predefined and approved criteria; review
and update policies and procedures for issuance of importation supply contracts: clearly
define criteria for allocation to ensure transparency and objectivity and finally selection
should be based on defined criteria.
24
Gillies (2009), also notes how complex corruption pervades the allocation of oil
licenses (import/export) in Nigeria. He attempts to shed light on how public sector
institutions governing the Nigerian oil sector permit the existence of corruption. He goes
on to succinctly state that:
NNPC awards licenses to import petroleum products such as petrol, kerosene, and diesel. These export and import transactions yield high levels of fungible returns, and the lack of transparency surrounding them creates considerable opportunities for corruption. Following a pre-qualification process for the licenses, it is not clear how winners are selected or how much the contracts are worth. Press reports allege that officials regularly receive payments by the come (Gillies, 2009:2).
He concludes that reducing oil sector corruption and improving the quality of oil
revenues expenditure remain great challenges. Nigeria exhibits characteristics of the
“rentier state”: the driving logic of governance is the allocation of resources and
opportunities in ways that strengthen the position of those in power. Such a system,
operating over decades, creates seats of wealth and influence which depend on these
distributional patters for their continued existence. Therefore, reforms that advance due
process, transparency and over sight should not be pursued
Furthermore, Odeh (2011) quotes the Independent Petroleum Marketers
Association of Nigeria (IPMAN), who exposed the Nigerian National Petroleum
Corporation (NNPC), Petroleum Product Pricing Regulatory Agency (PPPRA) and other
agencies connected with the subsidy regime. According to IPMAN these agencies
connected with the fuel subsidy regime had been awarding fuel importation contracts to
“briefcase importers” and as a result, contributed to the abuse of the subsidy regime in the
downstream sector of the petroleum industry. They note that such importers neither had
retail outlets nor storage facilities. Yet, they enjoyed favourable patronage from the NNPC
and PPPRA, questioning further that you don’t have retail outlets, you don’t have storage
25
facilities, but you get contracts to import fuel, where does the fuel go to after the subsidy
has been paid? They stressed further that there were instances were major marketers and
the association’s members who met the requirements for the award of contracts were
sidelined in favour of the briefcase contractors. They observe further that:
In 2011, IPMAN got less than one per cent of the fuel importation contracts; compared to the huge number of retail outlets and storage facilities that we have and described the case of kerosene as being the Worse as third-party contractors were allegedly favoured to import the product only to resell to the real marketers who have retail outlets (Odeh, 2011:94).
He finally, concludes by calling on the federal government to take the bold step of
removing the briefcase contractors from the system and ensures that regulatory agencies
did not provide a platform that encourages cutting of corners.
In the same vein, Sanusi (2012) explaines the rot in the petroleum sector and the
frauds perpetuated in order to benefit from fuel subsidy. He notes that it all started from
PPPRA “allocations” based on “capacity”. You will find a company like Mobil with
capacity for say 60,000mt and a relatively unknown name with a capacity of say
90,000mt. Although PPPRA is supposed to give license only to marketers with a national
distribution network you see names of companies where you have never seen a filling
station in their name. He further observes that on some days over 10 vessels are said to
have discharged cargo in Lagos on the same day clearly the same officers stamping and
verifying that the vessels were seen. Is it really realistic that on the same day 13-15
vessels can discharge in Lagos? Zenon and AP owned by the same businessman owed the
Nigerian banking industry N220b. And we all saw the amount of subsidy paid to those
companies published by Business Day. So, money had been taken, subsidy had been
collected but loans were not repaid.
26
The above review of extant literature on the issue of importation of fuel and the
political economy of refineries development has shown that scholars have not examined
the relationship between allocation of importation of fuel licenses to independent
marketers to satisfy private, prebendal ethno-regional interests and discouragement of
investors in the development of new refineries in Nigeria.
2.2 Did fuel importation probes fail to adequately define the challenges hindering the development of new refineries in Nigeria between 1999 and 2013?
Government oil policy in the form of fuel importation subsidy that turned to an
avenue of looting Nigeria treasury, gave rise to fuel subsidy probes which exposed a lot of
challenges, and has remained a subject of growing academic concern in recent times.
Therefore, fuel importation probes are discussed under two sub-headings:
1. Fuel subsidy debate
2. Fuel subsidy probes
2.2.1 Fuel subsidy debate
Fuel subsidy is one of the critical issues that dominate public debate in Nigeria.
While most scholars have argued that there is fuel subsidy, others insisted that it does not
exist in Nigeria.
Okonjo-Iweala (2011), for instance, who is the co-ordinating minister of economy
in Nigeria makes a strong politico-economic case to justify that there is fuel subsidy in
Nigeria and that its removal is necessary. She notes that subsidy does not get to the poor
as the middle and upper classes are the real beneficiaries. She argues that the price of fuel
in Nigeria is below both the African and international average. Nigeria, with its large
population and small oil base, is comparatively poor, compared to other oil producers.
27
With total crude oil production of approximately 2.5million barrels per day, Nigeria has a
significantly lower GDP per capita. Therefore, we must rethink our approach to managing
our scarce resources to provide services to Nigerians. We will be better off using the
amount spent on subsidy to target poorer groups and big infrastructure projects. According
to her:
Under the current downstream sector structure, prices are not determined by demand and supply. Pump price of PMS is fixed at N65 per litre by the government...Fuel subsidy is what is paid by government to keep prices below free market. The subsidy causes distortions that result in huge economic costs such as rent-seeking behaviour and smuggling... The amount of subsidy equals to the difference between the consumer pump price of fuel versus the total cost of producing or importing. The price of petrol is N65 per litre, but actual cost of supply is Nl.39 per litre. And projected at N120 per litre in 2012... This means that currently for every one litre of petrol purchased at the official price of N65, government contributes N73. Presently, only petrol and kerosene enjoy government subsidy. Diesel has already successfully been deregulated,..Subsidy is a major fiscal and financial burden on the nation. From 2006 -2011, about N3.7 trillion was spent on subsidy,,. In 2011, Nl.348trillion was spent between January and October and it is expected to reach Nl .436triliion by the end of the year. This represents 30 per cent of total Federal Government Expenditure; 11 S% of the capital budget; and 4,18% of GDP... Deregulation implies limited intervention by government; it allows for better regulation and transparency; allows for free operation activities in the sector; attracts new investors into the market and it increases competition and promotes overall higher productivity; reduces scarcity by ensuring adequate supply of petroleum products; and similar success story to the telecommunication sector (Okonjo-Iweala, 2011:2).
She further enumerates some social safety nets that the government will
implement if the subsidy is removed which include the following: (a) Launching of
Subsidy Reinvestment and Empowerment Programme (SURE); (b) Maternal and child
health services; (c) Public works/youth employment programme; (d) Urban mass transit
scheme; (e) Vocational training schemes; and (f) High-profile infrastructure projects:
Roads and rail; water resources, power; refineries (with private sector). She insisted that
28
the "Structures have been developed to guarantee adequate oversight, accountability and
implementation of the various projects… To ensure effectiveness, efficiency and delivery,
high powered committee of eminent Nigerians to monitor revenue proceeds and proper
implementation and use of the amount saved. Members with proven integrity will be
drawn from the Nigerian youth, women groups and civil society organisations.
Nwachukwu et al (2011) also subscribe to the above view when they examined
“fuel subsidy in Nigeria: Fact or fallacy”. They use multiple linear regressions to test the
research hypothesis. They find out that there is a significant relationship between the fuel
demand and fuel subsidy factors (fuel subsidy and price of fuel) at 0.01 level (R2 = 50.4).
This implies that fuel subsidy factor accounted for 50.4 per cent changes in demand for
fuel. This result is empirical evidence that fuel subsidy is a fact and not a fallacy.
Nwachukwu et al (2011:2800) therefore posit that:
Fuel subsidy responds positively and significantly to the fuel demand in Nigeria IB = 0.449; t=0.3772; p= .000(<0.01 significant level). This suggests that as the fuel demand increases, the fuel-subsidy also increases, while the fuel price decreases. It is an indication that fuel subsidy, is a significant factor that contributes to changes in fuel demand. This confirms that there is an existence of fuel subsidy in Nigeria.
They recommend, among other things, gradual withdrawal of fuel subsidy by the
federal government so as to minimize resistance from the citizenry.
In the same vein, Soyode (2001:6) also shares the above view that there is fuel
subsidy in Nigeria. He asserts that the argument of the opponents of fuel subsidy that
official prices of fuel cover the cost of production is an expression of pure sentiment, and
lack of economic sense. He opines that it is ridiculous to expect the nation’s resources to
be invested in oil production only for just recovering the cost of production at the end of
29
the day. According to him the cost of producing crude oil is irrelevant in the calculation of
fuel subsidy. He describes fuel subsidy as the loss of revenue that should have accrued to
the federation account if the crude oil allocated for domestic consumption were to be sold
at international market prices instead of the price at which it is sold to the Nigerian
National Petroleum Corporation (NNPC). He concludes that removal of fuel subsidy will
ultimately guarantee success and bring permanent solution to lingering fuel scarcity
problem in Nigeria.
Corroborating these views, Aminu (1993:4) argues that fuel subsidy exists and that
its removal will benefit the nation. This is because it will discourage wasteful
consumption and smuggling. The amount of money realized from it will be used to
provide world class mass transit and road systems, improved health care, good schools,
food security and new job opportunities, among others.
National Petroleum Corporation (1993:3) supports this viewpoint when they
declared that:
The issue does not require sentimental arguments, but, a close look at the major facts and figures both in domestic economy and comparative economies of other countries of the world. It suggests that there is need to remove subsidy on fuel price so as to minimize the excruciating effects of fuel scarcity by improving the supply and delivery system. It opines that fuel subsidy is not fair to all because it favours the rich who own cars and use more of fuel. According to it the subsidy that would be beneficial would be in health care, mass transit and education.
Furthermore, Kojima and Bacon (2006) examine the abuses in fuel markets and
how to protect consumers and public health. They argue that there is fuel subsidy and that
subsidizing fuels has high costs. More so, universal price subsidies always favour high
income households more than the poor, because richer households consume more energy.
The undesirable consequences include rampant abuses in fuel markets and an inefficient
30
downstream petroleum sector languishing for need of reform. Subsidies only give the
consumers financial incentives to over consume the subsidized commodity which leads to
deadweight loss.
Akinwale et al (2013), while arguing that there is fuel subsidy, examine the
political economy of phasing out fuel subsidy in Nigeria. They used empirical
investigation to examine the impact of fuel subsidy removal on fuel consumption using
least square method. They find out that twenty six years under review shows that subsidy
removal will reduce fuel consumption which will lead to efficient fuel demand and
reduction in carbon emission. Akinwale et al (2013:4) therefore posit that:
Wasteful consumption that was brought by energy subsidies will be removed if subsidy is phase out. Also, phasing out subsidy would cut global oil demand by 4.7mb/d by 2020; with savings predominantly in the transport sector (i.e. 60% of the energy saved is from transport sector). The CO2 emissions will be reduced by 6.9% in the year 2020 if subsidy is phased out, as this is equivalent to the current emissions of France, Germany, Italy, Spain and UK combined.
Akinwale et al (2013) conclude therefore, by stating that the money saved by
phasing out fuel subsidy can be used for transforming the economy by building
infrastructure, establishing new refineries and maintaining the old ones through improved
technology management among others.
Similarly, Adelabu (2012), argues that there is fuel subsidy in Nigeria and
examines the political economy of oil deregulation in Nigeria’s fourth republic. He
interrogates the politics and economics of the debate on the oil deregulation in Nigeria. He
finds some of the leading problems of the deregulation of the downstream sector to the
ruling elites, continuing deterioration of public services, growing inequality,
31
overdependence on oil and the Niger Delta crises. Adelabu (2012:197) therefore, posits
that:
Removal of subsidies and full deregulation at this point in time could compound the already unbearable economic hardship that Nigerian people are currently experiencing. This includes hikes in transport fare, prices of food and services, closure of local industries and job losses and unemployment, deepening of the poverty level and poor standard of living of most Nigerians. Until the challenge of infrastructural bottlenecks is addressed; any attempt to deregulate will suffer major setbacks that will impact negatively on the economy.
On a moderate note, Adenikinju (2011:2), while asserting that there is fuel
subsidy, at a recent Symposium organized by Academic Staff Union of Universities in
Ibadan, insists that fuel subsidy "has moved from implicit subsidy to explicit subsidy, with
the exchange rate used in the importation of oil, depleting the foreign reserves, thus making
removal of the subsidy a necessity. If we are to refine locally, all these costs spent on
importation will not be necessary".
In another development, Onyishi et al (2012), while acknowledging that there is
fuel subsidy, x-ray the implications of the subsidy removal on the economy in general and
the populace in particular. They focus on explaining the two sides of the existing views;
first, the proponents of the subsidy posit that the subsidy has to go because we need the
money to rebuild the economy. Opponents of the policy argue that there is nothing like
subsidy existing in Nigeria, and that was surreptitiously being promoted by government as
removal of subsidy was increase of petrol price under a deceptive guise.
They argue that the announcement of some marketers as beneficiaries recently was
diversionary. The marketers are too afraid to protest. The real culprits are the political
elites. We have not considered those who do round tripping and declare fuel at the port,
obtain subsidy and come back to declare same. This is what Nigeria need to stop with the
32
help of the National assembly and International forensic auditors. If we subsidize the
actual fuel that we consume in Nigeria, the expenditure will be negligible. In this regard,
Onyishi et al (2012:78) observe that:
The protesters who appear to be unimpressed by the government’s officials’ line clearly represent the gut feeling of the majority. They appear to be even less impressed with the committee on subsidy reinvestment and empowerment programme. Nigerians have rejected the “subsidy” removal because they are tired of policies which do not attempt to increase purchasing power in the country.
On the other hand, opponents of fuel subsidy maintain that it does not exist. Ola
(1998), for instance, totally disagrees with the government argument that the selling price
of petrol (PMS) per litre is below the cost of production, distribution and allowable profit
margins. Therefore, the subsidy element is the difference which the government bears. He
describes the claim as a decoy for upward review of fuel prices. He argues that upward
review of prices will not achieve efficiency in supply of petroleum products. According to
him:
It is wrong to consider removal of purported fuel subsidy when the nation’s refineries are operating far below their installed capacities. The low production cannot be used to determine prices as the advantages of economy of scale will be missing. Until the nation’s refineries are repaired and made to work at full capacity, one should not talk of appropriate pricing of fuel (Ola, 1998:14).
Subscribing to the above view, Aborisade (2012) in his analysis whether there is
subsidy on Premium Motor Sprit (PMS), argues that in order to determine the validity of
the claim, we have to answer the following major questions with facts and figures: Is the
selling price of petrol (PMS) per litre below the cost of production, distribution and the
allowable profit margins? According to him:
The available facts, figures and calculations below show that the selling price of petrol per litre is not below the cost of production, distribution
33
and allowable profit margins when we consider the crude oil refined internally in Nigeria; rather, the selling price is higher than the cost of production, distribution and profit margins, as far as the crude oil refined internally is concerned. Therefore, the conclusion is that the claim that subsidy exists cannot be validly sustained (Aborisade, 2012:14).
He notes that the oil merchants are making what economists call supernormal
profit per litre of N31 (N65- N34 = N31). The above conclusion is based on the following
facts and reasoning: the total costs of a barrel of petrol, plus allowable profit margins,
amount to $35.68, this means that the cost of a litre, plus profit margins is $0.21 (i.e.
$35.68 divided by 168, as there are 168 litres in one barrel). In Naira terms, at the
exchange rate of US$1: N160, the cost of a litre of petrol, plus profit margins is N33.90 or
N34.00 approximately. At the selling price of N65 per litre, which is higher than N34.00,
petrol refined internally in Nigeria is overpriced and there is no subsidy.
In the same vein, Agbon (2012) provides the full detail of the cost elements of one
barrels of petrol (from crude oil refined in Nigeria’s refineries), which shows that the
government’s argument’s that subsidy exists cannot be sustained. He focuses on
explaining that Nigerian government has earmarked 445000 barrels per day throughput for
meeting domestic refinery products demands. These volumes are not for export. They are
public goods reserved for internal consumption. According to him:
At the refinery gate in Port Harcourt, the cost of a barrel of Qua Iboe crude oil is made up of the finding/development cost ($3.5/bbl) and a production/storage /transportation cost of $1.50 per barrel. Thus, at $5 per barrel, we can get Nigerian Qua Iboe crude to the refining gates at Port Harcourt and Warri. One barrel is 42 gallons or 168 litres. The price of 1 barrel of petrol at the Depot gate is the sum of the cost of crude oil, the refining cost and the pipeline transportation cost. Refining costs are at $12.6 per barrel and pipeline distribution cost are $1.50 per barrel. The Distribution Margins (Retailers, Transporters, Dealers, Bridging Funds, Administrative charges etc) are N15.49/litre or $16.58 per barrel. The true cost of 1 litre of petrol at the Mobil filling station in Port
34
Harcourt or anywhere else in Nigeria is therefore ($5 +$12.6+$1.5+$16.6) or $35.7 per barrel . This is equal to N33.36 per litre compared to the official price of N65 per litre. Prof. Tam David West is right. There is no petrol subsidy in Nigeria . Rather the current official prices are too high (Agbon, 2011:2).
He observes that even as government claims that we are operating our refineries at
38.2% efficiency, and also that when we refine a barrel of crude oil, we will get 45 gallons
of petroleum products. Yet, he insists that the 45 gallons of petroleum products consist of
4 gallons of LPG, 19.5 gallons of Gasoline, 10 gallons of Diesel, 4 gallons of Jet
Fuel/Kerosene, 2.5 gallons of Fuel Oil and 5 gallons of Bottoms. Thus, at 38.2% of
refining capacity, we have about 170000 bbls of throughput refined for about 13.26
million litres of petrol, 6.8 million litres of diesel and 2.72 million litres of kerosene/jet
fuel.
He further notes that this is not enough to meet internal national demand. So, we
send the remaining of our non-export crude oil volume (275000 barrels per day) to be
refined abroad and import the petroleum product back into the country. We will just pay
for shipping and refining. The Nigerian government exchanges the 275000 barrels per day
with commodity traders (90000 barrels per day to Duke Oil, 60000 barrels per day to
Trafigura (Puma Energy), 60000 barrels per day to Societe Ivoirienne de Raffinage (SIR)
in Abidjan, Ivory Coast and 65000 barrels per days to unknown sources) in a swap deal.
The landing cost of a litre of petrol is N123.32 and the distribution margins are N15.49
according to the government. The cost of a litre is therefore (N123.32+N15.49) or
N138.81. This is equivalent to $3.54 per gallon or $148.54 per barrel. In technical terms,
one barrel of Nigerian crude oil has a volume yield of 6.6% of AGO, 20.7% of Gasoline,
35
9.5% of Kerosene/Jet fuel, 30.6% of Diesel, 32.6% of Fuel oil / Bottoms when it is
refined.
Consequently, Agbon (2011:4) uses a netback calculation method to calculate the
true cost of a litre of imported petrol from swapped oil. The gross product revenue of a
refined barrel of crude oil is the sum of the volume of each refined product multiplied by
its price. Domestic prices are $174.48/barrel for AGO, $69.55/barrel for Gasoline (PMS
or petrol), $172.22/barrel for Diesel Oil, $53.5/barrel for Kerosene and $129.68/barrel for
Fuel Oil. Let us substitute the government imported PMS price of $148.54 per barrel for
the domestic price of petrol/gasoline. Our gross product revenue per swapped barrel
would be (174.48*0.066 +148.54*0.207 +172.22*0.306+ 53.5*0.095+129.68*0.326) or
$142.32 per barrel. We have to remove the international cost of a barrel of Nigerian crude
oil ($107 per barrel) from this to get the net cost of imported swapped petroleum products
to Nigerian consumers. The net cost of swapped petroleum products would therefore be
$142.32 -$107 or $35.32 per barrel of swapped crude oil. This comes out to be a net of
$36.86 per barrel of petrol or N34.45 per litre. This is the true cost of a litre of imported
swapped petrol and not the landing cost of N138 per litre claimed by the government. The
pro-subsidy Nigerian government pretends the price of swapped crude oil is $0 per barrel
(N0 per litre) while the resulting petroleum products is $148.54 per barrel (N138 per litre).
The government, therefore, argues that the “subsidy” is N138.81-N65 or N73.81 per litre.
But, if landing cost of the petroleum products is at international price ($148.54 per barrel),
then the take-off price of the swapped crude oil should be at international price ($107 per
barrel). This is basic economic logic outside the ideological prisms of the World Bank.
36
The traders/petroleum products importers and the Nigerian government are charging
Nigerians for the crude oil while they are getting it free.
He finally concludes that the true price of 38.2% of our petrol supply from our
local refinery is N33.36/litre and the remaining 61.8% has a true price of N34.45 per litre,
then the average true price is (0.382*33.36+0.618*34.45) or N34.03 per litre. The official
price is N65 per litre and the true price with government figures is about N34 per litre
(even with our moribund refineries). There is therefore no petrol subsidy. Rather, there is
a high sales tax of 91.2% at current prices of N65 per litre.
Corroborating this, Alexander oil and gas connections (2004:2) argue that the
current price of fuel in Nigeria covers the cost of producing it. They disagree with
government’s intention of removal of subsidy for the purpose of reviewing the domestic
price level upwards as the panacea required to restoring supply-demand equilibrium. It
observes that previous upward price reviews did not do the magic expected. Rather, they
cause the government considerable loss of credibility. It describes the argument of
supporters of removal of fuel as not only persuasive, but fallacious. They conclude that
there is no subsidy in the prevailing official prices of fuel in Nigeria.
Similarly, Femi Falana writing on the “misconceptions on fuel subsidy”, argues that
there is no fuel subsidy. According to him:
In the last two years, a barrel of crude oil which is extracted for less than $10 has been sold in the international market for prices ranging from $100 to 180. Since the cost of production is by far less than price of the commodity the issue of subsidy does not arise. It is however conceded that the federal government has been subsidizing corruption and inefficiency arising from official negligence to maintain the existing refineries and build new ones to meet domestic needs and generate substantial revenue from exporting petroleum product (Falana, 2011:2).
37
He further notes that no doubt government can no longer justify the huge
expenditure on fuel importation. But instead of confronting the fuel cartel and some
unpatriotic public officials duping the country through fraudulent claims, round tripping
and smuggling of subsidized petroleum products to neighbouring countries government
has decided to inflict more excruciating economic pains on helpless Nigerians by
withdrawing subsidy from PMS.
Also, Tam David-West added a new dimension to the festering controversies on
fuel subsidy. He maintains that there had never been petroleum subsidy in Nigeria and that
the term was only coined to deceive Nigerians into believing that government is subsiding
prices of petroleum products, which ought to be higher than what they are. According to
him:
The mere thought of increasing petroleum prices is an irresponsible thought. There is no subsidy. The concept of petroleum subsidy is fraudulent. General Buhari was Petroleum Minister under General Murtala Muhammed and Olusegun Obasanjo respectively, before he later became Head of State. I was also petroleum minister under him. And both of us independently addressed the congress of the world that any form of petroleum subsidy is fraudulent (David-West, 2011).
He notes that government officials have to sabotage the refineries so as to import
fuel from abroad. And for every sabotaged ,they make millions the year round. He further
notes that subsidy removal is IMF/World Bank dangerous suicidal conditionality for oil
producing countries. The Minister of Finance is hand in glove with them. She should not
bring their script.
In another development, Strategies Union of Professionals for the Advancement of
Nigeria (SUPA) (2010) argue that there is no subsidy on the price of fuel after carrying
out a cost determination analysis that the actual cost of fuel is lower than the current retail
price. According to them:
38
Government makes a profit of 33.50 N/Litre on PMS (Petrol) at the current price of 65 N/Litre. This translates to a very high 106% profit per litre. In addition the government benefits from royalties, taxes and fees which were not factored in this simplified analysis. When factored, the actual crude cost per barrel to government is significantly less and its profit correspondingly higher. Therefore, posited SUPA, the claim of subsidies on petroleum products is incorrect. So that is another Government lie (SUPA, 2010:4).
Similarly, in her article titled “The Truth about Oil Subsidy”, Mrs Ganiyat Gani-
Fawehnimi insists that the truth is that there was never an oil subsidy; there has never
been an oil subsidy and today there is no oil subsidy in the pricing of petrol per liter in
Nigeria. According to her, the causes of our present oil chaos are not the issue of oil
subsidy but:
• High level of corruption in all strata of governance in all parts of Nigeria.
• Massive and unchecked stealing by our leaders, their cohorts and cronies in public and private sectors of the Nigerian economy over the decades.
• Open and deceptive mismanagement of our resources including public funds.
• Mindless and mind-boggling lavish projects specifically designed as conduit pipes to siphon the people’s common wealth into private pockets at the expense of the needs and cares of the suffering Nigerian masses.
• Unceasing and measured astronomical devaluation of the Nigerian currency, a result of gross mis-governance of the country in all facets of human activities” (Ganiyat quoted in Adejoma, 2011:4).
Adejumo (2012) while queuing–up on the above views, examines fuel subsidy
removal: fraud, deception, corruption or good intentioned? He focuses on explaining the
insincerity of Nigerian government at all levels. Already, since oil was discovered in huge
quantities in our country, the man on the streets of Nigeria has neither seen nor benefited
from this unique commonwealth. According to him:
39
The fraud called Petroleum/Fuel Subsidy Removal has at last been perpetrated on Nigerians? A fraud because the Government has not been telling us the whole truth. They have not even been economical with the truth; they have told us outright lies that even a baby will not believe. Or do they themselves understand what this is all about? For instance, we were told our refineries are not working. This is an outright lie. Our refineries are in full working order, or at the minimum, can be made to work with some repairs, sincerity and commitment; but the insidious and invidious cabal profiting from the fuel subsidy are not making them work. And the Government knows it; they profit from it too (Adejumo, 2012:6).
He argues that nearly everybody benefits from fuel subsidy except the masses of
Nigeria. The cabals of the profiteers have been exposed. A combination of a few corrupt
oil thieves, privileged individuals, political appointees and elected ones who as major
sponsors and backers of government, are milking the economy of this country dry. For
instance, they give the Government (the officials of whom are in collaboration with the
cabal) false invoices, which inflate the amount of crude they actually lifted by up to
1000% or more; e.g. they lift 30,000 barrels but claim 3 million barrels. And the
Government pays, knowing this to be false. The cabal shares the illegal profit with the
government and NNPC officials.
In another development, Afonne (2011) argues that there is no fuel subsidy in
Nigeria. Hear him:
Successive governments at the federal level in Nigeria since 1986, had tinkered in...several ways with the price of petroleum products under various guises. Often they blamed their administrations' failure to provide basic amenities for the citizens on government's channeling of scarce resources to augment the cost of importation of premium motor spirit and dual purpose kerosene into the country under a bogus heading tagged: oil subsidy.,. Yet government's huge appetite for increase in pump price of petroleum products seems insatiable as it has concluded plans to further tamper with it…Ordinarily, Nigerians would not have lost a minute's sleep on the purported hike in price of fuel, if previous exercises had yielded desired results. Rather, while many people in the
40
country may be feeling the crunch wrought on their already lean pockets by the incessant increase in price of the product, a select group of brief-case-businessmen are smiling to the banks. There is a cartel which has perfected plans to inflict maximum pain on many people in the country (Afonne, 2011:3).
In agreement, Ishiekwene (2011) supports the above view. He contends that the
rulers have been criminal liars and there don't seem to be any end to this, more or less,
perpetual fraud and deception of the people…that petrol in Nigeria is heavily subsidised,
and the "fuel Subsidy" must be removed so that government can free itself from subsidising
motorists and use the money for infrastructure development. He observes that the
arguments have been the same by the evil leadership Nigeria parades- leeches that don't
care about the welfare of its people because they get everything for free. According to him:
The truth of the matter is that there has never been any subsidy…a cabal has hijacked the Nigerian Petroleum distribution and Marketing process...What has been happening is that thieving and greedy governments...have caused Naira to continuously depreciate...And as Naira keep dwindling in value and the evil politicians…come back on the hard pressed people to tell them they want to withdraw "fuel subsidy". There is no end, and there will be no end, to this as long as these band of pirates continue to rule us…tons of cash has been allocated for TAM (Turn around maintenance of the four (4) refineries) which never get anywhere near Engineers or equipments for maintaining Refineries, but end up in bank accounts of PDP supporters and election rigging facilitators…And so Nigeria has been dependent largely on imported petrol and kerosene for a growing population. And who do all the importation of Petroleum products? PDP mafias and election rigging funders at all levels of the chain. Can you now see that the Nigerian people are in deep shit? The people are screwed, whichever way the pendulum swings, and no way out of the mess because the baton is been charged to the same group of oppressors... There will be no end to these cycles of increases and lies of “Subsidy removal” so long as the greedy elites…continually depreciate the Naira relative to the Dollar…Yes the Nigerian people must resist very vigorously this umpteenth increase in fuel prices (Ishiekwene, 2011:4).
41
2.2.3 Fuel subsidy probes
Fuel subsidy probes have exposed a lot of challenges which hindered the
development of new refineries in Nigeria. In this regard, Igbuzor (2012), for instance,
analyzes the report of the House of Representatives Committee Probes which conducted
public hearing from16th January, 2012 to 9th February 2012 and took testimonies from
130 witnesses including reception of over 3,000 volumes of documents. He interrogates
the interfaces among the Nigerian state, Legislators, the Executives, and civil society with
the economy. He finds that corruption is pervasive in Nigeria oil industry with serious
negative consequences. Despite the plethora of legislations and agencies fighting
corruption in the country, corruption has remained widespread and pervasive because of
failure to utilize universally accepted and tested strategies; disconnect between posturing
of leaders and their conduct; lack of concrete sustainable anti-corruption programming
and failure to locate the anti-corruption crusade within a broader struggle to transform
society. Igbuzor (2003:3) therefore posits that:
Fuel subsidy probe and the matters arising from it present a great opportunity for the people of Nigeria to be united to rescue our country from the stranglehold of thieves and charlatans. Interestingly, there appears to be unity among the Nigerian people and government that the looting of the treasury must stop. The House of Representatives has demonstrated commitment. The presidential Adviser (Senator Joy Emordi) has stated that the President is on the same page with the National Assembly. All stakeholders must rise up to be counted to bring the looting of the treasury to a stop.
Kolawole (2012) also shares the view that the House of Representatives probe on
fuel subsidy in the country has further exposed the rot in the nation’s oil sector, coupled
with the conflicting facts and figures being churned out on a daily basis by those who
ought to know better. He notes that the submissions of the minister of petroleum
Resources, Mrs. Diezani Alison-Madueke; Central Bank of Nigeria (CBN) governor-
42
Mallam Sanusi Lamido Sanusi; chairman of Revenue mobilization Allocation and fiscal
commission (RMAFC), Mr. Elias Mbam; the Nigeria Extractive Industries Transparency
Initiative (NEITI) and other stakeholders in the sector have confirmed the sorry state of
the nation’s most-price resources sector. According to him:
The probe has revealed that the money being spent on subsidy yearly could have been used to build new refineries so that the country could go beyond refining for local consumption to exporting products (Kolawole, 2012:15).
Kolawole (2012) also notes that the coordinating Minister of Economy and
Minister of Finance, Dr. (Mrs.) Ngozi Okonjo –Iwala, had claimed before the panel that
the government had paid the sum of N1.4 trillion on fuel subsidy in 2011, the CBN
governor, on his part, claimed that the subsidy on fuel had hit N1.7 trillion, while the
committee of the House probing the subsidy regime also maintained that from documents
at their disposal, the amount of money to be paid on fuel subsidy might hit N2 trillion. He
finally concludes that the probe revelations has given hope that this time, the government
would make errant people pay for their sins so as to serve as deterrent to others and
sanitize the oil and gas sector.
Similarly, Adesua (2012) is of the view that one of the unfortunate fallout of the
protest against fuel price hike of January 2012 was the revelations before the Ad hoc
committee of the House of Representatives. He argues that such committees in the past
were, however notorious for not achieving anything. Then, he notes that there were
disagreements on the figures representing the actual amount paid as subsidy on fuel. There
was also deliberate misconduct in the payment of subsidy that should lead to a refund of
substantial public funds to the government. There was, indeed, criminal behaviour that
should be punished. In this regard Adesua (2012:17) further observes that:
43
The comments by leading public officials in the oil industry before the Ad hoc Committee on fuel subsidy of the House of Representatives have put in bold relief that the rot in the oil industry and the complicity of top government officials in the mismanagement and corrupt practices that characterize the industry. This is one of the happy things that came out of the protest. Not only were the revelations greeted with outrage, many Nigerians also felt the revelations have provided a window of opportunity for the government to frontally attack corruption, incompetence and irresponsible behaviour by the leadership of the oil sector and the public sector in general.
In the same vein, Onwuemenyi (2012) examines the subsidy probe scandal as the
aftermath of the nation-wide protest. He argues that many stakeholders have blamed the
secrecy and corruption in the management of the subsidy process on government officials
and regulators, calling for a review of the entire subsidy regime. Consequently, the federal
government directed a review and investigation into subsidy process through the
Economic and Finance Crime Commission, EFCC, PPPRA, the agency responsible for the
management of the subsidy regime. But not satisfied with the above agencies, the
National Assembly through the House of Representatives, set an Ad-hoc committee.
Expectedly, the investigation by the House of Representatives Ad-hoc committee on the
fuel subsidy management led by Hon. Farouk Lawan opened the pandora’s box which
reveal the massive corruption and fraud that has over run the subsidy management system,
and the general rot in the nation’s oil and gas industry. According to them:
The 61-pages report by the House Committee revealed names of some government agencies and institutions and private enterprises that ran a well organized corruption regime, where both state officials and their private cohorts denied Nigerians the benefits of the subsidy policy, diverted public funds, over-invoiced fuel imports, and collected rebate for them… some of the industry regulators overpaid themselves under the subsidy regime. In this regard the Nigerian National Petroleum Corporation (NNPC) and Petroleum Products Pricing Regulatory Agency (PPPRA), were named as the chief culprits in the looting spree where fuel marketers acted for themselves and also as conduit pipes for state officials to defraud the government (Onwuemenyi, 2012:5).
44
He finally suggests different ways of getting out of the subsidy mess. First, the
provision of incentives to encourage private sector participation in refining, jetties and
pipelines operations, as well as restructuring government owned oil corporation (NNPC)
in a manner that her subsidiaries will not hold dominant market positions. Second, a
revisit of the implementation of the aborted open-Access, common-carrier regime in the
operations of strategic logistics to reduce bridging cost etc.
In his analysis of the impact or damage of the oil subsidy probe in the oil and gas
sector, Asobie (2012:7) argues that:
It may be a bit early to assess the effect of the probe on the industry. But from general practice, it can be summarized that no industry experiences growth when it is faced with headwinds of corruption and general malaise, corruption and inadequate governance is anathema to growth and development.
Asobie further notes that for an industry that remains the back-bone of the nation’s
economy, government needs to do more to ensure there is clear transparency and effective
governance structures so that resources from the sector would be used to the benefit of the
citizens. He finally warns that the fuel subsidy probe should not be thrown aside because
of the all-aged involvement of House Ad-hoc Committee members in the bribery scandal.
Perhaps, of more significance is the fact that the subsidy probe had further exposed
the state of corruption in the downstream oil industry, which has led to further loss of
confidence by international investors. Ugolor (2012:6) captures these concerns thus:
This episode has reinforced the notion that for any operator to succeed in the country, he must toe the path of corruption. We have seen these issues before in the Halliburton scandal and several other cases involving both international and local companies operating in Nigeria. In a global operating environment where transparency and best practices are quickly taking root, the Nigerian petroleum industry surely needs to clean house before it can enjoy the level of confidence and trust required to have the level of investment it needs to grow the sector.
45
He further notes that such people who have been indicted in the report should
voluntarily resign or the president should sack them for that is the only way government
would show the world it is actually tackling corruption. Odumakin (2012:4) supports this
viewport when he declared that:
The mind boggling tales of corruption that came from the Probe confirmed the position of Save Nigeria Group (SNG) in January that the problem with the oil sector was not subsidy but corruption. It was surprising when the committee discovered at the end of its assignment that as against the N2456b that was budgeted for subsidy in 2011, over N2.5 trillion was seen spent with other outstanding as at the time it wound up.
Aborisade (2012:10) corroborates this point when he argues that the fuel subsidy
probe has established that corruption is the problem not removal of subsidy. Therefore,
rather than increasing the price of petrol, with a view to raising funds with which to
provide so-called palliatives, it is better for the government to go after the looted funds,
which are already documented in various official probe reports. Furthermore, the KPMG
professional services (2010) probe discloses that corrupt or unethical practices abound in
fuel subsidy in Nigeria and was of great concern. They observe that there are instances of
delays in receipt of subsidy advice from PPPRA resulting in the estimation of subsidy
claims by NNPC which result in over/under-deduction from proceeds of domestic crude
sales. For example, N25bn was deducted as subsidy estimate for September 2009 from
domestic crude sales proceeds while PPPRA approved a subsidy of N23.8bn; N35bn was
also deducted as subsidy estimate for November 2009 but PPPRA approved a subsidy of
N21.3bn; over-deduction for these two months amounted to N14.9bn. However, only
N4.2bn was swept into the federation account by NNPC as adjustment for subsidy
claimable in the two months.
46
According to KPMG professional services (2010:33)
The implications are: under-remittance of domestic crude sales proceeds into the federation account- Based on our analysis, subsidy over-deduction for 2007, 2008 and 2009 was estimated at N2.0bn, N10.3bn and 16.2bn respectively- High risk of loss of subsidy adjustments trail specifically instances of under-remittance.
They conclude by recommending two things: first, re-enforce deadlines for
submission of subsidy advice by PPPRA. Second, deduction from the proceeds of
domestic crude sales by NNPC should be solely based on amount advised by PPPRA.
The HRACR (2012) on fuel subsidy probe, also shared the view that corruption
and inconsistency by various personalities, ministries, departments and agencies of
government have undermined Nigerian economy drastically. According to them:
We found out that the subsidy regime, as operated between the period under review (2009 and 2011), were fraught with endemic corruption and entrenched inefficiency. Much of the amount claimed to have been paid as subsidy was actually not for consumed PMS. Government officials made nonsense of the PSF guidelines due mainly to sleaze and, in some other cases, incompetence, it is therefore apparent that the insistence by top government officials that the subsidy figures was for products consumed was a clear attempt to mislead the Nigerian people (HRACR, 2011:5)
They observe that contrary to the earlier official figure of subsidy payment of N1.3
trillion, the Accountant General of the Federation (AGF) put forward a figure of N1.6
trillion, the Central Bank of Nigeria (CBN) N1.7 trillion, while the committee established
subsidy payment of N2,587.087 trillion as at 31st December, 2011, amounting to more
than 900 per cent over the appropriated sum of N245 billion. This figure of N2,587.087
trillion is based on the CBN figure of N844,94b paid to NNPC, in addition to another
figure of N847.942b reflected as withdrawals by NNPC from the excess crude naira
account, as well as the sum of N894.201b paid as subsidy to the marketers. The figure of
47
N847.942b quoted above strongly suggests that NNPC might have been withdrawing from
two sources especially when the double withdrawals were also reflected both in 2009 and
in 2010. They finally conclude that different agencies indicted should be investigated by
relevant anti-corruption agencies and that Mr. President should reorganized the ministry
of Petroleum Resources to make it more effective in carrying out the much needed
reforms in the oil and gas sector.
The Petroleum and Natural Gas Senior Staff Association of Nigeria
(PENGASSAN) (2011), provide detailed implications of fuel subsidy probe in Nigeria.
They note that the wastages which the government complained about in the subsidy, were
not in the policy itself but in the process of granting the subsidy on the petroleum
products. The impact of the volumes and proceeds of local fuel supplies show easy falls
against the import price parity regimes inflicted by the imported petroleum products. They
further note that while government foreign sincerity and commitment as the usual
gimmick for soliciting the people’s understanding on the planned removal of fuel subsidy,
there is no iota of reflection and commitment towards permanent stoppage of the ever
increasing level of importation of petroleum products, but the stories have been more of
the perpetuation of wanton wastages of public funds, and no justification of value for
money. They finally conclude by stating that there is a clear indication that overhaul of
refineries, depots, jetties and vandalized/ageing pipelines, which was highly politicized
were never appropriately responded. Today, the refineries are still stifled by problems of
power plants, fuel catalytic cracking (FCC) units, digital control systems intermittent
supply crude oil, as well as vandalized/aged pipeline networks.
48
Odeh (2011) notes two incontrovertible facts about the implications of fuel subsidy
probes in Nigerian economy. First, it shows the defeated local content (LC) policy of
Nigerian government. Making reference to the Indigenous Ship Owners Association of
Nigeria (ISOAN), Odeh (2011:95) affirms that:
The country lost about N45 trillion annually due to the preference given to foreign ship owners over the indigenous owners. NNPC deliberately sidelines Nigerian ship owners from lifting fuel both locally and internationally. It sets unnecessary bulwarks that made it impossible for Nigerian vessels to take part in the lifting of oil that were either imported or locally sourced. This further shortchanged Nigeria as she lost as much as N3.7 trillion monthly in freight or shipping costs. This clearly defeated government’s local content (LC) policy.
Secondly, there is a lopsided national development in Nigeria. He contends that
Nigerian citizens are impoverished based on the United Nation Human Development
(UNDP) Report of 2009, 83.9 per cent of Nigerian live under 2 dollars a day. The nation
is thus below virtually all the West African countries including Cameroon, Cote d’Ivoire,
Gabon, Mali, Mauritania, Sierra Leone, Togo, Gambia, Ghana, Guinea Bissau, Benin,
Senegal, and even Chad. This show the very lopsided distribution of the purchasing power
in oil rich Nigeria in the hands of a few ruling elites to the detriment of the majority. Apart
from the middle class that manages to scratch out a living, the poor wallow in abject
poverty while the few political elites, flaunt their ill gotten wealth without any sense of
modesty.
Sponsoring a motion on Tuesday, September 13, 2011 on the floor of the senate
on fuel subsidy probe, Agbedo (2012) quotes Saraki as stating that the federal
government operates a fuel subsidy regime with the primary purpose of making petroleum
products not only available but at the same time designed to cushion the possible effect of
the true market prices on the populace. He notes that because the fuel subsidy scheme was
49
a long-standing government palliative action to help the Nigerian people, the motion did
not aim “by any guise” at removing the fuel subsidy. He however, insists that in
sponsoring the motion, he was propelled by the need to make the scheme more
transparent, corruption –free and competitive within an appropriate legislative framework
and in compliance with the Appropriation Act. He quotes Saraki as stating:
The Senate should note that the wide disparity between what was budgeted for fuel subsidy scheme and what is expended goes to the integrity of the budget and an erosion of the authority of the National Assembly. This motion isn’t just about subsidy; it goes to the heart of the budget process and why we are here. Today, it’s the petroleum sector, tomorrow, it may be another sector. As at the time I moved the motion on September 13, the subsidy was N1. 3trillion. We have been told that it is now N1. 5trillion. Now, it has risen to 700 per cent above budget. I believe 700 per cent is a real slap on the budget process. The motion is not targeted at an individual, it’s a systemic thing. The motion is about the level of wastage, corruption, lack of transparency that has brought us here. These figures are too huge for us to ignore. We must act fast in view of the challenges ahead. This chamber owes it to Nigerians to unravel what’s happening. How else do we explain that in one accounting year, we are spending N1.2 trillion on petroleum subsidy, which is 14 times the value of capital budget for the power sector in 2011, or 14 times power capital (N87 billion) or nine times for roads or 24 times for health or more alarming, four times defense and security budget? Those who are charged with revenues of this country must be called to account for every monies they received on behalf of the country (Agbedo, 2012:12).
In their various contributions, majority of senators condemned the flagrant abuse
of the management of the fuel subsidy scheme and set an Ad-hoc Committee headed by
Senator Magnus Abe who unveil the fuel subsidy beneficiaries, who in the words of
Senate President, David Mark, constituted the faceless ‘Cabal’ in the nation’s oil industry.
Finally, it was clear to both senators and honourable representatives that the management
of fuel subsidy lacked transparency and accountability.
50
The above review of extant literature has shown that fuel importation related
probes have fairly exposed the challenges hindering the development of new refineries in
Nigeria. But the structural challenges in the development of new refineries such as
composition of petroleum matters board based on private economic interest, lack of
deregulation of downstream oil sector, lack of autonomy of NNPC, the dominance of
foreign oil companies in the servicing and maintenance of the four downstream oil sector
and government policy of leaving oil companies in charge of transferring technical know-
how, have not been subjected to thorough scrutiny or exposed by fuel importation related
probes between 1999 and 2013.
2.3 Did expatriates’ dominance of fuel importation and distribution undermine the integration of Research and Development (R&D) in Nigeria’s Petroleum Technology Development between 1999-2013?
For a nation that has oil as its mainstay, it is expected that serious attention would
have been paid to actual exploration, production and distribution of fuel. Unfortunately,
the ruling class economic interest has made the expatriates to dominate the exploration,
production, importation and distribution of fuel in Nigeria. Turner (1976) has noted that
Nigeria is sustained, not by what it produces but on ‘rent’ on production, here the oil
industry, where investments, production, marketing and sundry expertise are completely
dominated by multinational corporations who simply pay taxes and royalties to the state.
Thus the entire state apparatus becomes a commodity for rent to the highest bidder, a
bizarre bazaar presided over by a ‘commercial triangle’ of state officials, local middlemen
and foreign suppliers.
In the same vein, Kupolokun (2006) notes that in the past years, the downstream
sector of the petroleum products started under a market structure in which price were
51
determined by the interplay of the forces of supply and demand. Then, the product market
was dominated by the multinational oil companies until 1973 when the government
introduced uniform pricing of petroleum products in order to ensure even distribution of
products nationwide. In 1975, the Petroleum Equalization Fund (PEF) was established to
deal with the problem of cost differentials arising from the transportation of petroleum
products to various parts of the country, based on the uniform pricing policy. He observes
further that the introduction of the independent marketer’s scheme in 1978 as earlier
mentioned broke the complete dominance of the multinationals.
It is an indubitable fact that the exploitation of the people of Nigeria and economy
is carried out through the well known convergence of interests of Nigeria rulers and
agents of international capital represented by multinational oil companies (SPDC,
Chevron, Texaco, Agip, Total, final ELF etc). According to Ojo (2010:19):
50 years after its flag independence in 1960, the state is still under the weight of imperialist domination chiefly represented by multinational companies doing business in the former colonial countries. Hence, it is suggested that the lack of political will of government to regulate the oil industry is chiefly responsible for corporate abuse by oil multinationals who take advantage of Nigerian state weakness to maximize profit at all costs.
He further maintains that ‘‘oil multinationals and the elite hobnobbing with them
are the winners and the people and the environment are the losers. The wanton destruction
of the environment, the effects of this on the local survival strategies (such as farming and
fishing of the oil-producing communities and the poor responses of the state to their plight
has led to a ‘‘petrol-insurgency’’ in the Niger Delta’’.
Aturu (2010) treats exhaustively on the question: “Nigeria’s ruling elite and the
MNOCs: conspiracy or cooperation”? He notes that “the ruling elites in Nigeria are
essentially rent-seekers who lack the competitive financial capacity to engage the MNOCs
52
as equals in the oil industry. The main consequence of this is that they are satisfied with
the easy money that they make through their cronies to whom they award oil blocks and
who in turn sell or lease same to the MNOCs. It could be seen, therefore, that corruption
in the award of oil licenses prevents any serious regulation of the oil companies. He
further notes that another reason for laissez fair attitude by Nigerian ruling elite in the oil
and gas industry has been identified as the compromised status of government (as
represented by the Nigerian National Petroleum Corporation-NNPC) as both regulator and
business partners to the MNOCs in exploration and exploitation of oil and gas through the
Joint Ventures Agreements”.
The above view corroborated with that of Hutchful (1998:1221-160) who
identifies several difficulties of the petroleum inspectorate which reflect those generally
faced by most third world countries that regulate critical resource sectors and powerful
multinationals. “First, they found it difficult to regulate a critical resource exploitation in
which the Nigerian state was extensively involved. Particularly, it was difficult to regulate
the negative externalities of oil and gas exploitation, which itself constituted the revenue
base of the government. The inspectorate, and indeed the state, is expected to supervise
and regulate an industry in which the state was a major stakeholder and beneficiary. As an
equity holder in the MNOCs, the state and the inspectorate lacked the ‘‘distance and arms-
length relationship required to impose costly regulations’’ (Hutchful, 1998:151).
Secondly, the MNOCs which were supposed to be overseen were powerful, large,
complex, technologically advanced and very influential, given the fact that they are ready
to pay their way through as long as they get what they want, and they have global reach
53
(Barnet and Muller, 1974). Onyeagucha (2010:122) corroborates the above view when he
stated that:
Multinational corporations are experts in the art of corrupting regimes. The Halliburton case in Nigeria is but a tip of the iceberg. The executive, judiciary and legislature need to be populated with majority of persons of high moral rectitude with a patriotic zeal to improve the lot of Nigerians. Multinational oil companies sponsor coups and candidates for elections. In the struggle to get the Nigerian government to stop gas flaring, the manipulations of the multinational oil corporations can be defeated if the civil society coalition against gas flaring is united and committed.
The above view was shared by UNDP (2006). According to the report “the oil
companies, particularly shell petroleum, have operated for over 230 years without
appreciable control or environmental regulation to guide their activities”. Obi (1997:14-
15), supports this view point when he declared that:
Shell and other oil multinationals backed by the state have been able to operate with maximum leverage. Worse still, shell and others have been unable to show concrete evidence of detailed environmental impact studies of its activities in the Niger Delta, thus, exhibiting their scant regard for environmental considerations in their pursuit of profit.
According to Obi (1997:10-14), oil multinationals feed the Nigerian state giving
room for an unequal partnership formalized through three types of joint agreements in the
oil industry – the joint venture agreements, production-sharing agreements, and risk-
sharing contracts. Thus, most of Nigeria’s oil is produced by oil companies as “operators
or technical partners” of the state. Nigeria’s rentier nature has made its supervisory agency
in the oil and gas sector to be redundant. The Nigerian National Petroleum Company
(NNPC) has been more of an observer in the oil and gas exploration as it does not engage
in exploration but in monitoring the multinational oil companies, who employ experts to
do its work and pay rents to the Nigerian government, excluding the local oil companies
54
in the process. With a 57 per cent stake in the joint venture contracts it has with all oil
companies operating in Nigeria, the NNPC does not seem to care how much is made as
long as money keeps coming into the coffers of government. Omoweh (2005) also x-rays
shell petroleum Development Company, the state and underdevelopment of Nigeria’s
Niger Delta. He focuses on one of the sub-chapters on the nature of state-shell alliance
and implications for land. According to him:
The Nigerian state owns the oil and gas sector, it lacks the technical capacity to operate the sector, making its control of the foreign oil companies like shell incapacitated by a weak technological base, and lack of an energy policy, the state’s intervention into the petroleum industry has largely turned out to be for rent collection. In part, this explains its inability to tackle environmental/land degradation of the oil areas by the oil companies generally and those of the Isokos by shell in particular. All this informs the nature of the state shell alliance and the politics of land pollution (Omoweh, 2005:216).
He further notes that not only does the state like shell, conceives of the host oil
areas as a minefiled, the company still handles all operations for the joint venture, leaving
the state to collect. Under this kind of arrangement, the state is being left with one central
role to play: to guarantee regime of accumulation. This is because any threat to the
operations of shell will, in turn, bring bout drastic decline in the revenue accruing to itself
and the company.
In the same vein, Wilson (2005) attests to the overwhelming dependence of
Nigerian economy on MNOCs when he states thus:
Government restricts itself to tax collecting and monitoring the private firm. NNOCs (latter, the name was changed to NNPC) remained in a kind of classic dependency mode, relying on the oil companies for direction on prices and production levels. Compared to other more ‘hawkish’’ or militant countries like Algeria, Nigeria apparently did not press as heavily on the companies to raise prices nor to hire more
55
nationals. Thus, Nigeria remained firmly within the ‘‘Dependence’’ mode (Wilson, 2005:187).
Discussing technology development in the Nigerian petroleum industry, Adiele
(2009) notes that rather than NNPC being preoccupied with capabilities building in
skilled personnel, equipment, materials and know-how to operate, maintain and repair the
technologies and keep them functioning efficiently and indefinitely, rather attention is
focused on awarding contracts, collecting rent and sharing output from oil companies and
other operators in the petroleum industry. According to him:
After fifty years of petroleum production in Nigeria, no indigenous company could participate in the several licensing bid rounds on many petroleum prospecting blocks offered by the federal government of Nigeria! Participation here includes capability of mobilizing to any block won immediately, without the assistance of foreign technical partners. Interestingly, companies from Asia and South –American notably from Indonesia, Malaysia and Brazil, which started petroleum production later than Nigeria or have no petroleum deposits, have bided for Nigeria’s petroleum blocks!! Some of these companies like Indonesia Petroleum Company are wholly-owned by their government. Regrettably, Nigeria could not offer meaningful assistance in petroleum technology to her sister African country-Uganda –when her delegation came for assistance in producing her recently discovered oil fields. Instead, top officials in the petroleum industry have been eulogizing Nigeria’s achievement of 40 per cent NC and a projected 70 per cent NC by 2010 whereas there is very little in the industry or the economy as a whole, to show for it (Adiele,2009:12).
He further argues that Petroleum Technology Development Fund (PTDF) is not
properly organized or focused for the job it is intended to do. It suggests that PTDF is an
arm of the ministry of Education that facilitates acquisition of knowledge in the relevant
fields by Nigerians. Whereas the fund, as it name indicates, is supposed to facilitate
petroleum technology-development in Nigeria. In other words, PTDF focuses on building
capacity in Nigerians instead of its intended objective of capability –building in Nigerians
in the petroleum industry. It assists Nigerians to acquire knowledge whereas technology-
56
development is about application of knowledge. Proficiency is more of application than
acquisition of knowledge.
As a result of the above misguided mission of PTDF, Aturu (2010:106) in his
analysis of ‘‘National Interest and Economic Development’’ expresses the negative
implications of this on oil industry when he noted that what is surprising is that 53 years
after the discovery of oil in Oloibiri in 1956, the participation of Nigeria is still abysmally
low, so much so that even government in formulating its local content policy in the oil
industry which it defines as the utilization of the Nigerian human and material resources in
the exploitation and exploration of the Nigerian hydrocarbon resources cannot but lament
on Nigerian government complicity on this Nigerian local content policy. This was
corroborated by NNPC (2010) who bemoans the marginal participation of Nigerians in the
following words:
In Nigeria, the oil and gas sector plays a very dominant role to the economy in that 90 per cent of the total revenue is from oil and gas production while over 90 per cent of the national foreign exchange earnings comes from the sales of crude oil. Therefore a situation where less than 5 per cent of the total annual budget of about USD$ 5.5 billion in the industry is very worrisome to both the federal and citizenry (NNPC, 2010:3).
NNPC further notes that Nigerians have little share of the oil and gas business,
local participation is very low and in order to arrest and dissuade capital flight, a local
context policy was developed. The objective of the local content development is to
significantly increase the contribution of the expenditures in the upstream sector to the
gross domestic product over to the gross domestic product over a defined period of time. It
is hoped that local content development would ensure that the quatum or percentage of
locally produced materials, personnel, goods and services rendered to the industry are
increased, thereby generating more employment and economic empowerment.
57
Fanimo (2009) notes that the above statement by government is only a lip service
because government is actively collaborating with MNCs in sideling Nigerians in the oil
industry. He quotes the Senior Staff Association of Workers in the industry,
PENGASSAN who accused the government of colluding with the oil companies to
marginalize Nigerians thus:
The attainment of local content policy has continue to elude Nigeria due to the lackadaisical manner and official compromises of the weak and indulging legal and institutional frameworks coupled with official compromises of the immigration departments in the expatriate registration and renewal services. It took exception to the way government agencies and immigration aided by the encouragement of frivolous and absurd monthly returns filed by some oil and gas companies to continually justify expatriates applications which in most cases creates a lot of disconnect with the department of petroleum resources (DPR) and National Petroleum investment management service (NAPIMS), adding: ‘Don’t be surprise that some of the understudy names in such monthly returns employees are low cadre, ghost workers and ex-employees of the company, whereas there are qualified Nigerians being denied opportunities in such company (Fanimo, 2009:39).
This total dependence of Nigeria on oil multinationals, for almost all her
technological development made him to place Nigeria on stage one and two according to
the ladder of his economic development. Also, different authors have also expressed
concerns on the negative implications of MNOCs domination of Nigeria’s oil and gas
sector. Onimode (1981) captures these concerns thus:
Multinational oil companies such as Shell BP, Agip, Gulf, Mobil, Texaco, Elf, Ashaland and safrap, have dominated the exploration and exploitation of the petroleum resources in Nigeria. The fact that they possess what is called superior and appropriate technological know-how, has made their domination of the oil sector and Nigeria’s dependence on them inevitable. Consequently, these multinational corporation have been appropriating most of the surpluses from this sector and correspondingly de-capitalizing the economy (Onimode, 1981:90).
58
This is further supported by Obasi (2005) when he contends that through the
activities of multinational corporations (MNCs) which dominate major sectors of the
economy, the dependent nature of the economy is fully entrenched. As a single product
export economy-firstly through agricultural products and secondly through existence of
sectoral imbalance or inequality becomes also a major structural characteristics of the total
reliance on imported raw materials to serve the needs of industrial establishments makes
the issue of dependence a pathetic structural feature of the Nigerian economy. He further
notes that the structure of the Nigerian economy therefore encourages neo-colonial
domination and exploitation, increases distributional inequalities and mass poverty, and
promotes the dependent character of the economy inherited from colonialism.
Joab – Peterside (2010:62) corroborates this point when he argued that not only
does the sector export virtually all its output, it also imports virtually all its requirements.
Furthermore, the oil industry has resulted in little or no technological transfer since
virtually all the expertise and technical personnel required for crude oil operations are
imported, because the required training of local personnel has been rather ineffectual
owing to the great secrecy which surrounds oil operations.
Maihankuri (2012) offers a fresh perspective to the reason why expatriates
dominate the petroleum industry. He contends that the quality of technical and
engineering education in Nigeria has been plagued by different curriculum –related
challenges. These challenges have affected the quality, growth and development of the
petroleum industry. He equally notes that lack of appropriate investment in human capital
development in the technical and engineering fields have contributed significantly to the
59
failure of various national plans and development strategies. In this regard, Maihankuri
(2012:3) observes that:
The government of Nigeria has never had a sustained focus on the development and application of engineering and technology for transforming its national economy. Furthermore, the education curriculum was not design to deliver leadership base in science technology. The result is deficiency at all levels of curriculum development both in terms of relevance and setting the foundation needed for technological advancement.
He notes that the interest of government in education must be resuscitated in other
to provide a basic framework upon which other contributors to education can invest. He
notes further that economic activities in all fields of endeavour have demonstrated the
potentials of the local workforce. The level of funding and exchange programmes between
higher institutions of learning should be increased. The petroleum industry should
collaborate with heads of relevant fields’ departments in Nigeria tertiary institutions to
effects changes in curriculum when necessary.
Similarly, Chima et al (2002) evaluate the strategy and effort of training adopted
by Nigerian government as a means of transferring the acquisition of oil technology by
Nigerians. They argue that the assessments of the nature of the transfer and acquisition of
oil technology in the Nigerian oil industry show that learning of technology was initiated
and achieved through the Petroleum Technology Development Fund (PTDF). The fund
provided scholarships for Nigerians to study engineering and technology courses within
the country and abroad. In relation to technology development, they observe that:
Foreign oil company management resists the transfer of technology for use in the processing of crude and gas into petroleum product as part of its effort to avoid displacement in the upstream and downstream areas. If an oil exporting government establishes an export refinery, not only does the oil companies lose a portion of their crude supply and get displaced in the refining industry, but their international product markets may be penetrated and taken over by the “newcomer” state oil company. This
60
threat to market control is especially serious since state oil corporation have access to crude at no more than the set production, and therefore can afford to engage in price competition (Chima et al., 2002:21).
The local content which is an effort at the domiciliation of most of the operations
of oil and gas activities in Nigeria showed how abysmally low the level of participation of
indigenous personnel had been over the years in the oil industry. Akinyosoye (2009)
captures these concerns thus:
The official figures of 15 per cent local content by the Directorate of Petroleum resources (DPR) in 2009, which though doubtful, shows that the problem is a serious one when compared with other oil and gas producing countries with far lower reserve base like Brazil (75%), Norway (40%), and Indonesia (20%) (Akinyosoye, 2009:159).
He notes that the Nigerian local content is defined as the total composite value
added in-country to oil and gas activities by suing Nigerian labour, goods and services
without compromising health, safety and environmental standards. He further notes that
the law seeks to measure the percentage of the money retained in the domestic economy
from the oil and gas operations in the country. The basic premise for the local content
advocacy is to establish and sustain effective links between the industry and other sectors
of the economy to ensure that Nigeria derives maximum economic benefits from the
operations of its oil and gas industry.
Edemhanria (2010) provides detailed implications of the Local Content Act for the
Nigerian State. He states that beyond the issue of creation, the law also has far-reaching
implications for technological advancement, long term cost effectiveness, post-amnesty
programme in the Niger Delta and the improved impact of oil and gas industry on
Nigeria’s Gross Domestic Product. The law made clear provisions for exclusive
consideration of Nigerian indigenous service companies which demonstrate ownership of
61
equipment, Nigerian personnel and capacity to execute jobs and as such, all regulatory
authorities, operators, contractors, sub-contractors, alliance partners and other entities
involved in the project, operation, activity or transaction in the industry shall consider
Nigerian content as an important element of their overall project development and
management philosophy for project execution.
Much as the above literature tried to give a bird’s eye view of how the expatriates
dominance on fuel importation and distribution undermine the integration of R&D in
Nigeria’s petroleum technology development within the period under review, scholars
have not adequately addressed the subject as to how the link between the expatriates
dominance of fuel importation and distribution and the contradiction of integration of
R&D in Nigeria’s petroleum technology development between 1999 and 2013.
GAP IN THE LITERATURE
This review above shows the positions of pertinent extant literature that address
the political economy of importation of fuel dynamics and the problem of refineries
development in Nigeria between 1999 and 2013.
Scholars on the link between allocation of fuel licences and investments in the
building of new refineries (NEITI, 2006; Nwokeji, 2007; Gillies, 2009; Thurber et al,
2010; KPMG Professional Services, 2010; Oluwajuyitan, 2011; House of Representatives
Ad-hoc Committee Report, 2012; Gboyega et al, 2011; Odeh, 2011 and Sanusi, 2011)
harped on patronage allocation of fuel licenses based on private interests, corruption,
mismanagement, lack of functional refineries, and looting. However, the relationship
between allocation of importation of fuel licenses to independent marketers and
62
discouragement of investors in the development of new refineries, is yet to be given a
systematic treatment in Nigeria.
Scholars on the link between fuel importation probes and the challenges to new
refineries development (Aminu, 1993; Ola, 1998; Soyede, 2001; Alexander Oil and Gas
Connections, 2004; NNPC, 2005; Otedola, 2009; Oniwon, 2009; Finlayson, 2009; KPMG
Professional Service, 2010; Odeh, 2011; PENGASSAN, 2011; Okonjo-Iweala, 2011;
Nwachukwu and Chike, 2011; Falana, 2011; Afonne, 2011; David-West, 2011;
Ishiekwene, 2011; House of Representatives Ad-hoc Report, 2012; Adejum, 2012;
Agbon, 2012; Agbedo, 2012; Igbuzor, 2012; Kolawole, 2012; Adesua, 2012;
Onwuemenyi, 2012; Ugolor, 2012; Odumakin, 2012; Aborisade, 2012 and Asobie, 2012),
allude to corruption, inefficiency, mismanagement and sabotage in the policy process as
the challenges hindering the development of refineries in Nigeria. However, the structural
challenges hindering the development of new refineries indicated by composition of
petroleum matters board based on private economic interest; lack of deregulation of
downstream oil sector; lack of NNPC autonomy; dominance of foreign oil companies in
the servicing and maintenance of the four(4) refineries in Nigeria and government policy
of leaving oil companies in charge of transferring technical know-how, are not
systematically explored.
Scholars on the link between expatriates dominance and the integration of R&D in
oil industry (Turner, 1980; Onimode, 1981; Obi, 1997; Hutchful, 1998; Chima et al, 2002;
Omoweh, 2005; Wilson, 2005; Obasi, 2005; UNDP, 2006; Fanimo, 2009; Adiele, 2009;
Akinyosoye, 2009; Ojo, 2010; Onyeagucha, 2010; NNPC, 2010; Joab-Peterside, 2010;
Edemhanria, 2010; Aturu, 2012 and Maihankuri, 2012) focused on Nigeria ruling elites
63
collaborating with MNC, Nigeria government complicity on Nigeria Content (NC) policy,
lack of political will by Nigerian government to regulate MNOCs, lack of competitive
financial capacity and oil major technological advantage and resistance. In this light, the
link between the expatriates dominance of fuel importation and distribution and the
contradiction of integration of R&D in Nigeria’s petroleum technology development, is
yet to attract systematic investigation and analysis.
Although, scholars on the importation of fuel focus on the imperative of lapses in
the policy process, however, the relationship between the dynamics of importation of fuel
and structural contradictions of Nigeria’s political economy indicated by lack of
investment, failure to adequately define the challenges hindering refineries development
and integration of R&D in Nigeria’s Petroleum Technology, are yet to be given adequate
systematic scrutiny between 1999 and 2013. This study intends to investigate this gap in
the literature.
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CHAPTER THREE
METHODOLOGY
3.1 THEORETICAL FRAMEWORK
The framework for analyzing this study is the Marxian political economy theory as
lucidly presented in the works of Marx (1970); Ake (1981) and Akpuru-Aja (1998). As
noted by Momoh and Hundeyin (2000:38) political economy is “a technical and yet quite
useful tool of scientific analysis. It provides for a holistic study of issues, phenomena and
policies in any society”. There are different political economy models of analysis.
However, this study appropriates the most popular strand of political economy, which is
the Marxist perspective. Its main argument is summarized by the famous statement by
Karl Marx in the Preface to A Contribution to the Critique of Political Economy.
According to Marx (1970: 20-21):
In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in their development of material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life.
Marx strongly argued that the economic structure of society significantly
influences the character of the superstructure which includes the political, legal, cultural
and religious relations and institutions of society. But this does not imply a unidirectional
model. Account is also taken of dialectical relations; a form of feedback process in which
the superstructure also influences the economic substructure.
65
The fundamental theoretical proposition of the political economy approach is
captured by Ake (1981) when he noted that:
Once we understand what the material assets and constraints of a society are, how the society produces goods to meet its material needs, how the goods are distributed, and what types of social (criminal and prebendal) relations arise from the organisation of production, we have come a long way to understanding the culture of that society, its laws, its religious system, its political system and even its modes of thought (Ake, 1981:1).
In other words, understanding the production and production relations of a society
is the basis for understanding its political system. For Akpuru-Aja (1988), “if one
understands the economic structure of a society, the relations between the people in the
production process, it is easier to understand the nature of politics, culture, national
security, conflicts and its causes, socio-psychological consciousness, ideological
inclinations, etc of the society”.
As a tool for social research, Ilyin and Motyler (1986); Ihonvbere (1989) and
Ryndina (1985) argue that the central focus of political economy is the study of the
relations of production in their complex interaction with the productive forces and the
superstructure. In other words, the essence of political economy is to penetrate deep into
processes and policies, lay bare their essence and then explain concrete forms of their
manifestation in everyday life. Political economy uses dialectical materialism as its
methodological approach of inquiry. “Dialectics is simply logical reasoning in an
argumentative manner where deductions are made” (Boyer, 1978:81). Therefore, the
process of dialectical materialist analysis states that thoughts run from the visible, from
the concrete to the abstract, separating the phenomenon being analyzed into its
components parts and aspects. In this connection, political economy paradigm takes off
66
from materialist understanding of history and brings out the inner driving forces in the
interaction of the productive forces and the relations of productions.
As a theoretical approach to the study of social phenomenon, Ake (1981) noted
that political economy is anchored on four methodological assumptions. First, is that it
gives primacy to material conditions, particularly economic factors, in the explanation of
social life. Hence it advocates for “particular attention to be paid to the economic
substructure of society, and indeed use it as the point of departure for studying other
aspects of society” (Ake, 1981:1). Second, it emphasizes the dynamic character of reality.
This requires that the analyst views “society as something which is full of movement and
dynamism, the movement and dynamism being provided by the contradictions which
pervade existence” (Ake, 1981:3). Third, it focuses on the relatedness of different
elements of society, especially economic structure, social structure, political structure and
the belief system. The proposition is that the economic factor, which is the most decisive
of all these elements of society largely determine the character of the others. That is not to
say that the economic structure is autonomous and strictly determines the others. All the
social structures are interdependent and interact in complex ways. “Each one of them
affects the character of every other one and is in turn affected by it” (Ake, 1981:4).
Fourth, “it treats problems concretely rather than abstractly, by adopting a developmental
perspective. By putting social phenomenon in the context of their development, this
theory enables us to understand not only how social phenomenon come to be what they
are, but also to make reasonable conjecture as to what they might become” (Ake, 1981:7-
8).
67
Arising from the works of Ake (1981), Alemika and Chukwuma (2000), West
(2006), Norad (2010), and many other scholars who have written on the Marxist political
economy, the central propositions of this framework of analysis could be synthesised as
follows:
i. The centrality of the state and its apparatuses as the main instrument of
primitive accumulation especially by the dominant class and their
collaborators.
ii. Concerned first and foremost with power and interests. It analyses social
and political processes as the outcome of struggles for control over
resources and positions.
iii. Treat the economy and the political as monolithic units that continue to
exact remarkable influence on each other. Hence the intricate linkages
between political and economic structures determine society’s general
values, cultures and norms as well as the direction and practice of
governance.
iv. The primacy of material condition of society. Individual or collective social
attitudes or behaviours are conditioned by the realities of production,
distribution and exchange in society. Hence, conflicts and criminality
emerge not only in response to opportunities, but also as a process that
continually seeks to undermine the state due to contradictions inherent in
its economy.
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v. The relatedness of different elements of society, especially economic
structure, social structure, political structure, the belief system and even the
environment.
vi. Integrates analysis of the domestic productive structure and relations with
international structure, relations and transactions, including understanding
the nature of international division of labour, international exchange, world
market and crises.
However, as it relates to our study here, we are going to adopt only propositions (i)
and (ii) above which, for all intent and purpose fit the analysis of political economy of fuel
importation and development of refineries in Nigeria, between 1999 and 2013.
APPLICATION OF THE THEORY
The relationship between the importation of fuel in the midst of abundant oil
resources and the political economy of refineries development as seen in the crisis of the
Nigerian state is explained in the light of the theory of the Marxist perspective. This
framework will unravel how importation of fuel has become a drain–pipe for primitive
capital accumulation by the dominant ruling class, oil multinationals and individuals who
have common interest and distorts all efforts at the building of new refineries in Nigeria.
First, the political economy paradigm emphasizes the place and centrality of the
state and its apparatuses as the main instrument of primitive accumulation especially by
the dominant class and their collaborators in a capitalist society. Nigeria, as a creation of
British colonial state, was primarily geopolitical and an admixture of heterogeneous ethnic
69
groups, forced into a political structure to preserve and maintain British economic
interests. The acquisition of formal political independence did not alter the exploitative
and corruptive nature of the contemporary Nigerian political economy; the political class
continued to use state power as a means of primitive accumulation and self-reproduction.
This was succinctly attested to by Ifesinachi (2006:2), who argued that “At independence
the emergent ruling class was more interested in reproducing the neo-colonial character of
the state and the conditions for their domination, and continued the use of state power for
primitive capital accumulation”. In this way, the Nigerian colonial state served the
interests of global accumulation at the periphery through the local extraction and transfer
of resources to the metropolis.
With the above privatization of the state by Nigerian ruling class for primitive
accumulation, the state becomes an object for violent political competition. The Nigerian
state over the years through various laws that are non-democratic in nature, have taken
over the revenue accrual from different sectors of the economy especially oil which is the
mainstay of Nigerian economy. Therefore, the state becomes the medium for the
allocation of resources. The result is the aggressive intensification of political struggles for
the control of federal power for allocation of resources ranging from oil lifting licenses
(importation of fuel/exportation of crude oil) for primitive accumulation. In other words,
the state becomes the custodians of power at all levels of governance (Federal, State and
Local) and its consequent utilization for the pursuit of individual, sectional and ethno-
regional interests; as against the pursuit of common interest or the good (Onuoha, 2013;
Ibaba, 2008; Ake 2001; Ekekwe 1986; Oyovbaire 1980). As further attested to by Obi
(2000:265), the federal government as the very vortex of power became the ultimate prize
70
in politics, and all attention shifted to the contest for access to power and the capacity to
authoritatively allocate resources at the centre. Consequently, such conflicts that are
conventionally referred to as ethnic conflicts are actually democratic conflicts, that is,
attempts to capture political power for primitive accumulation (Ikelegbe, 2005; Obi, 2009;
Ukiwo, 2007:592).
Thus, with the abundance and dominance of oil in Nigeria’s economy, the
Nigerian state becomes only interested in primitive accumulation, in collaboration with
MNOCs, without any interest in refineries development to manage huge oil resources for
public interest. Its role was largely limited to the issuance of oil lifting licenses
(importation of fuel/exportation of crude oil) and the collection of rents. Ake (1981:69)
attested to the above fact by stating that “this group of political elites are in a rather ‘slick
alliance’, their principal interest knowingly or not is in the perpetuation of the
international capitalist system of inequality”.
In fact, it is in the oil sector that the ruling class conspicuously recycled the import
licenses to their relatives and cronies for primitive accumulation.
According to Thurber et al (2010:36),
The allocation through NNPC of ‘lifting licenses for exporting crude oil and importing products is opaque and highly discretionary… the gap between market prices and subsidized official prices for both crude oil and products creates enormous profit opportunities for holders of these licenses. It is alleged that NNPC officials in collaboration with politicians distribute such licenses both for individual gain, and to buy support of politicians in the legislature, who in turn use the proceeds for patronage among their home constituencies.
Consequently, refined oil importing licenses become instruments of politics.
Successive regimes could buy political support through the award of these licenses which
has drained Nigerian treasury. Yet, it often leads to high prices of this refine oil, frequent
71
shortages, with long queues and rationing at gas stations nearly every day because of their
interest in maximizing profit. These so-called ‘cartels’ of fuel importers determine volume
of importation and the proportion that should be released to the market. At times, “they
only allow a few produce-holders to supply the market while others hoard” (Adelabu,
2012:196). This at various times has been met with widespread public criticism and
controversy.
There is evidence to show that the ruling elites distribute these import licences to
their relatives and cronies, with the accompanying huge resources, “which make them to
be the power base of the society and therefore, in a prebendal mode of behaviour
determine who gets what, when and how” (Thurber et al. 2010; Joseph, 1987; Sandbakken
2006; Ezirim, 2012). This is exemplified by the HRACR on fuel importation probe which
indicted the Former Chairman (Senator Dr. Ahmadu Ali) of Petroleum Product Pricing
Regulatory Authority (PPPRA) from 2009-2011 of arbitrarily proliferating marketers to
protect their private interest. According to the HRACR (2012:75), “the Petroleum Support
Fund (PSF) guidelines on prequalification and monitoring completely broke down and the
scheme became an avenue for all forms of patronage. The number of importers increased
from an initial figure of 6 in 2006 to 36 in 2007, 49 in 2009, and 140 in 2011. As such,
issuance of fuel import licenses becomes a conspicuous avenue to loot Nigeria treasury”.
Apparently, The HRACR (2012: 190), recommended that “the chairman of the Board of
PPPRA from 2009-2011, and the entire members of the board during the period are
hereby reprimanded and their decision which opened the floodgate for the Bazaar is
condemned in the strongest terms”.
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The report quite clearly shows as well that government officials revolve majority
of the fuel import licenses among PDP sponsors and political loyalist. The HRACR
probing the management of fuel subsidy regime in the country, reeled out different names
of some companies purportedly benefiting wrongly from the fuel subsidy. Among the
names, which include the sons of the past and immediate Chairmen of PDP, are a clear
indication that those in authority want to maintain their hold in power and protect their
vast economic interests, which usually are at variance with the interests of ordinary
masses. According to Oluwajuyitan (2011:5):
The list contains names of those we have been told control the economy of the nation. And as it has turned out, many on the list are well known financiers, supporters and sympathizers of PDP”. He further noted that “as a result of Yar’Adua’s failing health, the PDP greedy buccaneers had a field day. Licenses for fuel importation were freely shared among the members and sympathizers. Under Jonathan’s husbandry, the number of approved fuel importers/marketers jumped to about a hundred. They even managed to smuggle into their list some construction firm (Oluwajuyitan 2011:5).
This was further attested to by the major Opposition Parties – Action Congress of Nigeria
(ACN) and Congress for Political Change (CPC) now merged as All Progressives
Congress (APC) who alleged that there was “apprehension on PDP based on the
indictment of major contributors to the PDP party’s campaign coffers of 2011 by the
House Probe Panel” (Aziken 2012:5).
Aside from the above issue, the attracting report of “allocation of fuel import
licenses to those companies that did not meet established guidelines by the House of
Representatives” (2012:146-153), speak volumes of patronage which ruled the operations
of the downstream sectors of the country’s oil and gas industry since 1999. These
patronages are orchestrated by the indigenous ruling class who strives to maintain and
73
consolidate the capitalist mode of production based on prebendal and patron-client
networks. Regrettably, “there are marketers that did not make first application to PPPRA
for supplies before they got their first allocation” (HRACR, 2012:150).This, as well,
shows the degree the Nigerian ruling elites apportioned to themselves the largesse that
trickles down from the rentier dynamics of the state.
The allocation of fuel import licenses to “marketers without storage facilities and
had no through-put agreement with any other Depots” (HRACR, 2012:151), is yet another
avenue opened up by the indigenous ruling class to drain Nigeria treasury and buy
political support among their relations and cronies. In fact, the PSF scheme became a free-
for-all, as all manner of companies engaged in every conceivable business and not
necessarily oil marketing/trading company.
The lack of storage facilities is not the only issue here, as some political actors and
state officials colluded with PPPRA and some marketers to collect fuel import allocations
and disappear into thin air without supplying the product. A very clear example was the
startling revelation by the HRACR (2012:75) that discovered “two promoters who
allegedly received an e-mail and came in from the USA with a proposal of waste
management with NNPC. Later, the two promoters changed their mind, came together and
incorporated ECO-Regan Ltd on 3rd Floor, UAC building, Central Business District,
Wuse, Abuja, applied for PPPRA registration on the 11th September 2011, got its first
allocation of 15,000mt on 20th January, 2011 and was paid one Billion, Nine hundred and
eight-eight million, one hundred and forty-one thousand, ninety-one naira, ten kobo
(N1,988,141,091.00) as subsidy for products not supplied.”
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The above firm grip of these import licenses by the successive regime heads in
Nigeria either directly or by proxy in the country’s energy sector to protect their interest,
has scared genuine local and international investors who wanted to invest in the
development of refineries in Nigeria. For instance, the Chinese (CSCEC) and India
(ONGC/Mittal) Companies that offered to build refineries in Nigeria were frustrated by
Nigerian government officials to promote fuel importation benefits. Also, the 18 local
Nigerian companies, which will be detailed in the analysis, secured licenses on June 14th
2004 and was revoked in 2006 by the Department of Petroleum Resources (DPR) as a
result of government hostile investment conditions in the downstream oil sector to protect
importation benefits to their cronies. According to the US government released secret
memo (2009), Femi Otedola, President and CEO of Zenon Petroleum and Gas, the largest
supplier of diesel fuel in Nigeria, confessed to the US embassy in Abuja Nigeria that “he
initially bid to purchase the Port-Harcourt refinery offered for privatization, but he later
told President Obasanjo he will not invest in the refinery so long as NNPC purchases fuel
from traders in other countries and leasing ships itself to deliver fuel to Nigeria”. He
further observed that the activities of these “international fuel traders “Mafias” are behind
the failure to bring Nigeria’s refineries back on-line and to capacity. The above indices go
a long way to show that the allocation of fuel import licenses to independent marketers
discouraged investors in the development of new refineries in Nigeria.
The second proposition of the political economy concerned first and foremost with
power and interests. It analyses social and political processes as the outcome of struggle
for control over resources positions. The dominant class interest is on importation of fuel.
Therefore, they manipulated the legislatures and other agencies on fuel related probes to
75
make sure their core interests are protected. For instance, there was fraud and criminality
unraveled by the audits into importation of fuel commissioned by NNPC in 2008; the
KPMG professional and the House Of Representatives Ad-hoc Committee Tagged
Resolution No (HR1/2012) which militating against the development of refineries in
Nigeria. Those expositions, among other things, include “some companies following 2008
audit in importation of fuel presented invoices twice for the payment of subsidies”
(Aborisade, 2012:6). There was also the report of “federal government paying as much as
N230,184,605,691.00 billion annually to 71 fuel marketers for disallowed claims to
discharges on subsidy from 2010 -2011”(HRACR, 2012:169).
Aside from the above issue, the attracting high rate of petroleum products to
countries surrounding Nigeria such as Benin ($1.04), Niger ($1.07), Cameroon ($1.2),
Chad ($1.32 per litre), compared to Nigeria ($0.44 per litre) has propelled most of these
corrupt marketers to divert most of these subsidized fuel to the above neighbouring
countries. There was also the report of “non-utilization of NNPC storage facilities of
18,8000 cubic metres” (KPMG, 2010:34); Report of marketers “instructing their foreign
sellers: Vitol SA, Trafigura etc to berth off-shore Cotonou or Lome” (HRACR, 2012:89);
Report of a “marketer declaring fake bills of laden and those discharging PMS into un-
approved tank forms” (HRACR, 2012:129), speak volume of rot in the downstream oil
sector of Nigeria. This made the president to mandate Economic and Financial Crime
Commission (EFCC) and the Independent Corrupt Practices and other Related Offences
Commission (ICPC) to prosecute these corrupt fuel marketers.
In terms of the identified challenges by these probes militating against the
development of refineries in Nigeria, is still a pointer to the crises in the oil industry as a
76
result of unbridled acquisitive instinct for primitive accumulation of wealth by the ruling
class and its cronies which has been displayed very prominently. “Instances of the turning
of fuel importation by PPPRA into a Bazzar, illegal payments to itself by PPPRA, extra-
budgetary expenditures, illegal deductions for kerosene subsidy, and payment above
PPPRA recommended figures by NNPC, inefficient and fraudulent system of kerosene
distribution by Pipeline Products Marketing Company (PPMC) and several other acts of
malfeasance attest to this” (HRACR, 2012:119). Willful damage of downstream
infrastructure in collusion with most of the operators of the four (4) refineries in Nigeria
was also exposed by the HRACR. Also, the daily allocation of 445,000bpd to NNPC for
domestic consumption if well managed and harnessed has the potentials of satisfying the
daily PMS and DPK needs of Nigerians. Implying, there will be no need to import fuel, let
alone subsidizing it. Yet, government promoted fuel importation benefits for private
interest at the expense of public interest of building new refineries in Nigeria to manage
the daily allocation of 445,000bpd.
However, despite these discoveries and indictments, yet the structural challenges
in the development of refineries in Nigeria such as report of composition of petroleum
matters board based on private economic interest; reports of government policy of subsidy
and fuel regulated pricing scaring investors in the development of refineries; lack of
autonomy of NNPC to carry out some independent reforms; lack of downstream
technological capacities by Nigerian engineers; politicization of Petroleum Industry Bill
(PIB) in the Nigeria National Assembly since 2009 because of one of its contents –
liberalization of the downstream oil sector and government policy of leaving oil
companies in charge of transferring technical know-how, are not properly articulated by
77
these probes. The above salient points in these probes constitute the fundamental obstacles
that must be objectively addressed by Nigerian government in the development of
refineries. Therefore, this scenario clearly shows that fuel importation probes failed to
adequately define the challenges hindering the development of new refineries in Nigeria.
This chapter also emphasizes the place of class interest and power relation factors
in the oil sector in Nigeria. It clearly shows how mutual interests of Nigerian dominant
class and MNOCs take precedence over every other factor. As such, MNOCs take the
advantage to dominate all sectors of the oil industry in Nigerian. This leads the researcher
to examine the issue of the importation of fuel in Nigeria (in this case, the structure of its
fuel import-dependent economy) and how it is connected to the global political economy
by transnational actors and structure.
In this regard, Nigeria depends on fuel importation mostly from western countries
through the oil MNOCs such as SPDC, Exxon Mobil, Total, Chevron and Agip to meet 70
per cent and above of its domestics needs. These MNOCs supply fuel, not only to NNPC,
but also to most of Nigeria’s international fuel marketers, and even dominate in
distribution of petroleum products in Nigeria. NEITI (2004:74), for instance, listed the
following MNOCs as being the dominant suppliers of fuel to NNPC: “Total, BP, Shell,
Chevron, Glencore, Addax, Napoii, Trafigura, Acadia and Vitol”. Also, from the NNPC
Statistical bulletin (quoted in Ehinomen and Adeleke, 2012: 239), “67 per cent of the total
sale of petroleum products are usually undertaken by the major oil companies, while the
independent marketing companies (indigenous) usually sell the remaining 33%”. This
gives a high level of dominance by expatriates on fuel importation and distribution in
Nigeria such that “there is dependence on the MNOCs for oil production, crude oil
78
exportation and importation of oil in the parent states of these MNOCs (Omoweh, 2006).
In this way, Nigeria’s import-dependent economy is locked into complex and opaque
transnational ties with global forces based largely on domination and deprivation of
sophisticated technology for refinery development.
The nature of Nigeria’s fuel import-dependent economy and consequent
integration into the global capitalist economy has ensured the existence of international
structures and ties that facilitates MNOCs management not encouraging and adopting
innovations generated by Nigeria research institutions. Since there is no law in Nigeria
requiring MNOCs to adopt innovations generated by research institutions, this implies that
indigenous business companies dream of acquiring petroleum technological development
in Nigeria will be farfetched. Poor funding of R&D sector has continued to be relegated to
background with less than the required UNESCO approved 1% of the Federal
Government Gross Domestic Product (GDP) each year. Since 1999, the R&D sector has
not been able to get the required funding needed to place it at par with other sectors, and
therefore inhibits, not only its contributions to R&D in Nigeria to reduce its dependence in
external countries, but also undermines the sector’s competitiveness globally.
This is as a result of the erosion of the legitimacy of the Nigerian state. The
Nigerian state has, rather than serving as a vehicle for development, been hijacked by a
group who have turned the national economy into a tool for capital accumulation
(Mariamaina, 2011). Due to private interest of its leaders, the state has no credible
legitimacy to define properly Petroleum Technological Development Fund (PTDF). As its
name indicates, it is supposed to facilitate Petroleum Technology Development in Nigeria;
rather, the state through PTDF concentrates on sponsoring students abroad to obtain PhD
79
and MSc degrees in relevant courses with very limited opportunity for practice. Little
wonder, Adiele (2009:11) noted that “PTDF appears to be funding knowledge acquisition
whereas technology-development is about application of knowledge. Proficiency is more
of application than acquisition of knowledge”. This lack of attention to R&D in Nigeria
has given the MNOCs leverage to dominate the R&D, and leaves Nigeria with no option,
than to depend on them for production, importation and distribution since her
independence in 1960. Thus, by considering the lack of adequate attention by the Nigerian
state and MNOCs blocking R&D development and dominating all aspects of the oil
sector, which is the bane of refineries development in Nigeria, are as of result of some
particular forms of connections and relations between some actors in Nigeria and those in
the international market. This clearly demonstrates that expatriates dominance of fuel
importation and distribution undermined the integration of R&D in Nigeria’s Petroleum
Technology Development.
The conclusion that emerges from this theoretical standpoint is that the analysis of
the political economy of refineries development cannot be carried out independently from
the analysis of the importation of fuel which has significantly shaped the political and
economic structures of the capitalist Nigerian state. Therefore, the contending forces over
the allocation of licenses (import/export), the locus of power, extraction, and
accumulation of resources, constitute the theoretical elements that must be objectively
confronted, in seeking to understand the patronage dynamics of importation of fuel and
the resultant neglect of refineries development in Nigeria between 1999 and 2013.
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3.2 Hypotheses
Based on the forgoing, the working hypotheses that guide this study are as follows:
1. The allocation of fuel import licenses to independent marketers discouraged
investors in the development of new refineries in Nigeria;
2. Fuel importation probes failed to adequately define the challenges hindering the
development of refineries in Nigeria; and
3. Expatriates dominance of fuel importation and distribution undermined the
integration of Research and Development (R&D) in Nigeria’s Petroleum
Technology Development.
3.3 Research Design
Research design is the arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the research purpose with economy in
procedure. It is the plan that guides the investigator in the process of collecting, analyzing
and interpreting observations. It also defines the domain of generalizability, that is,
whether the obtained interpretation can be generalized to a larger population or to
different situations (Wilkinson et al, 1984; Bailey, 1978:191; Nworgu, 1991:29).
This research is basically qualitative and non experimental; therefore, it is based
on the single based on the single case ex-post-facto design. An ex post facto design is used
when experimental research is not possible, such as when people have self-selected levels
of an independent variable or when a treatment is naturally occurring and the researcher
could not "control" the degree of its use. The researcher starts by specifying a dependent
variable and then tries to identify possible reasons for its occurrence. This type of study is
81
very useful when using human subjects in real-world situations and the investigator comes
in "after the fact." That is why the researcher needs to establish a plausible reason
(research hypothesis) for why there might be a relationship between two variables before
conducting a study (Diem, 2002).
Cohen and Manion (1980) define the ex post facto design as those studies which
investigate possible cause-and-effect relationships by observing an existing condition and
searching back in time for plausible causal factors. According to Kerlinger (1973), the ex
post facto design is a form of descriptive research in which an independent variable has
already occurred and in which an investigator starts with the observation of a dependent
variable; he then studies the independent variable in retrospect for its possible relationship
to and effects on the dependent variable.
This research design is very relevant to our study given the nature of the
phenomena under investigation. In the context of this study, the issue of oil resources
management and illegal oil bunkering are naturally occurring events that the researcher
cannot control, which makes the ex post facto design more apt in this study. In this design,
an existing case is observed for some time in order to ‘study’ or ‘evaluate’ it. Thus, there
is no control or variation group in this design. There are series of “before’ observations
and one case (subject) and series of “after” observations.
Where: = Observation
O
R B1 B2 B3 X A1 A2 A3
82
= Random assignment of subjects to experimental groups and random assignment of experimental treatments to experimental groups.
= Independent variable. = Dependent variable. = First observation, prior to 1999.
= Second observation, 1999-2007
= Third observation, 2007-2011
= Fourth observation, 2011-2013
= After observation 1999
= After observation in 2007
= After observation 2011
= After observation 2013
The analytical routines involved in testing structural causality based on ex post
facto analysis of the independent variable (X) and the dependent variable (Y) is based on
concomitant variation. This is to demonstrate that (X) is the factor that determines (Y).
This also legitimately infers that (X) does or does not enter into the determination of (Y).
This infers that whenever (X) occurs there is likelihood that (Y) will follow at some point
later. The criteria for inferring causality have been summarized by Selltiz et al (1976) as
follows:
(a) Co-variation between the presumed cause and presumed effect.
(b) Proper time order, with the cause preceding the effect.
(c) Elimination of plausible alternative explanations for the observed relationship.
R
X
B1
Y
A1
B2
B3
A2
A3
A4
B4
83
This design will guide us in testing the hypothesis which involves observing the
independent variable (importation of fuel) and dependent variable (refineries
development) at the same time because the effects of the former on the latter have already
taken place before this investigation. Randomized judgmental selections of series of
“before” and “after” observations of the variables in Nigeria were used to test the
hypotheses.
In conducting our investigation, therefore, our first observation is on the nature of
the importation of fuel before 1999, under civilian/military (but mainly military regimes).
It was observed that the importation of fuel was largely restricted to NNPC under
overwhelming control of few military elites and their political cohorts who used top
executives of the oil Agency to perpetuate fraud. This accounts for why successive
military Heads of state looted the treasury in the name of subsidizing fuel importation in
the absence of any strong democratic institutional oversight. While “President Ibrahim
Babangida in 1987 removed 80% of the so-called subsidy on Premium Motor Spirit
(PMS) which runs in millions without anything to show for it, his successor, General
Sani Abacha Stole between $4-5 billion between 1994 and 1998 (part of this money
came from subsidy cut from 1995)” (Social Action Group, 2012:13). This was stolen in
brazen disregard of peaceful protest from Nigerians over prices increases and shortages
of fuel which escalated inflation in all sectors of the economy, with long lines and
rationing at gas stations during the period.
Our second observation is on importation of fuel and the problem of new refineries
development within the Obasanjo’s administration (1999-2007). It was within this period
that NNPC monopoly over importation of fuel was abolished, and PSF scheme was
84
introduced, which have witnessed all manner of shady deals, all kinds of quacks with link
to the presidency joined the widening rank of the so called fuel importers. This was truly
the beginning of the era of the so called “cabal” which tightened its grip on the jugular of
the petroleum sector in subsequent years. The people had thought that the return to
democracy would ensure the provision of benefits to all especially the oil host
communities. Instead, the new administration continued with the prebendal allocation of
oil lifting licenses (import/export) to party loyalists, relatives and associates of top
government officials. With the non-transparent management of oil resources
(import/export) with massive infusion of subsidies meant that the benefits were
appropriated by the ruling class alone. This propelled oil host communities to blow oil
pipelines and petroleum products pipelines which made Nigeria to depend entirely on
importation of fuel during Obasanjo’s last days in office. Little wonder, between 2006-
2007, “Nigeria depended 100 percent on imported petroleum products for its fuel
needs…” (Izere, 2006:1).
Our third observation deals with the period 2007-2011, when Umaru Musa
Yar’Adua administration took a bold step to grant amnesty to Niger Delta militants.
Inspite of this Amnesty, yet the country depended 80% and above on importation of
products because of the near-moribund refineries, sabotage and corruption. It is very
important to note that “Nigeria spent N671 bn on fuel subsidies in 2009, but official
record had shown that Nigeria spent N421 billion in 2009. We were told that Nigeria
spent N673bn on subsidy claims in 2010 but it became N691 bn at the instance of
NNPC” (Falana, 2012:16). Also, that “the over-deduction made in 2007, 2008 and 2009
on fuel importation subsidy totaled N35bn” (Falana, 2012:16).
85
Our fourth observation deals with the period 2011 till present, when Jonathan’s
administration depended on over 80% on importation of fuel because of the worsened
state of the refineries. The entrenched inefficiency and corruption in fuel related
importation probes by marketers was exposed by the House of Representatives Ad-hoc
committee and other committees set by the Federal Government. Top government
officials complicity with fuel marketers has been on the news everywhere, with most of
them currently being prosecuted by anti-corruption agency (EFCC), in different courts in
Nigeria. The House of Representatives Ad-hoc committee investigation “revealed that
certain marketers collected subsidy of over N230. 184 billion on PMS volume of
3,262,960,225 litres that from the record made available to them were not supplied”
(HRACR, 2012:7). However, the federal government has taken different measures to
reform the importation of fuel such as sacking and prosecuting many of the indicted
importers, repositioning PPRA, and proposing full deregulation of the downstream oil
sector to stop this massive corruption.
In this wise, this study is anchored on three hypotheses which seek to establish
whether or not there is a link between allocation of fuel licences to independent
marketers and discouragement of investors in the building of new refineries; fuel
importation probes and the challenges to new refineries development; expatriates
dominance in importation and distribution of fuel and the integration of R&D in oil
industry. These hypotheses are couched in relational terms; that is, dependent and
independent variables. “The usefulness of relational categorization of variables lies in its
general applicability, simplicity and special importance in conceptualizing and designing
research as well as communicating the results of research” (Kerlinger 1973:35). These
86
hypotheses and the main indicators of the major variables are contained in the Logical
Data Framework.
3.4 Methods of Data Collection
The methods of data collection for this study is a combination of the qualitative
method and unstructured elite interview. Qualitative approach, according to McNabb
(2005:341), is:
a set of non-statistical inquiry techniques and processes used to gather data about social phenomena. Thus, qualitative data refers to some collection of words, symbols, pictures, or other non-numerical records, materials or artifacts that are collected by a researcher and is data that has relevance to the social group under study. The uses for these data go beyond simple description of events and phenomena; rather, they are used for creating understanding, for subjective interpretation, and for critical analysis as well.
In agreement, Boeree (2005:np) defined qualitative method “as any kind of
research that produces findings that do not involve measurement or statistics”. Nkwi et al.
(2001) maintained that “qualitative research involves any research that uses data that do
not indicate ordinal values.” Similarly, Bryman (2004:95) held that “the proponents of
qualitative research see it as an end in itself, in particular because of its capacity to expose
actors’ meanings and interpretations, which is a central requirement of the approach and
of its presumptive intellectual underpinnings”.
Qualitative method aims to gather an in-depth understanding of human behaviour
and the reasons that govern such behaviour that may be difficult to convey quantitatively.
Qualitative method investigates the why and how of decision making, not just what,
where, when. Hence, smaller but focused samples are more often needed, rather than large
samples. The qualitative method produces information only on the particular cases
87
studied, and any more general conclusions are only hypotheses. Thus, qualitative methods
is consistent with developments in social and policy sciences at large, reflecting the need
for more in-depth understanding of naturalistic settings, the importance of understanding
context, and the complexity of implementing social change (Shortell,1999). The main
strength of qualitative approach is the flexibility it permits. Researchers can modify their
field research design at any time and as often as they like. Again, qualitative method is
also systematic and rigorous. That is why data may be coded into categories, frequencies
tabulated, and relationships analyzed to yield quantitative results (Savenye and Robinson,
2001).
Burnham et al. (2004:31) on his own part, sees the qualitative method as “very
attractive in that it involves collecting in-depth information from a relatively small
number of cases”. He goes on to state that “analytic induction is often used by qualitative
researchers in their efforts to generalize about social behaviour. Concepts are developed
intuitively from the data, and are then defined, and their implications deduced from the
data” (Burnham et al, 2004:41).
Qualitative method of data collection is suitable for our study here because the
method is effective for studying subtle nuances in attitudes and behaviours and for
examining social processes over time which we can draw evidence so as to reach a
conclusion. Therefore, we shall adopt qualitative method of data collection because the
study will extensively utilize qualitative data generated from secondary sources.
Unstructured elite interview consists of questions designed by the researcher on
the subject matter of his/her research, to give elites wide leeway in interpretation and
direction of the conversation. Elites generally are the influential individuals with more
88
knowledge and assume a higher position than others in an organization or community;
usually defined from academic perspectives as a high-ranking figure characterized by
his/her position (Burk & Innes, 2007). Elites resent being encased in the straightjacket of
structured questions (Dexter, 1970 and Zuckerman, 2003). Elite interviewing has many
advantages. Elite interviews can shed light on the hidden elements of political action that
are not clear from analysis of political outcomes, or of other primary sources. In further
explanation of the importance of elite interviewing, Tansey (2007:7) posits that “by
interviewing key participants in the political process, analysts can gain data about the
political debates and deliberations that preceded decision making and action taking, and
supplement official accounts with first-hand testimony”. Elite interview can give
comprehensive individual insight, first-hand accounts and rich depth of an organization
(Bozoki, 2007). Elite can comprehensively give account of an organization, helping the
researcher cut through surplus of data and distinguishing for him/her the most significant
and accurate document that may be of immense help to his/her subject of research.
In this research work, we shall specifically and extensively seek for qualitative
data on the effects of allocation of fuel import licenses to independent marketers on the
development of new refineries; the effects of fuel importation probes on definition of the
challenges hindering the development of new refineries; and the effects of expatriates
dominance of the fuel importation and distribution on the integration of research and
development in Nigeria’s petroleum technology development.
To generate data for the foregoing study, we relied on both primary and secondary
sources of data. Primary sources of data are those materials collected by the researcher or
by his/her agents. It is that first-hand testimony or direct evidence concerning a topic
89
under investigation by the researcher. As succinctly captured by Booth (2008);
Agbonifoh et al, (2012) and Osemwota et al (2007), primary sources of data are
collections in a document that was created at the time of the event on the subject one has
chosen to study, or by people who were observers of, or participants in that event or topic.
The medium of the primary source can be observation, surveys, interviews and so on.
Primary sources provide the ‘raw data’ that one use to test the working hypothesis and as
evidence to support one’s claim. Primary sources of data are not pre-recorded data by the
researcher himself or herself or his/her agents. Ogbiede, (2000:17) supported the above
view by positing that “primary sources of data can be obtained through the experimental,
survey and observation method and they are preferable more than the secondary sources
of data”. Thus, the primary data sources for this study shall include from the Ministries of
Finance, Petroleum, Trade and Investment, Economic Planning, National Planning,
Central Bank of Nigeria (CBN), National Refineries Special Task Force (NRSTF), the
Independent Petroleum Marketers Association (IPMAN), Petroleum Product Pricing
Regulatory Agency (PPPRA), Petroleum and National Gas Senior Staff Association of
Nigeria (PENGASSAN), Nigeria Union of Petroleum and Natural Gas Workers
(NUPENG), Association of Mega Station Owners of Nigeria (AMFSON), Depot and
Petroleum Marketers Association of Nigeria (DAPMAN), Major Marketers Association
of Nigeria (MOMAN), and Orient Petroleum Nigeria Limited. We shall elicit relevant
data from them using unstructured elite interview.
Secondary sources of data, on other hand, are materials collected from external
sources such as journal articles, books, official reports, conference papers and so on. They
are works that discuss a subject, but which are written after the time that the event(s)
90
occurred by someone other than an eyewitness; works that contain explanation, analysis,
judgments, discussions of past events; work that explain or interpret primary sources. In
line with the above view, Ogbeide (2000) posits that secondary sources are data
previously recorded by someone other than the researcher himself. They can be obtained
through the unobtrusive method or content analysis. Though data speak for themselves;
they have to be organized and analyzed to fit an explanatory scheme sometimes through
the use of statistical techniques. As further explained by Hox and Boeije (2007),
secondary sources are data originally collected for a different purpose and reused for
another research question.
For secondary sources of data, we shall focus on institutional and official
documents that will be sourced from, among others, the Nigerian Police, Joint Task Force
(JTF), the Nigeria Extractive Industries Transparency Initiative (NEITI) Abuja, Nigerian
Maritime Administration and Safety Agency (NIMASA), Indigenous Ship Owner’s
Association of Nigeria (ISAN), Jetties and Petroleum Tank Farms Owners of Nigeria
(JEPTFON), the Economic and Financial Crime Commission (EFCC), and the Nigerian
Customs Service (NCS), the Nigerian Navy (NN). Also relevant documents, statistics and
tables will be sourced from the Central Bank of Nigeria (CBN), National Bureau of
Statistics (NBS), Nigerian Institute of International Affairs (NIIA), United Nations
Development Programme (UNDP) Abuja, and Nigeria Port Authority (NPA).
In addition to institutional and official documents, this study will equally utilize
other secondary sources as books, journal articles, conference papers, periodicals, and
other written works from the University of Benin Library, Nnamdi Azikiwe library,
University of Nigeria Nsukka and Nigerian Institute of International Affairs (NIIA) Lagos
91
that dwell on importation of fuel and the trends and dynamics of the refineries
development in Nigeria. We shall complement our use of primary and secondary sources
of data with the technique of non-participant observation by the researcher who has been
an active observer of trends and dynamics of refineries development in Nigeria.
3.4.1 Population of the study
The population of this study consists of one senior staff each from the following
organizations - Ministries of Finance, Petroleum, Trade and Investment, Economic
Planning, National Planning, Central Bank of Nigeria (CBN), National Refineries Special
Task Force (NRSTF), the Independent Petroleum Marketers Association (IPMAN),
Petroleum Product Pricing Regulatory Agency (PPPRA), Petroleum and Natural Gas
Senior Staff Association of Nigeria (PENGASSAN), Nigeria Union of Petroleum and
Natural Gas Workers (NUPENG), Depot and Petroleum Marketers Association of Nigeria
(DAPMAN), Major Marketers Association of Nigeria (MOMAN), and Orient Petroleum
Nigeria Limited. In all, the above fourteen (14) actors that are involved in refinery
development in Nigeria will be studied.
3.4.2 Sample size and technique
Due to the size of the population, we shall study the entire elements of the
population. We shall utilize unstructured elite interview to elicit relevant information from
the elements of the population such as Ministries of Finance, Petroleum, Trade and
Investment, Economic Planning, National Planning, Central Bank of Nigeria (CBN), etc.
Unstructured elite interview is a specialized case of interviewing that focuses on a
particular type of interviewee. Elite individuals are selected for interviews on the basis of
their expertise in areas relevant to the research (Wengraf, 2001). Elite interview is an
92
excellent form of data collection that provides a more comprehensive understanding of
political phenomena than other forms of data collection, and it provides researchers with a
rich variety of perspective (Johnson and Joslyn (1995). Summary of interviews schedule
and the lead questions asked to the respondents can be seen in Appendix (1).
In this way, we shall, therefore, use purposive sampling technique to select, for
interview, one Senior Staff each from the following: Ministries of Finance, Petroleum,
Trade and Investment, Economic Planning, National Planning, Central Bank of Nigeria
(CBN), the National Refineries Special Task Force (NRSTF), the Independent Petroleum
Marketers Association (IPMAN), the Petroleum Product Pricing Regulatory Agency
(PPPRA), the Petroleum and National Gas Senior Staff Association of Nigeria
(PENGASSAN), the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG),
the Depot and Petroleum Marketers Association of Nigeria (DAPMAN), the Major
Marketers Association of Nigeria (MOMAN), and Orient Petroleum Nigeria Limited.
Details of persons interviewed and cited are documented in Appendix II.
3.5 Methods of Data Analysis
As articulated by Burnham et al. (2004), data analysis means using relevant
techniques, tools, strategies and procedures for explaining relationships between or among
key variables gathered in the course of research. What this means is that data collection
naturally leads up to data analysis such that in the course of the analysis, the collected data
are broken and given appropriate treatment so as to decipher meaning out of the mass data
generated, presented, tested and interpreted. Thus, we used qualitative descriptive analysis to
analyze information generated from both 'secondary and primary sources. Qualitative
93
descriptive analysis, according to Asika (2006), essentially has to do with summarizing the
information generated in the research verbally. Qualitative descriptive method is a dynamic
form of analysis of verbal and visual data that is oriented toward summarizing the
informational contents of that data (Morgan, 1993). Qualitative descriptive analysis moves
further into the domain of interpretation because effort is made to understand not only the
manifest but also the latent content of data with a view to discovering patterns or regularities
in the data (Sandelowsld, 2000).
Deducing from the foregoing, the purpose of analysis, therefore, is to grasp and
explain how the constitutive elements of a complex whole are related with a view to gaining
a better knowledge of the subject under study. The mass of data used in this study
were analyzed qualitatively. Thus, by extracting valuable information from the
available evidence, we arrived at conclusions which in turn informed our
recommendations. Also, figures, maps and tables were used when and where necessary
to illuminate the study as well as enhance clarity of thought and presentation.
94
Research Questions
Hypotheses Variables Main Indicators Sources of Data Methods of Data Collection
Methods of Data Analysis
1. Did the allocation
of fuel import
licenses to
independent
marketers
discourage
investors in the
development of
new refineries in
Nigeria between
1999-2013?
The allocation of
fuel import
licenses to
independent
marketers
discouraged
investors in the
development of
new refineries in
Nigeria between
1999-2013.
(X)
The allocation of
fuel import licenses
to independent
marketers
� House of Representatives Report on fuel import probe
indicting Senator Dr. Ahmadu Ali, as Chairman PPPRA
(2009-2011) who issued fuel import licenses arbitrarily
from initial 49 to over 128 marketers including his son,
Mamman Nassir Ali;
� Report of government officials revolving majority of the
fuel import licenses among PDP sponsors and political
loyalists: Mahmud Tukur, Mamman Nassir Ali, Capital
Oil Nigeria Ltd, Zenon Oil and Gas Ltd etc;
� Report of allocation of fuel import licenses to 35
companies that did not meet established guidelines;
� Report of allocation of fuel import licenses to marketers
without storage facilities and had no Through-Put
Agreement with any other Depots: Lingo & Gas
Company Ltd; Nadabo Energy Ltd; Nasaman Oil
Services Ltd; and Prudent Energy & Services Ltd;
� Report of allocation of fuel import licenses to Eco-Regen
Ltd from U.S. of 15,000mt and subsidy of N1,988, 141,
091, 10 paid for product not supplied.
� Reports of
committee and
panels;
� Official
records, reports
and
publications;
� Conference
proceedings;
� Books and
journal articles ;
� Newspapers
and magazines;
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
3.6 Logical Data Framework (LDF)
Table 3.1 : Logical Data Frame Work
95
(Y)
Investors in the
development of
refineries.
� Report of Femi Otedola, CEO of Zenon Petroleum and Gas , initially bid to purchase the Port Harcourt refinery offered for privatization but later declined because Nigeria’s government refused to cut off the activities of international fuel marketers whom he believes are behind the failure of Nigeria’s refineries;
� Report of MNOCs active in the upstream oil sector in Nigeria such as SPDC, Exxon Mobil, Total , Chevron and Agip declined to invest in downstream oil sector because of patronage from Nigeria’s international fuel marketers at their home refineries;
� Report of Government officials frustration of Chinese and Indian firms who offered to build refineries in exchange for oil blocs, to promote fuel importation benefits;
� Report of the 18 local Nigerian companies, (Akwa-Ibom Refinery and petrochemicals Ltd, Badagry Petroleum Refinery Ltd, Clean Waters Refinery, etc) who secured licenses on June 14th 2004, which were revoked in 2006 and scared away because of the high cost of about $1.5 billion (N193.5 billion) and government refusal to award oil blocs to them to part- finance the project, to protect importation benefits to the ruling class;
� Report of stalling of Joint Venture agreement between US investors, Vulcan petroleum Resources and Nigerian Joint Ventures group on the construction of six modular refineries at the cost of $4.5 billion in early 2012 in Nigeria based on conflictual allegation by NNPC and trade minister over consultation and non-consultation.
� Reports of
committee and
panels;
� Official
records, reports
and
publications;
� Conference
proceedings;
� Books and
journal articles ;
� Newspapers
and magazines.
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
96
2. Did fuel
importation
probes fail to
adequately
define the
challenges
hindering the
development
of new
refineries in
Nigeria
between
1999 and
2013?
Fuel importation
probes failed to
adequately define
the challenges
hindering the
development of new
refineries in Nigeria
between
1999 and 2013
(X)
Fuel importation
probes.
� Report of the audit into importation of fuel
commissioned by NNPC in 2008;
� Report of the audit of the NNPC by KPMG professional
services which exposed fuel subsidy scam submitted to
the presidency on 22nd November, 2010;
� Report of the House of Representatives Ad-hoc
committee tagged ‘‘Resolution No. (HR.1/2012)” on fuel
subsidy probe that exposed different subsidy scams;
� Report of subsidy over-deductions involving NNPC for
2007, 2008 and 2009 totaled N35 bn;
� Report of Federal Government paying as much as
N230,184,605,691.00 billion annually to 71 fuel
marketers for disallowed claims to discharges on subsidy
from 2010 -2011;
� Report of Diversion of subsidized fuel as much as 24
million liters to neighbouring countries;
� Report of non utilization of NNPC storage facilities of
18,000 cubic metres which were in good condition and
paying of N3 per litre to third parties tank farm owners;
� Report of marketers instructing their foreign sellers:
Vitol SA, Trafigura etc, to berth off-shore Cotonou or
Lome territorial waters were ship-to-ship transfer
between the seller’s mother vessels and Nigerian
marketer’s shuttle vessels were carried out;
� Reports of
committee and
panels;
� Official
records, reports
and
publications;
� Conference
proceedings;
� Books and
journal articles ;
� Newspapers
and magazines.
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
97
� Report of 192 marketers that discharged PMS into un-
approved tank farms between 2008 and 2011;
� Report of PPPRA arbitrary increase of the numbers of
fuel marketers from 6 in 2006 to 140 in 2011;
� Report of a marketer-Venro Energy Ltd declaring fake
bills of Laden form ‘M’ No. MF475241, BA No.
03320104910009 which was used in subsidy scheme by
the company without any vessel actually brining in petrol
into the country;
� Report of arrest and/or prosecution of 7 fuel importing
companies and 12 directors of fuel marketers by EFCC in
Ikeja judicial division of Lagos State High Court before
Justice Habeeb Abiru and Adeniyi Onigbanjo, on July 26,
2012.
98
(Y)
Challenges
hindering the
development of new
refineries.
Structural challenges in the Development of Refineries:
� Report of composition of petroleum matters board based
on private economic interest;
� Reports of government policy of subsidy and fuel
regulated pricing scaring investors in the building of new
refineries in Nigeria;
� Alison–Madueke (petroleum minister) Commissioned
report on “why investors are refusing to invest in
downstream oil sector of Nigeria” in early 2012;
� Lack of autonomy of NNPC to carry out some
independent reforms makes it difficult to effect sustained
positive change within the organization. E.g. Petroleum
Act 1969 and the petroleum (Amendment) Degree 1996
empowers the president to hire and fire in the oil
industry;
� Lack of downstream technological capabilities by
Nigerian Engineers. E.g. servicing and maintenance of
the 4 downstream refineries in Nigeria alone by foreign
oil companies, from (1999-2009) has taken above $ 1
billon;
� The government policy of leaving oil companies in
charge of transferring technical know-how to Nigerians
with ineffective enforcement of local content Act of less
than 20% , constitute one of the actual challenges of
� Reports of
committee and
panels;
� Official
records, reports
and
publications;
� Conference
proceedings;
� Books and
journal articles ;
� Newspapers
and magazines.
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
99
development of refineries;
� Politicization of Petroleum Industry Bill (PIB) in the
Nigeria National Assembly since 2009 because of one of
its contents – liberalization of the downstream oil sector;
� Recycling of lifting licenses (import/export) among few
companies and use of it as well to buy political support.
Identified Challenges by KPMG and House of
Representative Probes
� The report showed incidence of complete breakdown of
PSF guidelines on prequalification and monitoring of
fuel marketers and turned to avenue of all forms of
government patronage through PPPRA;
� The report showed incidence of greed, corruption and
sabotage by marketers in collusion with the operators of
the downstream oil sector in strangulating the existing 4
refineries despite the repeated TAM;
� The report as well showed incidence of pipeline
vandalisation which incapacitated the existing 4
refineries’;
� The report also showed incidence of 445,000bpd
allocation to NNPC to refine for local consumption as
being sufficient to provide the nation with forty million
� Reports of
committee and
panels;
� Official
records/ reports
and
publications;
� Conference
proceedings;
� books and
journal articles ;
� Newspapers
and magazines.
100
litres per day for PMS and ten million litres of HHK
through offshore processing arrangement and no need for
government to grant importation or pay subsidy;
� The report showed incidence of Rilwanu Lukman (Ex-
petroleum minister: 2007-2009), a major exporter of
crude oil (Afren Ltd)/importer of fuel who protected the
lucrative interest of the marketers through insisting on no
TAM;
� The report showed incidence of over-deductions on fuel
subsidy by NNPC made from 2009-2011 which totaled
1,025.353 billion;
� The report showed incidence of government officials
such as: Accountant General, Audit Firms, Attorney
General etc, working in concert with cartel of importers
and are to refund money to government treasury;
� Complete drain-pipe for looting Nigeria treasury by
government officials who are to refund N1.1 trillion.
101
3.
Did expatriates
dominance of
fuel
importation
and
distribution
undermine the
integration of
Research and
Development
(R&D) in
Nigeria’s
Petroleum
Technology
Development
between 1999-
2013?
Expatriates
dominance of fuel
importation and
distribution
undermined the
integration of
Research and
Development (R&D)
in Nigeria’s
Petroleum
Technology
Development
between 1999-2013
(X)
Expatriates
Dominance of fuel
importation and
distribution
� Supply of fuel to NNPC by MNOCs such as SPDC,
Exxon Mobil, Total, Chevron, Agip;
� Supply of fuel to most of the Nigerians International
Marketers by SPDC, Exxon Mobil, Total, Chevron,
Agip;
� Expatriates control the largest national distribution of
fuel in Nigeria. E.g. 67% are controlled by these
MNOCs: Total, Mobil, Mrs. Nigeria, Con Oil, Oando and
African Petroleum Plc;
� Takeover of majority of the fuel importation and
distribution by SPDC, Exxon Mobil, Mrs. Nigeria, Con
Oil, Oando, Total and African Petroleum Plc
� Reports of
committee and
panels;
� Official
records/ reports
and
publications;
� Conference
proceedings;
� books and
journal articles ;
� Newspapers
and magazines.
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
102
(Y)
Integration of R&D
in Nigeria’s
Petroleum
technology
development
� Relegation of Nigeria’s R&D of applied research projects
and technical services for the up and downstream oil
sector. E.g: MNOCs do not adopt prototypes generated
by Nigeria’s R&D;
� R&D in petroleum industry in Nigeria both in the up and
downstream sectors are mostly dominated by MNOCs -
SPDC, Exxon Mobil, Total, Chevron, Agip, and New
Asian MNOCs: CNPC, KNOC, India ONGC-Mittal;
� Government policy does not encourage applied R&D in
Nigeria’s oil industry. E.g: (1) Government funding of
R&D is 0.2%, less than 1% of the UNESCO stipulation
of GDP;
� PTDF assisting Nigerians to acquire knowledge (PhDs’,
M.Scs’ etc), instead of assisting them to apply knowledge
in the oil industry, (e.g. no existing law in Nigeria
mandating MNOCs to adopt Nigeria’s R&D).
� Reports of
committee and
panels;
� Official
records/ reports
and
publications;
� Conference
proceedings;
� books and
journal articles ;
� Newspapers
and magazines.
Qualitative
method and field
study
Ex-post facto
design;
Political
economy theory;
Qualitative
descriptive
analysis.
103
CHAPTER FOUR
FUEL IMPORTATION AND DEVELOPMENT OF NEW REFINERIES IN
NIGERIA
4.0 INTRODUCTION
This chapter seeks to test whether allocation of fuel import licenses to independent
marketers discouraged investors in the development of new refineries in Nigeria since
1999. The study highlighted how class interests and power relations affect polices and
policy outcomes. This, however, resulted in the conspicuous neglect of building new
refineries by the dominant class and the use of state apparatuses to make investment
opportunities in the downstream oil sector impossible in a capitalist society. This is
examplified by the manipulation of allocation of fuel import licenses by the dominant
class, as shown in the below pages, to a few politically connected individuals by various
administrations on the basis of prebendalism, favouritism and clientelism which
discouraged investors such as Femi Otedola, CEO of Zenon Petroleum and Gas Ltd;
MNOCs active in the upstream oil sector in Nigeria; Chinese and India firms who offered
to build refineries in Nigeria; 18 local Nigeria companies and US Vulcan Petroleum
Resources and Nigeria Joint Ventures Groups.
4.1 INVESTORS IN THE DEVELOPMENT OF REFINERIES AND THE
NIGERIAN STATE, 1999-2012.
Nigeria owns four (4) refineries and they were all constructed or installed between
1965 and 1989 with total capacity of 445,000 barrels per day. They are the old Port
Harcourt Refinery (OPHR), the new Port-Harcourt Refinery (NPHR), Warri Refining and
104
Petrochemical Company (WRPC) and Kaduna Refining and Petrochemical Company Ltd
(KPRC).
The OPHR is a simple 60,000 barrels per stream day (bpsd) with hydro skimming
plant commissioned in 1965. It has a crude distillation, Naphtha reforming and liquefied
petroleum gas process units. The NPHR has an installed capacity of 150,000 bpd and was
commissioned in 1989. “It has atmospheric and vacuum distillation units, Naphtha Hydro
treating and reforming units, fluid catalytic cracking unit, dimersol and HF-Alkylation
units” (NEITI, 2006: 74). WRPC was incorporated as a limited liability company in 1988
after the merger of the then Warri Refinery and the Ekpan Petrochemical Plants. It was
built to process 100,000 BPSD, but was later expanded to process 125,000 BPSD in 1987.
KPRC was built and commissioned in 1980 with the installed capacity for refining
100,000bpd. The concept was to have a refinery inland in Nigeria with a pipeline
supplying crude from the coast (Escravos and Forcados terminals through PPMC’s crude
pipeline) and product evacuation by road, rail and pipeline supplying the more northern
inland regions of Nigeria. “The design of the three modes of evacuation was 200% of
refinery output capacity. With this plan, there was to be no backlog of products” (NEITI,
2006:74). Data provided in table 4.10 summarizes the above history of the four refineries
and their installed capacities.
105
Table 4.1 History of Refineries in Nigeria
PLANT DATE COMMISSIONED INSTALLED CAPACITY BBL/DAY
First Port-Harcourt Refinery 1965 60,000
Warri Refinery 1978 125,000
PLANT DATE COMMISSIONED INSTALLEDCAPACITYBBL/ DAY
Kaduna Refinery
Second Port-Harcourt Refinery
1980
1989
110,000
150,000
Total 445,000
Source: Adapted from Dayo, F.B. (2008). Clean Energy Investment in Nigeria: The Domestic Context; A country case study completed for IISD’s clean energy investment project.
These refineries at a time were able to meet local consumption or demand while
surplus was exported to the neighboring countries in the West Africa sub-region.
Government involvement in the downstream oil sector following the 1970 promulgation
of decrees allowing Nigerian government ownership and management of refineries in the
country militated against effective management of the local refineries in Nigeria. This fact
was attested to by the former Nigerian President of Independent Petroleum Marketers
Association of Nigeria (IPMAN), who among other things, stated that:
Government involvement in the management and ownership structure of the refineries and downstream logistics infrastructure gave rise to a regulated regime that was characterized by: inadequate supply and distribution of petroleum products, pricing regimes that did not allow for recovery, acute products scarcity which often lead to long queues at filling station (Abdulkadir, 2009:2).
106
However, with a daily growing population of over one hundred and sixty million
(160,000,000) people, coupled with the increasing daily consumption of Premium Motor
Spirit (PMS), estimated at about 40 million litres per day, the four state-owned refineries
are apparently insufficient to meet domestic demand, even when fully operational. For
instance, “the refineries operate sometimes at only about 20 percent capacity and rarely
above 40 per cent, meet only about 20 percent of the domestic demand” (IMF, 2013:50).
The country was caught in the situation with domestic demand for fuel far outweighing
supply, and with corruption, sabotage of pipeline that supply petroleum product to
different depots, smuggling and mismanagement, the refineries were operating at less
than optimal level (Salau, 2012:46; Nwogwugwu, 2011; Gilles, 2009).
Detailed output from these moribund refineries in Nigeria according to data
released from NNPC’s Annual Statistical Bulletin (2010) shows that the Kaduna refinery
operated at 31.39 per cent capacity utilization in 2001, 34.95 per cent in 2002, 15.96 per
cent (2003), 26 per cent (2004), 33.08 per cent (2005), 8.34 per cent (2010). On average,
in the ten years, the Kaduna Refining and Petrochemical complex attained capacity
utilization of 20.97 per cent. The Port-Harcourt refinery was not better off. In 2001, it
operated at 60.73 per cent, 52.17 (2002), 41. 88 per cent (2003), 31.04 per cent (2004),
42.18 per cent (2005), 50.26 per cent (2006), 24.87 per cent (2007), 17.84 per cent (2008),
9.08 per cent (2009), and 9.17 per cent (2010), averaging 34 per cent in ten years. Warri
operated at 48.29 per cent in 2001, 55.53 per cent (2002), 14.27 per cent (2003), 9.10 per
cent (2004), 54.85 per cent (2005), 3.85 per cent (2006), 0.00 per cent (2007), 38.52 per
cent (2008), 43.01 per cent (2009), and 43.36 per cent (2010), averaging 31 per cent
between 2001 and 2010. In the first quarter of 2011, the Kaduna, Port-Harcourt and Warri
107
plants operated at 9.02 per cent, 11.94 per cent and 24.93 per cent respectively while in
the second quarter, the same plants attained output of 27.78 per cent, 16.87 per cent and
38.40 per cent respectively (Nwogwugwu, 2011).
The above detailed explained data are represented in table 4.2
Table 4.2: Refineries Average Annual Capacity Utilization, 1999-2011 (%)
Area 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
P/Harcourt 48.07 30.95 60.73 52.17 41.88 31.04 42.18 50.26 24.87 17.84 15.23 9.17 15.26
Warri 43.51 5.04 48.29 55.53 14.27 9.10 54.85 3.85 0.00 38.52 41.34 43.36 41.67
Kaduna 24.60 22.65 31.39 34.95 15.96 26.00 33.08 8.34 0.00 19.56 22.17 20.46 22.17
Source: NNPC Annual Statistical Bulletin, 2009-2011.
Also, table 4.3 shows trend in refinery capacity by local refineries from 1999 to
2012. While in 1999, the crude oil received by the four refineries was 65,979,134, the
crude oil processed was 66,409,253. Also in 2011, the crude oil processed was 40,405,
605, the crude oil processed was 39,408,108.
Table 4.3: Domestic Crude Oil Refining by Local Refineries, 1999-2011 (in barrels)
1999 2000 2001 2002 2003 2004 2005
Crude Oil
Received
65,979,134 36,189,139 82,578,546 78,160,576 42,754,815 38,019,906 72,360,780
Crude Oil
Processed
66,409,253 36,282,789 81,512,099 79,579,031 44,811,925 38,026,965 70,637,019
2006 2007 2008 2009 2010 2011 2012
Crude Oil
Received
42,471,739 18,191,136
45,533,304 19,392,571 33,633,907 40,405,605 NA
Crude Oil
Processed
43,445,397 19,059,670 39,264,519 17,745,656 34,871,693 39,408,108 NA
Source: NNPC Annual Statistical Bulletin, 2011.
108
Table 4.4 shows the domestic crude oil refining by local refineries in 2011.
Table 4.4: Domestic Crude Oil Refining by Local Refineries in 2011
Refinery Crude Received
(MT)
Crude Processed
(MT)
Capacity Utilizatio
n (%)
PMS (MT)
DPK (MT)
AGO (MT)
Fuel Oil (MT)
LPG (MT)
KPRC 1,183.73 1,154.98 22.17 180,453 126,785 235,387 281,496 0.00
PHRC 1,552.59 1,580.77 15.26 430,070 235,726 344,526 380,672 23,210
WRPC 2,749.63 2,568.99 41.67 666,348 388,395 514,898 730,912 83,393
TOTAL 5,284.68 5,088.21 26.37 1,276,871 750,906 1,094,811 1,393,080 106,603
Source: Economic and Financial Indicators, Businessday, Monday, 6/8/2012:36.
When we compare the above refineries capacities of 22.17% to 30% between 1999
to 2013 with a very high demand for all categories of petroleum products in Nigeria and
the inability of the four refineries to meet the above demand, the need for importation of
fuel becomes obvious. For instance, official sources show average demands in 2012 are
put at: “PMS 30-33 million litres per day; AGO 12 million/d; 10 million/d; and ATK
(Aviation Turbine Kerosene commonly known as aviation fuel) 1.6 million -3 million/d
depending on the season” (Vanguard, January 26, 2011). Also, Table 4.5 and figure 4.1
show statistics from the National Bureau of Statistics on the daily increase of domestic
consumption of petroleum products from 8,306,985 in 2006 to 8,859,802 in 2007, to
9,500382 in 2008 and 9,891,226 in 2009. Although it declined to 6,353,518 in 2010.
109
Table 4.5 Domestic Consumption of Petroleum Products from 2006-2010.
Year PMS Kerosene Gas Oil/Diesel TOTAL
2006 8,306,985 926,391 1,649,749 10,883,125
2007 8,859,802 535,098 1,384,956 10,779,856
2008 9,500382 979,285 1,517,521 11,997,188
2009 9,891,226 713,214 1,155,773 11,760,215
2010 6,353,518 668,548 879,368 7,901,434
Source: Adapted from National Bureau of Statistics, (2010). Abuja, Nigeria.
Figure 4.1: Domestic Consumption of Petroleum in Products from 2006-2010
Source: Constructed from table 4.5
Equally, figure 4.2 shows fluctuations in the daily consumption of petroleum
products from 1985 to 2006 in thousand litres per day. The fluctuations continued till it
reached 7000 litres per day in 2006.
110
Source: Adapted from Adenikinju, A. (2011) “Energy Pricing and Subsidy Reforms in Nigeria”,
http://www.oecd.org/tad/envtrade/42987402.pdf. 12/01/2013.
With the above high consumption of petroleum products outweighing domestic
refining capacity, Nigeria has no choice but to look for alternative means to augment the
existing refineries in Nigeria. Successive military administration in Nigeria from 1985 to
1998 (Generals Babagida, Abacha and Abubakar) only concentrated on the importation of
fuel as a means of filling the gap in domestic demand. No attempt was made by these
military leaders to build new refineries in Nigeria.
Following the return to democracy in 1999, government made efforts to develop
policy guidelines to attract investors in the development of new refineries in Nigeria. The
first step taken by Obasanjo’s administration was the establishment of a 34 member
special committee on the Review of Petroleum Product Supply and Distribution
(SRCPPSD) on August 14, 2000 to look into the problems of the downstream petroleum
Figure 4.2: Trends in consumption of petroleum products 1985-2006 in thousand liters per day.
111
sector. The committee submitted its report to the government in October 2000 and the
government issued its white paper on it on January 2001. Among the far-reaching
recommendations of the committee accepted by the government in its white paper are as
follows:
• Stakeholders (marketers, transporters, dealers, industrial converters and others) are unhappy because of the shortages and the prevailing cost and price structure which lead to low returns on capital investment and encourage malpractices, which in turn hamper an efficient supply and distribution system.
• Operational facilities at the depots and the pipelines should immediately be repaired.
• To prevent further malpractices, all coastal supplies of AGO through nominated company vessels should be stopped as subsidies to the target group (NEPA, Rigs operators) were not justified.
• Restructuring of the NNPC and its subsidiaries with the setting up of the committee on that in the first quarter of 2001.
• Dualisation of all roads leading to the refineries and depots to allow easy access and improve efficiency of operations.
• Current efforts to resuscitate the Nigeria Railway system by Government should be sustained.
• Government should deregulate and liberalise the import of petroleum products by other parties and that prices of products should be based on import parity to enhance and encourage the participation of other players other than the NNPC.
• Privatisation of all four government refineries and encouragement for the establishment of private refineries.
• Expansion of loading capability of all marined-fed depots. • Establishment of a pipeline management authority for the
management of pipelines and depots, which will charge both private and public users a tariff per throughput litre of products.
• Downward review of NPA ports charges to a comparable level with other ports in the world.
• Immediate setting up of a Petroleum Products Pricing Regulatory Agency with sufficient autonomy to superintend the various phases of the proposal embodied in the report (SCRPPSD) especially the liberalisation of the downstream sector of the petroleum industry (PPPRA, 2014:http://www.pppra-nigeria.og/history.asp).
With the acceptance of most of the recommendations of the report of SCRPPSD as
contained in the Government white paper, a Presidential Technical Campaign Committee
112
on liberalisation of the downstream sector of the petroleum industry, headed by the then
Special Assistant to the President on Petroleum and Energy matters and later GMD
(NNPC) Engr. Funsho. Kupolokun went into action to sensitise the Nigerian public on the
need for deregulation and liberalisation of the downstream sector of the petroleum
industry. The result of that campaign which saw the Committee visiting State Governors,
traditional rulers, various interest groups including organized labour, was that
deregulation and liberalisation were the only viable options the Government could adopt
to attract investments into the sector and to remove the recurrent and endemic problem
plaguing the sector.
Overwhelmed with the success of the campaign on liberalisation of the
downstream sector, the Government on march 8th 2001, set up the Petroleum Products
Pricing Regulatory Committee (PPPRA) as an interim measure to carry out the functions
of the PPPRA as recommended by the SCRPPSD while waiting for the enactment of the
Act of the National Assembly for the setting up of the Petroleum Products Pricing
Regulatory Agency (PPPRA) as required in a democratic set up. The PPPRA was
inaugurated by the Secretary to the Government of the Federation. After series of
meetings with the stakeholders and the interest groups, the PPPRC recognised that pricing
is a condition precedent for deregulation and liberalisation. It therefore, commenced a
phased liberalisation of the downstream sector by announcing the selling prices for PMS,
AGO and HHK at N26, N26 and N 24 per litre respectively on January 1st 2001. The
consumption tax N 3.00 per litre of product was abolished while the import duty of N 1.50
per litre was introduced. The sale of crude to NNPC at $9.50 per barrel was raised to
$18.00 per barrel (PPPRA, 2014). On 2nd July 2003, the import tax of N 1.50 per litre of
113
products was removed to stabilise the selling prices earlier announced to encourage
importation of products by other marketers. The bill for the establishment of the
Petroleum Products Pricing Regulatory Agency submitted by Mr. President on March
2001 to the National Assembly was finally passed into law by the Senate and the House of
Representatives on February 5th 2003 and May 22nd 2003 respectively. The President
assented to the bill in May 2003 and inaugurated the board of the Agency on 19th June
2003.
With the law establishing PPPRA, the Obasanjo Administration attempted full
deregulation and liberalization of the downstream sector, which met with stiff opposition
from different stakeholders in Nigeria. As expected, “public opinion about deregulation in
Nigeria covers a wide spectrum, and cuts across all sides of the argument. Some schools
of thought strongly believe that the Nigerian petroleum industry must not be liberalized,
or deregulated, or privatized completely, for whatever reason, and that the status quo
should remain, maybe, with some minor fine-tuning made ‘here and there’, to improve
efficiently, as appropriate, in the overall rational interest. Essentially, this is the implied
position of the Nigerian Labour Congress (NLC)” quoted in Adelabu (2012: 194). Some
Nigerians hold the view that deregulation of the petroleum industry in Nigeria should be
implemented in phases, so as to enable the state-owned monopolies to regain efficiency,
before their full privatization. However, some others insist that complete deregulation,
including the total, and final dismantling, unbundling, and subsequent wholesale
privatization of all state-owned petroleum businesses, should proceed without further
delay, with maximum dispatch, for the continued, and meaningful survival of the Nigerian
petroleum industry in the 21st century (Braide, 2003).
114
In spite of the opposition, the Obasanjo’s administration still offered the Port
Harcourt refinery for privatization. Femi Otedola, President and CEO of Zenon Petroleum
and Gas, the largest supplier of diesel fuel in Nigeria won the bid to purchase the refinery
but the activities of international fuel marketers made him to change his mind. He
confessed to US embassy in Abuja, Nigeria that:
He initially won the bid to purchase the Port-Harcourt refinery offered for privatization, but he later told President Obasanjo he will not invest in the refinery so long as NNPC purchases fuel from traders in other countries and leasing ships itself to deliver fuel to Nigeria. These traders arrange for the vandalization of crude oil feeder pipelines, which keep the refineries at Port-Harcourt, Warri and Kaduna closed or under capacity. International traders generally receive at least one million dollars per shipload of fuel to Nigeria and have grown accustomed to the easy money Nigerian offers as long as its refineries remain down (US government secret memo, 2012:2).
The above view was corroborated by Ngonadi (2014: interview), who contended
that the allocation of fuel import licenses in a prebendal manner to those very close to
power discourage prospective investors in the development of new refineries in nigeria.
Another attempt was made by Obasanjo’s administration (2003-2007) to attract
Asian National Oil Companies (ANOCs) from China, Taiwan, India, and South Korea
into Nigeria to invest in refineries development in the downstream oil sector of Nigeria.
The administration’s game place was to entice ANOCs to acquire oil blocks for an
exchange for investment in the downstream oil sector, power projects or infrastructural
development. This was later to be known as the concept of the “oil-for-infrastructure
deal” made with the ANOCs. According to Vines et al (2009:7),
The ANOCs were given the Right of First Refusal (RFR), and discounted signature bonuses on a number of oil blocks in return for their commitment to invest in downstream and infrastructure projects. The concept of the ‘oil-for-infrastructure’ deal was novel but its
115
introduction compromised the much –proclaimed transparency of the oil licensing rounds of 2005, 2006 and 2007.
In 2005 oil block bid round, awards of rights of first refusal (ROFR) on OPLS
231, 2002, 321, and 322 under the oil-for-infrastructure scheme were granted to the
Korean National Oil Company (KNOC). KNOC is said not to have paid 231 million
signature bonus for OPLs 321 and 322 allocated to it by the federal government in 2005
(Obasi, 2008). A Chinese consortium, Chinese Petroleum Corporation (CPC) also had
ROFR on OPLs 2005, 2006, and second ROFR in OPL 226, 231, 2001 and 2011. Also, an
Indian interest that got Ajaokuta, the entire deposit of iron ore in Itakpe, and Delta Steel
under mysterious circumstances was granted ROFR on OPLs 225 and 275 and second
ROFR on OPLs 226 and 290. This consortium got the concession by promising the
federal government that it would construct a 550 metric tons per day offshore gas
gathering facility, 550MW independent power plant (without specific mention of the
location) and compressed natural gas facilities in Lagos and Abuja. Another Indian
business interest also got ROFR on OPL 250 by pledging to construct Lagos-Benin-
Onitsha –Owerri railway lines (Izeze, 2010).
The 2005 bidding round turned out to be anything but transparent, leading a
National Assembly Committee report to conclude that:
The overall objectives of the Bid Round though highly commendable were not achieved. Many factors were responsible for this failure… Central to all these factors were two things. First, the obvious manipulation of the bid process for various reasons to meet specific ends and secondly, the room such manipulation created for abuse. The result is that due process and transparency which were touted as the hallmark of this bid round were definitely blurred (Report submitted by the Ad-hoc Committee on Investigation of the Activities of DPR, NNPC and its subsidiaries from 1999 till date, Vol. 1, 2008:16).
116
The bidding round which took place in May 2006, known as the “mini-round”
raised more questions about the transparency of oil –for- infrastructure deal. This bid
round was much smaller than its predecessor and the bidder were mostly companies from
China, India and other foreign countries which had pledged investments in Nigeria’s
infrastructure in return for being granted oil licenses (Global Witness, 2012). An Indian
consortium India’s National Oil Corporation (NOC) and EMO oil owned by Ojie
promised to invest $ 6 billion in a private refinery, IIP project, and the same railroad and
got away with two lucrative acreages-OPL 279 and 258.
During the 2007 oil block licensing round, 45 oil blocks, were put on offer. As
usual, most of the foreign firms from Asia in an oil-for-infrastructure deal emerged
winners. The KNOC got OPLs 321 and 323 under the same oil-for infrastructure scheme.
ONGC/MITTAL of India were allocated OPLs 279 and OPL 285 on the mere promise
that they would invest $ 6billion into a 180,000bpd refinery. It is pertinent here to note
that “OPLs 279 and OPL 285 awarded to ONGC/MITTAL in 2007 by Former President
Olusegun Obasanjo, is a source of fierce feud between two Indians, Lakshmi Mittal and
Moni Varma, who are in court in the UK over disagreement regarding the oil bloc deal”
(Onuoha, 2013: 125). Tables 4.6, 4.7 and 4.8 listed most of the above mentioned oil blocs
awarded to the Asian Companies in an oil-for-infrastructural deal in Nigeria from 2005 to
2007.
117
Table 4.6: Blocs offered to the ANOCs on RFR Terms, 2005 -2007
ANOC BLOCKS WITH RFR
ROUND TAKEN UP
KNOC 2 2005 2
1 2006 None
4 2007 None
ONGC-VL 2 2006 None
OMEL 3 2006 2
1 2007 None
CNPC 4 2006 4
1 2007 None
CNOOC 4 2007 None
CPC 2 2005 None
1 2006 None
PETRONAS 1 2007 None
Total 26 8
Source: Compiled from data from the Department of Petroleum Resources, April 2008
Table 4.6 shows that KNOC had two blocks in 2005 round; ONGC/Mittal, two
blocks in 2006 and a third which is sub-judice; and CNPC four blocks and one in 2007.
Taiwan’s CPC ended with none following its withdrawal from Nigeria after unwittingly
caught up in political intrigue.
Also, table 4.7 contains the summary of the precise oil blocks to the ANOCs.
While KNOC in 2005 has OPL 321 and 323; CNOOC in 2006 has OML 130 and OPL
229 etc.
118
Table 4.7: Total Oil Blocs Assets of the ANOCs in chronological order 2005- 2007
ONGC May 05 JDZ Bloc 2 9% share/Equator 6% = 15%
Sinopec May 05 JDZ Bloc 2 28%; operator wef Mar 06
KNOC 2005 Round
OPL 321 & 323 strategic Deal
CNOOC Jan 06 OML 130 Bought Contractor rights for US$ 2.3
bn
CNOOC Mar 06 OPL 229 Bought 35%
CNPC 2006 round OPL 471,
298,732,721
Strategic Deal
OMEL
(ONGC/Mittal) 2006 Round OPLs 279
&285
Strategic deal
OMEL
(ONGC/Mittal) Sept. 06 OPEL 297
Discretionary award still sub-judice
Source: Compiled from data from the Department of Petroleum Resources, April 2008.
These ANOCs in return promised strategic investments in Nigeria. See Table 4.8
for more clarifications on their respective promises. While South Korea promised two
integrated gas power station at Abuja and Kaduna including gas pipeline. China promises
core investment in the Kaduna refinery and so India, Taiwan and Malaysia
119
Table 4.8: Summary of Strategic Deals with ANOC
South Korea - Gas pipeline from Ajaokuta to Kano via Abuja with Spur to
Katsina
- 2 Integrated gas power station at Abuja and Kaduna
China - Core investor in the Kaduna refinery
- Construction of double track, standard guage Lagos-Kano railway
- Construction of an HEP complex at Mambilla (3 gorges project)
India - Build a Greenfield refinery 180,000bd capacity
- Build a 2000mw independent power plant
- Feasibility study for a new east-west railway Lagos to Delta
Taiwan - Core investment in Port Harcourt refinery
- Unspecified IPP (Power plant)
Malaysia - 2.5m ton pa petrochemical projects in Delta State with creation of
7000 jobs..
Source: Compiled from data from the Department of Petroleum Resources, April 2008.
As Nigerian government has fulfilled their own part of the oil-for-infrastructure
deal with the ANOCs, the China state construction Engineering Corporation (CSCEC) in
may 2010 started fulfilling their own part of the deal. They signed a deal with Nigeria
National Petroleum Corporation (NNPC) to construct three refineries in Nigeria.
According to BBC News of 6th July (2010),
The refinery will be built in the Lekki free trade zone of Lagos, Nigeria’s biggest city. The Chinese will cover 80% of the cost, and
120
NNPC 20%, while the state of Lagos will provide land and infrastructure. Under the $23bn framework agreement signed in May 2010, NNPC and CSEC will also build two other refineries in Bayelsa and Kogi, as well as a fuel complex. This agreement will add 750,000 barrels of capacity a day to Nigeria’s refining capability.
But problem arose when China’s CSEC wanted to take control of the oil blocs. In
spite of having signed the PSC a month before Obasanjo left office, the NNPC stalled the
follow-up paperwork. India’s, ONGC/Mittal (OMEL) which signed the MOU with the
Nigerian government in November 2005 to build $6 billion in Greenfield refinery with the
capacity of 180,000bpd for oil-for- infrastructure deal, and was later acquired in the 2006
mini-round. The MOU was valid for 25 years. At the signing of the agreement between
NNPC and chairman of ONGC, India made it clear that:
The investment in infrastructure would depend on the joint venture’s returns from the blocs. That would suggest that no action would be taken on the downstream promises for many years. Mittal had made it clear that he wanted 2 billion barrels of reserves before signing up to the implementation of any downstream investment (Wong, 2009:13).
This largely explains why India’s case of building refinery in Nigeria is a near
impossible task. Progress depends on when India meets their targeted oil commensurate
to what they want to invest in Nigeria. “The legal department of the NNPC descried this
arrangement as highly anomalous” (Wong, 2009:16).
However, all the efforts of Former President Obasanjo to use oil-blocs bidding
rounds of 2005, 2006 and 2007 to attract investors, especially from Asia in the
downstream petroleum industry, yielded no result, as all the Asian companies’ promises
were not fulfilled. This controversial oil blocs vis-à-vis oil-for-infrastructure deals
attracted criticisms from different people in Nigeria. It was reported that most of the Asian
firms that got lucrative oil blocs under the oil-for-infrastructure scheme were still keeping
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the acreages and have decidedly abandoned the infrastructural development side of the
deal several years after. Worse still, most of these so-called investors did not even pay the
required signature bonus fees and those that did only paid between 20-30 per cent of the
fee (Izeze, 2010).
This attracted criticism from Nigerians. Prominent among them is the Senate
President, David Mark, who criticized the NNPC over its $35 billion contract with a
Chinese company on oil-for-infrastructure deal. According to him:
China does not possess the best of technology in refinery construction. It is only in Nigeria that a foreigner can come in with a briefcase with absolutely no idea; only access to the corridors of power and be sure of getting a juicy contract without due process. About $600 billion has left the shores of Nigeria in the last 50 years due to such indulgences. When will we bring the money back-by incentives or by guaranteeing security of investments of Nigeria (Amodu, 2013: 17).
Following allegations that trailed the last round of bids in 2005, 2006 and 2007,
the administration of President Umaru Musa Yar’Adua set up a panel headed by Olusegun
Ogunjana to investigate the level of transparency in the award of oil blocs (Including the
oil-for-infrastructure deal with Asian firms) awarded by the Obasanjo’s administration.
The panel reported that all the oil blocs be revoked because the manner they were
obtained failed to meet the best practices in the industry. According to the committee:
The deals were opaque, the financial arrangement were unsatisfactory and due process had not been followed… many companies took advantage of the oil-for-infrastructure scheme to have access to concessions with high potentials without fulfilling their commitment to government by the commencement of downstream or infrastructure projects of strategic importance which formed the basis of philosophy (Wong, 2009:13).
This recommendation received the approval of Sadiq Mahmood, permanent
secretary in the ministry of petroleum who forwarded it to the President for the revocation
of the oil blocs (including the oil-for-infrastructure deal) awarded by Obasanjo’s
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administration (Akukwe, 2012). The President subscribed to the above advice and ordered
for the revocation of all the oil blocs.
But Falana (2012:17), however, objected by insisting that since “the past five
years, the Chinese have offered to build refineries for us in exchange for oil blocs which
are doled out, even to girlfriends, when the government frustrated the Chinese to promote
fuel importation, they moved to Niger and Chad to build two refineries which have since
been commissioned”. This also applies to India and other ANOCs because it was in the
same 2005, 2006 and 2007 bidding and the same oil-for-infrastructure deals offered. The
above view was corroborated by Omoruyi (2014: interview), who contended that those
oil blocks were cancelled by Yar’Adua’s administration to promote fuel importation
benefits because they felt northern region was shortchanged. These regional contestations
of resources are the greatest challenges hindering the development of new refineries in
Nigeria today.
Beyond the ANOCs frustration from Nigeria, is the 18 local Nigerian companies
who secured licenses on June 14th 2004 and was revoked in 2006 by the Department of
Petroleum Resources (DPR) as a result of government hostile investment conditions in the
downstream oil sector to protect fuel importation benefits. These 18 local companies are
represented in Table 4.9 below.
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Table 4.9: Local oil companies that secured licenses to build refineries in 2004
S/N LOCAL COMPANIES
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
Akwa-Ibom Refineries and Petrochemicals Ltd
Badagry Petroleum Refinery Ltd
Clean waters Refinery
Ilaje Refinery and Petrochemicals
Niger Delta Refinery and Petrochemical Ltd
NSP refineries and Oil Services Ltd
Ode-Aye Refinery Ltd
Orient Petroleum Resources Ltd
South Land Associates Ltd
Southwest Refineries and Petrochemicals Ltd
Stares Petroleum Refinery Ltd
The Chasewood Consortium
Tonwel Refinery
Total Support Refineries
Union Atlantic Petroleum Ltd
Sapele Petroleum Ltd
Rivgas Petroleum and Energy Ltd
Owena Oil & Gas Ltd
Source: Adapted from Tell Magazine, April, 2007.
There were no motivational conditions by Nigerian government to encourage these
investors. Even when the Association of Private Refineries Owners of Nigeria (APRON),
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under the then Chairmanship of Olatunde Ilori, tabled the financial involvement in 2007 to
President Obasanjo and begged to grant their members right to lift crude oil to part-
finance the project, Obasanjo turned down the offer and this situation has remained till
date. The enormous capital involvement scared these indigenous private firms away. For
instance, as one of the directors who got the license revealed:
It would require about $1.5 billion (N193.5 billion) to build a new refinery. He said that having paid $50,000(N6.5 million) application fees… market studies gulped between $75,000 (N9.7 million) and $100,000 (12.9 million), site studies attracted between $250,000 (N32.5 million) and $500,000 (N65 million), while Environmental Impact Assessment, EIA, cost between $500,000 (N65 million) and $1 million (N129 million). According to him, liquefaction process modelling costs between $200,000 (26 million) and $250,000 (32.5 million). These were not the only costs needed to start the project. He said detailed feasibility report and basic engineering design attract between $1.5 million (N193 million) and $3.5 million (N452 million) and $2.5 million (N297.1 million) and $5million (N545 million) respectively while FEED takes between $15 million (1.6 billion and $20 million (N2.2 billion)” (Tell, 2007).
This lack of government encouragement and turning down the request of APRON
to lift crude oil to part finance the project put a final seal to any hope that any private
refinery will come on stream in the tenure of the Obasanjo administration. According to
Obasanjo “I don’t want a situation where someone will take crude oil and resell it just
because he has a licence” (Tell, 2007). This development put an end to private refinery
development during Obasanjo’s eight years administration. However, apart from all these,
Akpatason quoted in Ajanaku (2008:4) who was the former President of NUPENG, noted
that the “18 licences were revoked because of continued participation of the Nigerian
National Petroleum Corporation (NNPC), in Product distribution through its mega –
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filling stations, which dispense fuel at prices relatively lower than those of major and
independent marketers”.
The more worrisome situation about the building of new refineries in Nigeria is the
activities of MNOCs in the upstream sector of Nigeria for more than five decades such as
Shell, Chevron, Total, Texaco, Exxon Mobil and Agip, who want to maintain, at all cost,
the huge capital they are earning through exploitation of raw materials (crude oil) from
Nigeria and bringing back finished product (fuel) to Nigeria. These MNOCs have
frustrated all government efforts in ensuring that private refineries do not see the light of
the day. Some private sector organizations in Nigeria who want to invest in refineries
development have seen themselves unable to get financial assistance from abroad as a
result of MNOCs directives to western banks to shun private refineries funding in Nigeria.
This fact was attested to at the 4th Business Roundtable Conference between some local
investors in oil and gas sector and the Nigerian government in Abuja, where it was
confirmed by participants that:
Multinational oil firms operating in the Nigerian oil and gas industry have directed their financial partners abroad to shun financing of private refineries in Nigeria. This is to ensure that there oil trading subsidiaries continue to benefit from the importation of petroleum products on behalf of the Nigerian National Petroleum Corporation (NNPC) and other petroleum marketing companies. The Federal government spent $18.5 billion (about N2.35 trillion) on fuel importation between January 2000 and December 2006 (Ibiyemi, 2008:1).
As further testified in the conference, “an official of a Nigerian firm who has plans
to construct a private refinery in the country said a foreign financial institution which
earlier signed a financing agreement with his company has pulled out on the ground that a
multinational firm operating in Nigeria threatened to move its account to another bank if
the agreement was honoured. The withdrawal of the financier, the official said, took place
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after the company had obtained guarantee from the federal government for securing
access to crude oil supply by the NNPC for the private refinery as demanded by the
financier. The official said the withdrawal was announced after an investment of over $2.5
million (about N300 million) for registration processes and revalidation of the private
refinery’s licence after it was revoked by the Department of Petroleum Resources DPR.
The revocation came at the expiration of the 18-month deadline in March 2006” (Ibiyemi,
2008). Also, the latest draft of Nigeria’s Petroleum Industry Bill (PIB) before Nigeria’s
National Assembly, gives MNOCs great reasons why they have to produce fuel for
Nigerian consumers including tax breaks. But this has followed aggressive threat to leave
Nigeria by these MNOCs on April 4th 2013 for fear of losing the patronage of
International fuel marketers including Nigeria. According to oil producers Trade Section,
a body that was founded to speak for both international and indigenous corporations in the
Nigerian Petroleum Industry, “Exxon Mobil, Chevron, Total and Shell have made it clear
that they favour export of crude oil to America and Europe than to produce it for the
Nigerian market” (Member, 2013:20).
Also, Jonathan administration on January 2, 2012 made another attempt at full
deregulation of the downstream sector to attract investors in the development of new
refineries in Nigeria. This was greeted by a nation –wide strike declared by the Nigerian
Labour Congress (NLC) and its affiliates on January 9, 2012. After several meetings, the
federal executives and Labour leaders arrived at agreement and the price of petrol was
brought down to N97 on January 16, 2012. President Goodluck Jonathan has sought to
justify this pro-capitalist measure on the basis that Nigeria stands to gain more if she
allows market forces to determine the cost of petrol. He asked rhetorically “why is it that
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people are not building refineries in Nigeria, yet it is a big business? It is because of the
policy of subsidy and that is why we want to get out of it” (Agande, 2012:5). He further
argued that:
Unless fuel subsidy is scrapped, the government will not be able to attract the investment it needs to get the refineries working. North American Country has 16 functional refineries that are performing at optimal capacity because all the refineries in Canada are privately owned (Agande, 2012:5).
In the same vein, Okoro (2014: interview) corroborated the above view by stating
that what can attract and stop policy sabotage in terms of new refineries development in
nigeria is full deregulation of the downstream oil and gas sector.
But the Nigeria Labour Congress chairman Abdulwaheed Omar, argued on the
contrary. According to him:
The economic meltdown has now shown that the economy and its regulation cannot be left to the whims and caprices of free market forces and that government does have a strong and leading role to play not only in the regulation of business and the economy but that it must also be a key player in the ownership and management of business and non-business institutions for the regulatory role to make impact (quoted in Adelabu, 2012:196).
President Jonathan finally suspended the deregulation of downstream sector and returned
to the status quo. But his administration has not relented as they keep on assuring
Nigerians that they will continue to pursue full deregulation of the downstream oil sector
which is for the good of Nigerians.
Similarly, in an efforts to boost the refining capacity in the downstream oil sector
in Nigeria during Jonathan’s administration from 2011 till date, the Minister of Trade and
Investment, Mr. Olusegun Aganga, formally entered into agreement with an American
and Nigerian Joint venture group, Vulcan petroleum Resources Limited and Petroleum
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Refining and Strategic Reserve limited, for the construction of six modular refineries. The
six refineries, which are estimated to gulp $4.5bn (N697.5 bn), will have a combined
capacity of refining 180,000 barrels of oil per day. Two of the refineries are expected to
be completed within the next 12 months, while the others will be completed within the
short/medium term. The refineries are to be located in areas where there are crude oil
pipelines and will be built in collaboration with the Nigerian National Petroleum
Corporation. When completed, each modular refinery will refine up to 30,000 barrels of
crude oil per day and produce up to five million litres of petrol, diesel and kerosene.
Speaking on the signing of the agreement, Aganga said:
The event represented a major milestone in the federal government’s plan towards industrial revolution, job creation and wealth generation. This is a historic moment and a big step for us as a country. Apart from power, one of the critical areas, which President Goodluck Jonathan has made a priority, is to have functional refineries. My understanding is that by the time the whole project is completed, the cost is estimated at about $4.5bn. This is the beginning of changing our old paradigm from exporting just raw materials and exporting jobs to the western countries. There is no nation that has moved from being a poor nation to a rich one by exporting raw materials without having a vibrant industrial base (Aganga, 2012: 5).
The Chairman of Petroleum Refining and Strategic Reserve, Mr. Jim Mansfield and Mr.
Edozie Njoku, signed on behalf of their respective companies. Aganga (2012:5) said “the
Ministry would work together with the ministry of petroleum resources and the NNPC to
ensure the actualization of the projects”.
Unfortunately, NNPC later disowned the above Memorandum of Understanding
(MOU), insisting that they were not carried along. According to the report released by
NNPC to This Day Newspapers:
The corporation had no hand in the project and is currently not in partnership with either the trade ministry, US firm or the Nigerian company in respect of the said modular refinery project. As far as we are
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concerned, we don’t know anything about six refineries project. The NNPC was not consulted, nor its consent sought by the Ministry of Trade. The NNPC was not invited at the said signing ceremony and was also not represented. We are not collaborating with any company on any such project (Amanze-Nwachuku, 2013:3).
This conflictual allegation by NNPC and Trade Minister over consultation and non-
consultation stalled this Joint Ventures agreement between US and indigenous firms and
Trade Minister till date.
This state of affairs has exposed the crisis of the Nigerian state, underpinning why
investors are discouraged from investing in the downstream oil sector of Nigerian
economy. To a large extent, therefore, discouragement of investors to such a critical sector
of Nigerian economy is not only a contradiction of the Nigerian state, but also, a pointer
of how the state and its apparatuses are used as the main instrument of primitive
accumulation by the ruling class and their collaborators. Let us then examine how
prebendal politics affects allocation of fuel importing licenses in Nigeria
4.2 FUEL ALLOCATION: THE REQUIREMENT IN NIGERIA
The Nigerian National Petroleum Corporations (NNPC) which came into being in
1977 formally coordinates all related policies, manages the petroleum resources and
administers the relevant laws and regulations. NNPC, in addition, carries out the
coordination of exploration and production, importation of refined petroleum product,
marketing of petroleum product, engineering and data support services, training and crude
oil refining, construction and maintenance of a network of pipelines etc. The above NNPC
responsibilities are enshrined in the Petroleum Act/Decree of 1969, Exclusive Economic
Zone (EEZ) Decree of 1978, the Land Use Act of 1978, and the 1999 constitutions.
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With the change to democratic governance in 1999, the administration of
Olusegun Obasanjo set up Petroleum Support Fund (PSF) and the Petroleum Products
Pricing Regulatory Agency (PPPRA) to manage the fund which was passed by Nigerian
parliament on May 2003, as PPPRA Act No. 8. The PPPRA Act officially started in 2006
with the admission of a few major and independent marketers which finally led to the
abolition of NNPC monopoly on importation of refined petroleum products. The PPPRA,
as a regulatory agency, among other things, have the following mandate:
i. To maintain constant surveillance over key indices relevant to pricing policy
and periodically approve benchmark prices for all products.
ii. To moderate volatility in petroleum products prices, while ensuring reasonable
returns to the operators.
iii. To establish parameters and codes of conduct for all operators in the
downstream sector of the petroleum industry.
iv. To prevent collusion and restrictive trade practices harmful to the sector.
v. To exercise mediatory role as necessary for all the stakeholders in the sector.
vi. To regulate the supply and distribution of petroleum products.
vii. To establish an information data bank through liaison with all relevant
agencies to facilitate the making of informed and realistic decisions on pricing
policies.
viii. To identify macro-economic factors relating to prices of petroleum products
and advice the Federal Government on appropriate strategies for dealing with
them.
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ix. To establish firm linkages with key segments of the Nigerian society and
ensure that its decisions enjoy the widest possible understanding and support.
(PPPRA, 2009:5).
Before proceeding to examining the requirements for fuel allocation in Nigeria, let
us examine the mandate - the petroleum support fund.
THE PETROLEUM SUPPORT FUND (PSF)
The PSF is a “pool of fund provided in the budget and contributed to by the three
tiers of government (Local Government Areas, States and Federal Government) to
stabilize the domestic prices of petroleum products against the volatility in the
international crude and products prices, to be a supplementation with the accruals during
the period of over-recovery; (over recovery here refers to the period at which the
Petroleum Products Price Regulatory Agency, (PPPRA) recommended ex-depot price is
higher than the landing cost of petroleum products)” (House of Representatives Ad-hoc
Committee, 2012:28; PPPRA, 2009:5). The PSF guidelines are aimed at ensuring
efficiency and prudence in the importation, distribution, marketing and availability of
petroleum products to Nigerians at Government regulated prices. These “PSF guidelines
are classified into principles, responsibilities of stakeholders/operators and eligibility for
drawing from the fund” (PPPRA, 2009:7).
PRINCIPLES:
1. Under-recovery shall apply when the Landing Cost of product based on import
parity principle is in excess of the approved PPPRA ex-depot price for the product.
In the case of NNPC, the subsidy shall be computed by deducting the ex-depot
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price, the PEF(M)B Allowance and the PPPRA Administrative charge from the
Landing Cost.
2. Payment from the Marketers on over-recovery into the Fund shall apply when the
Landing Cost of product based on import parity principle is below the approved
PPPRA ex-depot price for the product.
3. The Central Bank of Nigeria (CBN) shall be the custodian of the Fund, while the
PPPRA shall be vested with the authority to administer the Fund as spelt out in
this document.
4. Claims from/payment into the Fund shall be based on the duly verified shore tank
volume.
5. PPPRA shall determine the volume required for imports based on national
demand/supply gap and taking cognizance of local production in line with its
statutory mandate.
6. The PPPRA shall constantly liaise with the Oil Trading /Marketing Companies
and other relevant Stakeholders/Operators for the purpose of data collection,
verification, certification and updating of the downstream information Data Bank.
7. (i) All payments relating to over/under recovery shall be made through the Fund's
account domiciled in the CBN as approved by the Federal Ministry of Finance.
(ii) The PPPRA shall be responsible for compilation and verification of import
documents and computation of over-recovery/under-recovery due to each
Marketer within the prescribed timeframe in the Service Level Agreement as
contained in Appendix I in this Guidelines and submission of the same to the
Honorable Minister of Finance.
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(iii) The Federal Ministry of Finance, through the Office of the DG Budget and the
Office of the Accountant General of the Federation (OAGF) shall be responsible
for auditing, fund-sourcing and crediting the accounts of Marketers in line with the
Government e-payment policy.
8. (i) All claims from/payment into the Fund must conform to the objectives of the
PSF.
(ii) Payments to Marketers under the PSF Scheme shall be net of the applicable
PEF(M)B Bridging Allowance and the PPPRA Administrative charge and such
deductions shall be paid directly to the respective accounts of each of the two
Organizations by the Office of the Accountant General of the Federation.
9. Submission of PSF claims closes on the 20th of every month. All claims received
after the 20th of the month shall be treated in the next batch of the successive
month.
10. On receipt of verified documents from the Operators, payments shall be due not
later than 45 days.
RESPONSIBILITIES OF STAKEHOLDERS/OPERATORS:
A. Central Bank of Nigeria (CBN): The CBN as the financial regulatory authority shall:
1. Issue Statement of Account of the Fund to the PPPRA on monthly basis.
2. Issue FOREX to importers subject to the prevailing import procedures/guidelines of
CBN.
3. Manage the idle funds for security and maximum returns.
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4. Render to the PPPRA monthly disbursement of FOREX to petroleum products
importers.
5. Render to the PPPRA on monthly basis, the actual FOREX rates debited the
Marketers’ account by the commercial banks.
B. Oil Marketing/ Trading Companies (OMC's/TC`s) shall:
1. Import, supply and distribute petroleum products nationwide.
2. Comply with rules and regulations set by the PPPRA concerning products
scheduling, shipment to jetties, products transportation through pipeline
network/trucks/rail to storage depots and evacuation to retail outlets.
3. Submit on a monthly basis, data on products supply and distribution.
4. Allow PPPRA Operatives to monitor products movements from jetties to the
depots and from depots to retail outlets.
5. Furnish PPPRA with three (3) spiral-bound copies of the import documents
sequentially arranged as prescribed in the Checklist
C. Department of Petroleum Resources (DPR) shall:
1. Issue import permits OMC/TC which is valid for one year from the date of issue.
2. Verify/Confirm petroleum products specifications.
3. Enforce of stipulated price regime based on approved bench-mark prices in
collaboration with the PPPRA.
4. Oblige the PPPRA with necessary information and data relating to products
procurement, supply and distribution (both import and local productions).
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5. Collaborate with the PPPRA and PEF(M)B on intelligence monitoring to check
malpractices.
D. Petroleum Equalization Fund Management Board (PEF(M)B) shall:
1. Provide the PPPRA with data regularly on products distribution (local and
bridging).
2. Ensure bridged products are received and acknowledged at invoiced destinations
and report defaulting Operators to the PPPRA for appropriate action.
3. Collaborate with the PPPRA and DPR on intelligence monitoring to check
malpractices and report incidences to the PPPRA for necessary action.
E. Regulatory Authority (PPPRA) shall perform the following responsibilities in line
with its mandate:
1. Plan and programme the receipt and distribution of petroleum products to ensure
uninterrupted products availability in the country based on determined petroleum
products supply gaps.
2. Deploy PPPRA staff to monitor and verify data on products reception and
distribution at the jetties, refineries and depots nationwide.
3. Demand from refineries, monthly production volume on products basis and from
the Operators, data on products supply and distribution.
4. Maintain a reliable databank on the activities of the Fund and the industry.
5. Collaborate with DPR on adherence to products specification and HSE standards.
6. Collaborate with PEF(M)B and other Stakeholders on products movements to
ensure efficient products supply and distribution to every part of the country.
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7. Collaborate with CBN/FMF on data exchange, FOREX allocation and
reconciliation.
8. Embark on wide publicity and enlightenment programme to educate Stakeholders
and the public at large on the benefits of the initiative (Petroleum Support Fund).
9. Collaborate with the PEF(M)B and DPR on intelligence monitoring to check
malpractices and apply appropriate sanction to the defaulters.
10. Perform conciliatory and mediatory roles among Stakeholders/Operators.
11. Set regulations on holding of petroleum stocks and ensure compliance.
12. Security of Supply: Collaborate with the NNPC and other Marketers to release
their reserved stocks into the market in time of emergencies and supply gaps
arising from the inability of the Marketers in fulfilling their obligation on products
procurement and short fall in refinery production.
13. The PPPRA may from time to time review the PSF Guidelines in line with its
statutory mandate (PPPRA, 2009:9).
However, the guidelines for importation of fuel are of two types-MNOCs that want
to bring fuel in Nigeria and Nigerian Independent Marketers who are on the business of
fuel importation. For MNOCs, we have one standard requirement that must be met. They
are:
• The importing company must have a turnover of at least $5 billion, as evidenced in its
audited accounts for the previous year end OR it must have a minimum current credit
rating of BBB awarded by standard and poor: and
• The importing company must have a global presence: and
• A relationship with a refinery: and
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• Trading experience with Nigeria of a minimum of 4 years (NEITI, 2006:49).
For independent marketers, their guidelines have undergone three stages between
1999 and 2013. The first was published by PPPRA in 2006; second, in June 2009 and
finally, fresh guideline released by 2012 after the House of Representatives Probe. We
have to take them one after the other.
1. ELIGIBILITY FOR DRAWING FROM THE PETROLEUM SUPPORT FUND
PUBLISHED BY PPPRA IN 2006.
In line with the Federal Government pronouncement to stabilize petroleum
products prices for the year 2006, the first Executive Secretary E.D. Afiakurue put request
for the expression of interest thus: “marketers who wish to procure petroleum products
(Petrol & Kerosene) for local consumption under the PSF scheme are required to possess
the following:
� Evidence of registration with the Corporate Affairs Commission (CAC).
� Department of Petroleum Resources (DPR) import permits.
� Proof of Ownership of storage facilities with a minimum storage capacity of 5000
MT for the particular product as well as dispensing facilities (retail outlet
network).
� Ability to finance a minimum cargo size of 5000 MT of referenced product.
� Local and international experience in the industry (if any).
Marketers are to be guided by periodic benchmark prices evolved by the PPPRA
as well as other pronouncements by the Federal Government and those shall be the
reference prices for drawing from the PSF” (PPPRA, 2006).
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2. ELIGIBILITY FOR DRAWING FROM THE PSF AS AMENDED IN JUNE
AND PUBLISHED BY PPPRA IN 2009.
Oil Marketing/Trading Companies are expected to meet the Rules and Regulations
set by the PPPRA on the management/administration of the Petroleum Support Fund
(PSF) as follows:
1. Applicant must be an Oil Marketing/Trading Company registered in Nigeria with
the Corporate Affairs Commission (CAC) to conduct petroleum products
business,
2. Beneficiary/Claimant must possess the following:
i. Proof of Ownership or a valid through-put agreement of storage facility with
a minimum of 5,000 metric tons for the particular product. Ownership of
retail stations is an added advantage.
ii. Possession of a valid DPR import permit.
3. Having satisfied 1 and 2 above, an applicant shall submit application for
participation in the Scheme to the PPPRA.
4. Successful applicants shall sign an Agreement with the PPPRA to become a
participant under the Scheme.
5. Approval to import shall be expressly conveyed by the PPPRA to the Participant
Importer.
6. Beneficiary/Claimant must notify PPPRA within a minimum of three (3) days
ahead of cargo arrival in the country and furnish the PPPRA with the relevant
documents including copies of invoices, bills of lading, source of funding and
expected date of arrival for documentation.
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7. The product loading and arrival time must be within a maximum of 30 days and
must meet products specification by the DPR.
8. All approvals for importation are valid for a maximum of three months based on
the current PPPRA quarterly importation plan.
9. Deliveries must be made to depot locations approved by the DPR and witnessed
by PPPRA Operatives, External Auditors and the Industry Consultant
(Independent Inspectors).
10. All documents forwarded to the PPPRA must contain shore tank report duly
signed by PPPRA Representatives at discharge locations.
11. (i) All out-turn deliveries to approved locations must be through invoices at
approved ex-depot prices.
(ii). Marketers shall, render out-turn delivery returns which must contain the
invoiced ex-depot prices and volumes to the PPPRA as part of conditions for
continued participation in the Scheme (PPPRA, 2009:15-17).
The below Table 4.10 serves as PPPRA proposed payment to major/independent
marketers.
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Table 4.10 Petroleum Support Fund (PSF) Proposed Payment Schedule S/N TIME FRAME ACTIVITY COMMENT
1. 1st - 20th of the
month
Submission of complete
import documents to
PPPRA
Not counted as part of the
processing/payment time.
This is because liability of
submission of complete
import documents within the
period lies with marketers
and not with the government.
2. 21st -25th of the
Month
Data processing
computation by PPPRA
3. 26th of the month PPPRA forward
documents to the Ministry
of Finance
48 days payment agreement
starts counting
4. 27th -30th of the
month
Ministry of Finance
forward documents to the
Auditor
5 2 weeks (10 days) Auditing
6 2 weeks (10 days) Payment/HMF/AGF/CBN
Source: Adapted from PPPRA (2009:11). Revised Guideline for the administration of petroleum support fund (PSF), http://www.resourcedat.com/wp-content/uploads/2012psfguidelines.pdf, 01/05/2014.
Also, Table 4.11 provides a comprehensive checklist for importation of fuel as
released by PPPRA.
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Table 4.11: Checklist For Import Document
� Witness page
� PPPRA approval page
� Guarantee page
� Notification of nomination of vessel
� DPR import permit
� Marine insurance
� Form M
� Proforma invoice
� Bill Of lading
� Certificate of origin.
� Cargo manifest
� Ullage Report (port of origin)
� Certificate of quantity (load port)
� Certificate of quality (load port)
� Notice of readiness (load port)
� Vessels survey report after loading (mother vessel & shuttle vessels(if any)
� Vessels survey report before discharge (mother vessel and shuttle vessels (if
any)
� Time log of discharge
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� Vessel experience factor
� Tank inspection report
� Bunker survey report
� Cargo pumping log
� Letter of protest (if any)
� Notice of readiness at discharge port
� Transfer of Certificate
� Certificate of quantity at discharge port
� Certificate of quality at discharge port
� Shore tank report
� DPR vessel report
� Nigeria Customs Service clearance
� Nigeria Navy clearance
Source: Adapted from PPPRA (2009:12). Revised Guideline for the administration of petroleum support fund (PSF), http://www.resourcedat.com/wp-content/uploads/psfguidelines.pdf 04/11/2013.
Fig. 4.3 presents PSF institutional linkages starting from NNPC to PPPRA, then to
CBN. From DPR to PEF and other agencies in the Downstream Oil Industry.
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Figure 4.3: Petroleum Support Fund- Institutional Linkages
Source: Adapted from PPPRA (2009:13). Revised Guideline for the administration of Petroleum support fund (PSF), http://www.resourcedat.com/wp-content/uploads/psfguidelines.pdf. 01/11/2013.
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3. PPPRA ISSUES FRESH GUIDELINES FOR FUEL IMPORTATION,
PUBLISHED IN 2012
The PPPRA, through the then Executive Secretary, Reginald Stanley, rolled out a
fresh guidelines to regulate the importation of petroleum product into Nigeria. According
to him, all stakeholders are expected to conduct their businesses in compliance with global
best practices. These guidelines (PPPRA, 2012) include:
i. Allocation of import permit to importers will henceforth be based on
performance and capability.
ii. Import licenses will be issued to oil marketing companies owning depots with
the capacity to store products for distribution, while importers are only allowed
specific time frame for discharge of petroleum products.
iii. Oil marketers granted permit for the third quarters, but are unable to meet their
importation obligations are expected to take steps to do so before the end of
each year or forfeit the permits.
To ensure efficiency and transparency in the delivery of fuel in seaport, he
outlined these measures taken by PPPRA:
i. An international independent cargo inspectors system would be introduced and
charged with the inspection of every cargo of petroleum products imported into
the country to ensure efficiency and transparency.
ii. Establishment of a three –tire inspection system that would take cognizance of
the arrival of imported fuel volume at the port, the discharge volume and the
truck out volume; enforcement of daily opening and closing stock of all the
terminals as well as chain all Premium Motor Spirit (PMS) in-let discharge
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valves after completion of discharge, while the valves can only be opened
when the next cargo arrives.
iii. To sanction any importer found to have defaulted in its import obligations.
4.3 PREBENDAL POLITICS AND ALLOCATION OF FUEL IMPOR T
LICENSES IN NIGERIA
Prebendalism as a concept comes from the world prebend. A prebend is “an office
of state, typical of feudal Europe and China, which an individual procures either through
examinations or as a reward for loyal service to a Lord or ruler” (Joseph, 1999:55-56).
The above point has been clarified further by Weber who stated thus:
We wish to speak of prebends and of a ‘prebendal’ organization of office, wherever the Lord assigns to the official rent payments for life, payments which are somehow fixed to objects or which are essentially economic usufruct from lands or other sources. They must be compensations for the fulfillment of actual or fictitious office duties; they are goods permanently set aside for the economic assurance of the office (Weber, 1948:207).
In line with the above conceptualization, prebendalism in the Nigerian context
describes the way in which a person elected to or employed by the state uses that office to
amass wealth, and further distribute public jobs or special favours in exchange for
political or electoral support. The concept depicts the notion that those in power either
elected or by appointment are entitled to the “spoils of office” that come with the control
and power of government spending. Thus, the concept specifically refers to the parochial
disbursement of public offices and state resources in a patron-client mode often using
ethnic and primordial sentiments, support and solidarity. It also refers to the relationships
between the patrons (higher-up individuals) and the client (subordinate individuals) that
benefit from the relationship as political favours are given by the patron to the client in
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return for support from the client. Thus, in Nigeria, power is exercised through patron-
client networks without much reference to the formal structure of governance or to the
Nigerian people, to whom the political elite has never been accountable. As noted by
(Olarinmoye, 2008:30), “the redistribution ‘art’ is central to the legitimizing and
accumulation of political capital that permits the continued access to state resources. The
elite are known for excelling in the art of redistribution”. Therefore, politics in Nigeria, as
elsewhere in Africa, is an exercise in the art of redistribution, dominated by the elite
(Ugochukwu, 2004; Daloz, 2003).
Thus, prebendal politics encourages politicians to divert resources through
manipulation of policies, programs and projects of the state in order to broaden their
political base. This is actually the case of Nigeria where the political class manipulates the
structures of the state to amass wealth for themselves and their cronies. As demonstrated
in the proceeding section, allocation of fuel import licenses has proved to be an exercise to
ingratiate political loyalists, cronies, relatives and close associates of power of the day.
The above fact has been acknowledged by different scholars. Prominent among them is
Joseph (1991), who interpreted prebendalism as a pattern of Nigeria politics. For him,
prebendalism denotes a form of patron-clientelism in Nigeria whereby state officeholders
appropriate and use public resources to generate private material benefits for themselves
and their constituents. According to him, the term entails “the patterns of political
behaviour which reflects as their justifying principle that the offices of the existing state
may be competed for and then utilized for the personal benefit of office-holders as well as
that of their reference or support group” (Joseph, 1991:63). In this context, the ‘state’ is
regarded as a ‘congeries of offices susceptible to individual cum communal
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appropriation’. The statutory purposes of such offices become a “matter of secondary
concern however, much that purposes might have been codified in law or other
regulations or even periodically cited during competition to fill them” (Joseph, 1991:55).
This suggests that both the formal and informal structures of governance that are
inevitably in apposition nevertheless buoy the system that allows “spoils politics”
insecurity, and corruption as part of the institutionalized means of governance (Allen,
1999:372, Smith, 2007).
In a related development, Omoweh (2006:49) corroborated the above statement by
contending that:
Patronage has ruled the operations of both the up and downstream sectors of the country’s oil and gas industry since 1960 when Nigeria gained political independence… virtually all the nation’s past and present heads of state and presidents have been indicted as major players either directly or by proxy in the country’s energy sector. They have, both when in office and after retirements, continued to maintain strong links with the oil sector, deciding who gets which oil blocs and its renewal, licenses to lift crude oil and refined petroleum products, among others.
Commenting on how fuel importing licenses are distributed arbitrarily to Nigerians
and non-Nigerians by Nigerian ruling elites to consolidate their hold on power, and thus,
acquire many advantages over and above others, the National Mirror of January 17th 2012
reported that:
The Petroleum Products Pricing and Regulatory Agency (PPPRA), that administer the fuel import regime with the Nigerian National Petroleum Corporation (NNPC), gave some influential people, including a United States-based jeweler known for designing expensive wristwatches for ministers, allocations to import fuel as gifts from the Federal Government to compensate them for their political support. This confirmed that the unusually high level of political interference in the process of allocating fuel import contracts was largely responsible for the abuses that had resulted in huge losses to the NNPC, investigations reveals. Findings showed that portfolio contractors, who did not have retails or storage facilities, were in some cases given priority over well-
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known marketing companies in the allocation process while some were smuggled into the quarterly fuel import programmes or their names replaced with pre-qualified importers.
The House of Representatives Ad-hoc Committee Report (2012:107) was more
pointed in their criticism of the politics of fuel importing licenses:
It appears that the implementation guidelines of the PSF scheme was circumvented to the extent that this vital platform of independent monitors or industry consultants was deliberately supplanted or side lined. The committee could not confirm the presence or the identity or even, the existence of this category of participants under the PSF scheme.
This confirmed the manipulation of policy process (prebendalism) which is
associated with allocation of fuel import licenses in Nigeria. It is therefore understandable
why transparency would undermine patron-client networks in Nigeria, such that the
successive leaderships in Nigeria since 1999 have always paid lip-service to ensuring that
there is a level playing ground in the allocation of fuel import licenses in Nigeria. Even
when the PPPRA wants to do the right thing, contrary orders must come from the top. In
fact, allocation of fuel import licenses, according to PPPRA unanimous (2014: Interview),
are based on clientelism and prebendalism. This was further attested to by KPMG
professional services (2011:10) who stated on the report how “the PPPRA was ordered by
the NNPC to pay importers without any verification of vouchers submitted by them. Thus,
the PPPRA –a regulatory agency is being regulated by NNPC”.
All this is an attempt by the ruling class to consolidate power through patron-client
politics. This patron-client mentality has caused the state to lose a lot of resources that
would have been channeled to the wellbeing of the populace and governance instead of
settling a political client. For instance, the money lost as a result of prebendal allocation of
import licenses, following the parliamentary probe between 1999-2012 has caused Nigeria
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billions of dollars. According to Ploch (2013:9), “public scrutiny of the programme has
since increased – in mid 2012, a legislative inquiry revealed that an estimated $7 billion
allocated for the subsidy may have been misappropriated. This complicity involves
various agencies and government officials who colluded with certain marketers to short-
change Nigerians”.
Therefore, the deeply entrenched culture of domestic capitalist accumulation
through the post-colonial politics of prebendalism, have combined to become the
dominant and defining characteristics of the Nigerian state, with successive governments
mismanaging the allocation of fuel products which they award indiscriminately. The
patron-client network makes the state officials to ignore or water down the rules and
regulations of PSF scheme to satisfy private and prebendal ethno-regional interest such as
cronies, brothers, friends and stakeholders. The tables – 4.12, 4.13, 4.14, 4.15 and 4.16
give a bird’s eye view of how the PSF scheme was watered down to accommodate
patronage distribution of special favours through fuel importing licenses in exchange for
political or electoral support.
Table 4.12: Marketers not registered with PPPRA before they got first allocation for
product supplies.
S/N Names of Marketers Date of Registration With PPPRA
Date of 1st
Allocation 1 Anosyke Group of Companies 24 th Jan. 20 11 18 th Jan.2011
2 Brila Energy Ltd I5 th Oct. 2010 8th Oct. 20 10
3 Cadees Oil and Gas Ltd 8 th April 20 11 9 th Feb.2011
4 Ceoti Ltd 26 th Jan.2011 18 th Jan.2011
5 Downstream Energy Source 15th Oct. 20 10 8th Oct. 20 10
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6 Duport Marine 5 th Nov.2010 8 th Oct.2010
7 Eco-Regen Ltd 20th Jan.2011 18 th Jan.2010
8 Frad.ro 20th Jan.2011 18th Jan. 2010
9 Fresh Energy Ltd 5th Aug. 2011 2nd Aug. 2011
10 Linetrale Oil 1st Feb. 20 11 30 th Dec.2010
11 Lingo Oil and Gas Company 15th Oct. 20 10 8th Oct. 2010
12 Lottoj Oil and Gas Ltd 12 th Aug. 20 11 18 th Dec. 2009
13 Menol Oil and Gas Ltd 28th Jan. 20 11 18 th Dec. 2009
14 Naticel Petroleum Ltd 1 0 th Dec, 20 10 10 th Aug. 20 10
15 Oakfield Synergy Network Ltd 5th Aug. 20 11 2nd Aug. 2011
16 Oilbath Nig Limited 4th Aug. 20 11 2nd Aug. 20 11
17 Rocky Energy Ltd 27 th.201J 1st Jan. 2011
18 Prudent Energy and Service Ltd 12 th Aug. 20 11 2nd Aug.2011
19 Spog Petrochemicals Ltd 23rd June 20 10 4th June 20 10
20 Yanaty Petrochemicals Nig Ltd 15th Oct. 20 10 8 th Oct. 2010
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:149), http://www.africa- confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
Data in table 4.12 shows how marketers registration with PPPRA which is a pre-
condition for the agency’s documentation and appraisal of marketers legal status with
respect to incorporation and compliance with the provision of Companies and Allied
Matters Act of 1990, among others, was jettisoned by PPPRA to accommodate private
economic interest of the ruling class. For instance, while Anosyke Group of Companies
registered with PPPRA on 24th of January 2011 got their first allocation of fuel product
supplies on 18th of January, 2011; Brila Energy Ltd registered with PPPRA on 15th
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October 2010 and got their 1st allocation on 8 October 2010; Cadees Oil and Gas Ltd
registered on 8th April 2011 and got their first allocation on 9th February 2011. Likewise,
others from number 4 to 20. All these show that they have gotten their allocation to import
before they were registered. The implication of this is that due process was not followed
in allocating petroleum product supply by PPPRA. This is a clear indication of
manipulation of policy process through patronage.
Table 4.13: Marketers that did not make first application to PPPRA for supplies before they got their first allocation No Names of Marketers Date of 1st
Allocation Date of First Application
to PPPRA Quantity Allocated
1 Cadees Oil & Gas Ltd 9th February 20 11 13th June 20 11 15,000MT
2 Lottoj Oil & Gas Ltd 18th December 2009 11th May 2011 10,000MT
3 Mob Integrated Services Ltd
8th October 2008 20th April 20 10 I5,000MT
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:150), http://www.africa- confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
Statistics in table 4.13 suggests that the above marketers (Cadees Oil and Gas Ltd;
Lottoj Oil and Gas Ltd and Mob Integrated Services Ltd) were found not to have made
any application to PPPRA for supplies of petroleum products before they got their first
allocation. For a valid contract, there must be an offer and acceptance. This implies that
PSF guidelines were not followed in allocating petroleum products to be supplied.
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Table 4.14: Marketers that never applied to PPPRA at all but were given allocation
to supply products.
Qty Litres
Amount N
a. Nasaman Oil Services Ltd 49,691,912 3,411,253,193
b. Sifax Oil & Gas Co. Ltd 42,928,602 3,589,063,041
c. Conoil 46,664,121 3,027,526,589
d. AX Energy Ltd 20,048,627 1,471,969,643
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:150-151), http://www.africa- confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
Table 4.14 contains a breakdown of marketers that never applied at all to PPPRA
but were allocated fuel to supply. Under the basic rules of contract, PPPRA and the
marketers are in blatant breach of the guidelines, ostensibly to satisfy private economic
interest. This has shown how the Nigerian ruling elites try to satisfy their relatives and
political associates.
Table 4.15: Marketers that did not obtain forex but claimed to have imported
petroleum products based on which they have collected subsidy.
S/N Names of Marketers 2010 subsidy As per Accountant General
N
2011 subsidy as per Accountant General
N
1 Bovas & Company - 10,992,583,784.50
2 Brila Energy Ltd - 963,796,199.85
3 Ceoti Ltd - 2,944,681,700.17
4 Eco - Regen Ltd - 1,988,141,091.10
5 Eurafic Oil & Coastal Services Ltd - 3,189,069,707.43
6 First Deep Water Discovery 257,396,183.68 4,061,148,533.35
7 Knight Bridge 1,685,869,439.29 2,706,273,858.82
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8 Mobil Oil Nig. Pic 3,991,754,441.53 3,060,232335.26
9 Nadabo Energy Ltd 247,184,147.50 2,660,902,801.58
10 Ocean Energy Trading & Services Ltd - 1,778,180,051.20
11 Origin Oil & Gas Ltd - 2,703,454,122.11
12 Somerset Energy Services 959,012,939.72 2,056,208,548.22
13 Sulphur-Stream Ltd - 4,758,693,052.00
14 Swift Oil - 5,062,403,548.18
15 Frapro International Ltd - 1,486,837,448.90
16 Fradro International Ltd - 1,148,792,391.50
17 Vivendi Energy Nig Ltd - 1,095,790,255.02
Total 7,141,217,151.72 55,019,978,401.14
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:147-148), http://www.africa-confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
Analysis of marketers that did not obtain forex as contained in table 4.15 indicates
that some marketers may have utilized their offshore funds to import petroleum products
without purchasing forex from CBN even though by procedure, they were supposed to
have obtained Form “M”, or forex as a pre-condition to import petroleum products. This
shows that the PSF guidelines have been jettisoned for patronage purposes.
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Table 4.16: Those who obtained Forex but did not import petroleum products S/N Names of Marketers 2010 $ 2011 $
1
2
3
4
5
6
7
8 9
10
11
12
13
14
15
16
Business Ventures Nig Ltd
East Horizon Gas Co. Ltd
Emadeb Energy
Pokat Nig. Ltd.
Synopsis Enterprises Ltd
Zenon Pet & Gas Ltd.
Carnival Energy Oil ltd
Downlines Ice Energy Petroleum
Trading Ltd
Index Petroleum Africa
Ronad Oil & Gas W/A
Serene Greenfield Ltd
Supreme & Mitchelles
Tridax Energy Ltd
Zamson Global Res.
Total
22,927,339.96
20,735,910.81
6,606,094.30
3,147,956.19
51,449,977.47
232,975,385.13
337,842,663.86
51,089.57 4,756,274.94 2,131,166.32
6,438,849.64
4,813,272.00
4,813,360.75
16,947,000.00
15,900,000.00
8,916,750.00
64,767,763.22
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:141), http://www.africa- confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
These marketers in table 4.16 were found to have obtained forex in 2009, 2010,
and 2011, but did not import fuel. They were not dragged to relevant anti-corruption
agencies for prosecution. They might have exploited the subsidy regime, because of
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patronage, to engage in money laundering activities. The requirement for fuel allocation
in Nigeria is what the next section addresses.
4.4 FUEL IMPORTERS AND LACK OF STORAGE FACILITIES
The contract for the importation of fuel since 1971 Nigeria started managing her
oil resources had been under the auspices of National Oil Company (NOC) and NNPC’s
precursor, who imports fuel at the international price and uses its subsidiary, Pipeline and
Products Marketing Company (PPMC) for overall distribution of the products in Nigeria
being supported by MNOCs. But, following the return to civilian rule in 1999 and the
consequent introduction of PSF fund under the control of PPPRA in 2006, the monopoly
of NNPC was abolished. The PPPRA introduced eligibility for drawing from PSF scheme.
This eligibility has undergone a lot of modifications.
However, with particular reference to having storage facilities, the eligibility made
it compulsory for prospective importers in 2006 and 2012, while in 2009, it allows for a
throughput agreement with any other company. Let us highlight briefly these pieces of
legislation for clearer understanding.
In 2006, eligibility for drawing from PSF guidelines published by PPPRA in 2006,
among other things, stated that “proof of ownership of storage facilities with a minimum
storage capacity of 5000 metric tons (MT) for the particular product as well as dispensing
facilities (retail outlet network)” (PPPRA, 2006). This scheme continued smoothly with
emphasis on having minimum storage facilities of 5000MT for prospective importers as a
conditio-sina-qua-none.
Unfortunately, in 2009, the eligibility for drawing from PSF Scheme incorporated
in number 2, sub-section (i) that “proof of ownership or a valid throughput agreement of
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storage facility with a minimum of 5,000MT for the particular product, ownership of
retail stations is an added advantage” (PPPRA, 2009:15). With the addition of this clause,
‘a valid through put agreement’, corruption started creeping in the PSF Scheme. Different
brief case marketers with connection to the powers of the day started finding their way
into fuel importation business with no storage facilities. This fact was attested to by the
Executive Secretary of Major Oil Markets Association of Nigeria, Thomas Olawore, who
stated that:
At inception, participating under the PSF was limited to marketing companies that owned storage of minimum 5,000 metric tons and a network of petrol stations/retail outfits. The PSF was to be funded by contribution of the three tiers of government during times of under recovery and by funds contributed by the participating marketing companies during periods of over recovery. Unfortunately, a change in the guidelines of the PSF in particular number 2, subsection(i) of 2009, allowed companies with nothing more than a throughput agreement to operate under PSF, this saw the emergence of ‘briefcase’ companies (with no asset, no accountability) in the PSF Scheme (Olawore, 2012:12).
Ostensibly, the number of fuel importers increased from “6 in 2006 to 10 in 2007,
19 in 2008 and 140 in 2011” (HRACR, 2012:4). The number became too much to control
that the administration of PSF guidelines was jettisoned by PPPRA. Some fuel importers
without storage facilities and had no throughput agreement participated in the scheme.
Former Secretary, PPPRA, Mr. Reginald Stanley, aptly captured the consequences of this
ballooned number of fuel importers on the administration of PSF scheme thus:
It is a fact that some of these participants are just brief case marketers, with no storage facilities. In 2006 when we started this exercise, only three major marketers and the NNPC and NIPCO Plc Participated and the whole country was wet with products. Five major marketers, two independent marketers, NNPC and NIPCO imported products in 2007 and there was no crisis. There was no incident in 2008 when 17 independent marketers participated. In 2009, the list grew to include 24 independent marketers without any allegation of fraud. But we started to
157
hear stories when more participants came on board in 2010 and 2011 and the figures were on the high side, with over 100 marketers claiming to be importers (Alike and Chima, 2012:5).
The KPMG professional services and the House of Representatives probes opened
up the eyes of Nigerians on how the ruling class politicizes such important condition as
storage facilities through PPPRA, to apportioned to themselves the largesse that trickles
down from the importation of fuel. Table 4.17 contains names of fuel importers, as
exposed by the fuel related probes, with no storage facility and had no throughput-
agreement with any depot, yet participated in the PSF scheme. Under the PPPRA
guidelines as enumerated from pages 113 to 128, no marketer is allowed to participate in
the PSF regime except the marketer either has a Tank-farm (Storage facility) or has
agreement with other Depot. This is to ensure that the imported products are discharged
into an identifiable storage facility before truck-out. Any importer/marketer that did not
satisfy this condition cannot be said to have brought petroleum product that can legally
qualify for subsidy.
Table 4.17: Marketers with no Tank-Farm, no through-put Agreement with any depot but claimed to have discharged products.
Qty Litres
Amount N
Lingo Oil & Gas Company Ltd 13,939,286 1,201,297,922
Nadabo Energy Ltd 40,608,289 2,660,902,801
Nasaman Oil Services Ltd 49,691,912 3,441,253,193
Prudent Energy & Services Ltd 18,318,267 1,360,898,638
Source: Adapted from House of Representatives Ad-hoc Committee Report, (2012:151-152), http://www.africa-
confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
There were also fuel importers who merely obtained through-put agreement
probably to evade security agencies or to have their relevant papers to claim subsidy.
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Information in Table 4.18 points to the fact that these marketers never utilized the
through-put agreement, but claimed subsidy money. How can the regulatory agencies
identify whether they imported fuel. All supplies claimed to have been made by the below
marketers (1 to 12) were adjudged irregular and unsustainable. The relevant subsidy
payment received has not been legally earned.
Table 4.18: Marketers with no Tank-Farm, had through –put Agreement but not confirmed to have utilized same, but claimed to have supplied products under PSF
S/N NAMES OF MARKETERS SUPPLIES CLAIMED BUT UNCONFIRMED
2010 &2011
DATE OF FIRST THRU-
PUT
SUBSIDY CLAIMED
LITRES N/A N 1. DOWNSTREAM ENERGY
SOURCES 39,341,145 N/A 2,9471,780,261
2. DUPORT MARINE 47,374,819 N/A 3,555,127,358
3. ECO- REGEN LTD 38,060916 N/A 3,339,101,218
4. IMAD OIL AND GAS 40,621,597 N/A 2,701,002,852
5. SETANA ENERGY LTD 44,833,464 N/A 2,791,264,070
6. RYDEN OIL TRADING COM 6,033,043 N/A 451,150,983
7. SOSOMERSET ENERGY 39,649,669 N/A 2,172,206,037
8. SULPHUR STREAMS LTD 55,281,456 N/A 4,758,693,054
9. SWIFT OIL 66,649,190 N/A 5,062,403,555
10. TECHNO OIL LTD 6,137,738 N/A 547,179,342
11. TONIQUE OIL SERVICES LTD 65,055,054 N/A 3,827,112,622
12. VALCORE ENERGY LTD 59,270,240 N/A 5,177,393,607
TOTAL 508,308,331 37,330,414,959
Source: Adapted from House of Representatives Ad-hoc Committee Report, (2012: 153), http://www.africa- confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014
159
Table 4.18 automatically amounts to having no storage facilities because the above
marketers just try to have evidence of storage facilities to perpetuate their fraud. No
wonder, the HRACR (2012:153), observed that “all supplies claimed to have been made
by the marketers identified under this category (Table 4.18) were adjudged irregular and
unsustainable. The relevant subsidy payments received, having not been legally earned,
should be refunded”. These categories of marketers, according to PPPRA Secretary have
been delisted from importing fuel in Nigeria. According to him, “we have been able to
push 97 briefcase importers from the downstream sector. If you want to participate in the
downstream sector, you must have assets and be able to prove that you are employing
Nigerians” (Otedola, 2013:1). However, the comprehensive list of importers with or
without storage facilities are documented in Appendix III.
From the foregoing, it is evident that what has been playing out in the fuel
importation and development of refineries in Nigeria can be traced to British colonial rule
in Nigeria. Just as the colonial state used the instrument of the state for primitive
accumulation and transfer of resources to the metropolis, likewise, the current Nigerian
state compradors (emergent ruling class) reproduced the neo-colonial character of the state
by using the state power for primitive capital accumulation through the issue of fuel
importing licenses to those close to the corridor of power. These fuel importing licenses
cut across the ruling class, that is why they are unrepentantly corrupt and sabotage every
effort to attract investors in the downstream oil sector. Interestingly, while the military
administration before 1999 restricted to NNPC the importation of fuel under the control of
few military elites and their political cohorts who used top executives of the oil agency for
primitive accumulation, the civilian administration from 1999 till present used their
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political loyalists and relations for primitive accumulation. As elaborated by Ikelegbe
(2005:111), being “a neo-colonial capitalist peripheral economy, the state remained
controlled by a dependent comprador ruling class, which is accumulative, parasitic,
violent, exploitative, corrupt, profligate and unproductive…”
In fact, the petroleum sector exhibits the characteristics of Pork-barrel sector in
which those who have captured power (state officials) dispense fuel import licenses
arbitrarily in a neo-patrimonial manner, not minding the cost to the sector and the state.
Although it is difficult to ascertain for sure the extent to which political intrigues and
clientelistic inclinations of state officials influenced all the fuel importing licenses
allocated between 2006 and 2011, it is obvious, however, that fuel importing licenses have
become perks of office distributed not only to the ruling elite coalitions, but also to their
cronies. This underpins why the four (4) state –owned refineries have been in a moribund
state despite millions of dollars spent on TAM since 1999. This interplay of politics and
economics helped the dominant class to keep the Nigerian downstream oil sector
unproductive and investors unfriendly, while at the same time making fuel importing
businesses attractive and lucrative. That explains why Nigeria has to depend almost
entirely on importation of fuel since 1999. To make matters worse, Nigerian laws,
constitutions, Economic and Financial Crime Commission (EFCC) and Independent
Corrupt Practices and other related offences Commission (ICPC) are ineffectual due to
politicization. That explains why there are weak policy implementations due to class
interests and power relation factors. As such, the ruling class uses these laws and
institutions to further their political and economic interests.
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Furthermore, the recent unfolding in the world economy is gradually destroying
the lucrative business of the Nigerian dominant class in crude oil exportation and fuel
importation respectively. The shale gas of United States entrance into the world oil market
with heavy crude oil production capacity has forced the prices of crude oil down in the
world market with its corresponding effects on prices of fuel. Even the OPEC is confused
on how to fix the prices of crude oil in the international market. Worse still, most of the
countries in Africa such as Uganda, Chad and Mozambique have discovered oil in large
quantities and this will be very difficult to regulate by OPEC. Also, recent statistics have
shown that Nigeria produces only about three percent of world’s supply of oil. Russia
produces about 12 percent, the United States produces about eight percent and Saudi
Arabia produces about 13 per cent (Akinadewo, 2015:55). The effects of all these are
quite simple, since price of crude oil is very low, fuel prices will also be low. This has
started to reflect in developed countries like U.S.A and some other Western Countries.
This implies that subsequently crude oil and fuel importing business will no longer be a
lucrative business. Therefore, Nigeria should deregulate the downstream oil sector as it is
in Canada where the 16 functional refineries are privately owned. In fact, there is no
alternative to deregulation. Technology will take over to rule the world economy. In fact,
productive technology will be the driver of the world economy. In this light, the study
accepts the hypothesis that allocation of fuel importing licenses to independent marketers
discouraged investors such as Femi Otedola, CEO of Zenon Petroleum and Gas, MNOCs
active in the upstream oil sectors, Chinese and Indian Firms, 18 Local Nigerian
Companies and stalling of Joint Venture Agreement between US investors and Nigerian
Joint Ventures Group in the development of refineries in Nigeria.
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CHAPTER FIVE
FUEL IMPORTATION PROBES AND THE CHALLENGES OF REFIN ERY
DEVELOPMENT IN NIGERIA
5.0 INTRODUCTION
This chapter seeks to test the hypothesis which states that fuel importation probes
failed to adequately define the challenges hindering the development of refineries in
Nigeria. The study unraveled the political manipulation of the Nigerian legislatures by the
dominant class who thrives on globalization that provides alternative in a fuel-import
dependent economy. The result is that fuel importation probes failed to adequately expose
the challenges hindering the development of refineries in Nigeria. This is examplified, as
clearly and distinctly shown in the below pages, by the nature and dimensions of the
probes; the identified challenges to new refineries development; the structural challenges
to new refineries development; and the law enforcement agencies and prosecution of oil
marketers/companies on refined petroleum product.
5.1 NATURE AND DIMENSIONS OF FUEL IMPORTATION PR OBES IN
NIGERIA, 1999-2013
The activities of NNPC spanning from its inception in April 1977 to 1998 under
the military/civilian era were shrouded in mystery as far as fuel importation related probes
were concerned. Probes were conducted, but nobody hears of the outcome. The above
view was succinctly attested to by Nwokeji (2007:3) who argued that:
With several probe panel reports over the years almost never made public, evidence of corruption and mismanagement seemingly everywhere, and the sporadic polemical discourse, the dominant picture of the corporation in the media and popular imagination is an arena where personalities and interest groups simply collaborate and clash over bread and butter.
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Even the so-called Nigerian Extractive Industries Transparency Initiative (NEITI),
which was established in February 2004 by Former President Olusegun Obasanjo’s
Administration and mandated by law to promote transparency and accountability in the
management of Nigeria’s oil, gas and mining revenues, falls short of current expectation
of the citizens. NEITI reports (1999-2004; 2006-2008 and 2009-2011) have been alleged
to protect the integrity of the powers of the day and have grown accustomed of setting one
oil agency against another.
It was in 2010 that the administration of President Goodluck Jonathan officially
directed a reputable firm, KPMG professional services, to examine the activities of NNPC.
Hence, NNPC was being examined for the first time. The above assertion was
corroborated by a Human Right Activist, Femi Falana (2010:16-17), when he stated, inter
alia:
That NNPC is being examined for the first time since 1999, the place was untouchable completely. This was how KPMG professional services were brought in.
The KPMG professional services revelations on NNPC, which has been
on the public domain, has been startling. They include the following:
i. Many fuel importers were not on the approved pre-qualification list;
ii. The NNPC refused to use its storage facilities of 18,000 cubic metres were in
good condition. Thus, for five years the NNPC paid colossally to third parties
through leasing;
iii. Whereas payment for import of petroleum products was to be effected within
45 days of the submission of notice of readiness, nor, this was delayed for
several months, leading to payment of huge interests;
iv. The Federation Account is shortchanged by NNPC;
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v. The NNPC uses foreign exchange rates that are lower than the rates fixed by
the CBN;
vi. The sum of $196 million at an average of $6.6million was paid on imported
fuel products between 2008 and 2010;
vii. The over deductions made in 2007, 2008 and 2009 totalled N35 billion;
viii. The PPPRA was ordered by the NNPC to pay importers without any
verification of vouchers submitted by them. Thus, the PPPRA- a regulatory
agency – is being regulated by NNPC; and
ix. The two external auditors engaged by the Federal Government have been
collecting billions of naira as professional fees for covering up the grand fraud
in the fuel importation scam (KPMG, 2010: 1-40).
Another probe carried out (2009-2011) by the House of Representatives Ad-hoc
Committee tagged “Resolution No. (HR.1/2012)”, unrevealed so many lapses which
militated against effective administration of the fuel importation in Nigeria. According to
HRACR (2012:5),
We found out that the importation of fuel (subsidy), as operated between the period under review (2009 and 2011), were fraught with endemic corruption and entrenched inefficiency. Much of the amount claimed to have been paid as subsidy was actually not for consumed PMS. Government officials made nonsense of the PSF guidelines due mainly to sleaze and, in some other cases incompetence.
Thus, the whole process was marred by corruption and inefficiency as PPPRA
admitted all manner of people in the name of importers. For instance, “from 2000-2011,
the rising influence of the marketers increased drastically from the initial figure of six (6)
in 2006, 36 in 2007, 49 in 2009 and 140 in 2011” (HRACR, 2012:75), which gave room
for all manner of shady deals such as smuggling of refined products to neighboring
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countries, the over invoicing of imported fuel, inadequate monitoring of crude oil sales by
NNPC, and the billing of the Nigerian nation for product not supplied (The Guardian
Editorial, 2012:14). The salient aspects of the report, include among other things;
• The revelation of rot in importation of fuel through subsidy; • Says 35 firms collected allocation without registration;
• Panel asks NNPC, PPPRA, marketers to refund N1.1 trillion;
• Queries national oil corporation’s solvency;
• Indicts offices of budget, Accountant General;
• Blacklist three audit firms; wants PPPRA’s ex-scribe prosecuted;
• Seeks two Ministers of Petroleum Resources Prosecution (HRACR, 2012:1-205).
Finally, the Committee recommended the refund of N1.067 trillion to the federal
purse. The NNPC’s share of this money is N310,414,963,613 for kerosene subsidy. It
gave the breakdown simply as:
• NNPC (above PPPRA recommendation) N285,098,000,000.00;
• NNPC (self–discount) N108,648,000,000;
• Marketers (total violations of Petroleum Support Fund (PSF) N8,664, 352,554;
• Companies that refused to appear before the panel N41,936,140,005.31; and
• PPPRA’s excess payment to self- N312,279,000,000 bring the total money stolen
by the agencies and others to 1,067,040,466,171.31 (HRACR, 2012:1-205).
5.2 LAW ENFORCEMENT AGENCIES AND PROSECUTION OF OIL
MARKETERS/ COMPANIES ON FUEL FRAUD
Following the report of the House Representatives Ad-hoc Committee tagged
Resolution No (HR.1/2012)on fuel subsidy probe, submitted to the House of
Representatives on Wednesday 18th April 2012, which indicted seventy one (71)
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marketers as can be seen in (Table 5.1) of various criminal acts ranging from over-
invoicing, diversion of products and round-tripping, Nigerians at home and abroad raised
alarm calling on the President and different anti-corruption agencies to immediately
initiate criminal proceedings. The President (Goodluck Jonathan) immediately swung into
action on 23rd May, 2012 by directing the Economic and Financial Crime Commission
(EFCC) to launch a criminal investigation based on the findings in the document and
prosecute those found culpable of wrong doing. In the words of the President through the
Attorney General of the Federation (AGF), he said:
There would neither be sacred cows nor would the Federal Government prosecute anybody against whom there was no evidence of wrongdoing…N1.7 trillion that was frittered away by dubious importers of fuel would help the EFCC in its investigations to ensure that those who ran foul of the law of the land would be brought to book (Ogbu, 2012:1).
Table 5.1 Fuel importers and amount to be refunded
S/No Name of Marketers Volume deductible Litres
Subsidy Refundable N
1 NNPC
2. Acorn Pic 140,894,149.00 8,514,900,513.00
3 Alminnur Resources Ltd 46,918,888.00 2,543,800,931.00
4 Anosyke Group of Companies Ltd 15,769,795.00 1,318,443,535.00
5 Ascon Oil & Gas Company 64,745,352.00 4,451,932,090.00
6 Avant Garde Energy 19,470,988.00 1,154,824,298.00
7 A-Z Petroleum 130,721532.00 8,065,557,648.00
8 Cah Resources Association Ltd 323,005.00 24,206,727.00
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9 Channel Oil & Petroleum Ltd 28,966,976.00 622,518,071.00
10 Crust Energy Ltd 13,301,936.00 1,192,651,581.00
11 Downstream Energy Source Ltd 39,341,145.00 2,947,780,261.00
12 Dozzy Oil and Gas Ltd 19,081,051.00 1,587,298,801.00
13 Duport Marine Ltd 47,374,819.00 3,555,127,358.00
14 Eco-Regen Ltd 38,060,916.00 3,339,101,218.00
15 Eurafic Oil & Coastal Services Ltd 42,442,180.00 3,868,147,024.00
16 First Deep Water Discovery Ltd 12,244,946.00 932,207,739.00
17 Fradro International Ltd 45,808,707.00 3,661,643,268.00
18 Fresh Synergy Ltd 19,350,390.00 1,417,029,059.00
19 Heyden Petroleum 3 40,441,260.00 3,345,455,733.00
20 IbafonOilLtd 20,134,910.00 1,474,479,459.00
21 Imad Oil & Gas Ltd 40,621,597.00 2,701,002,852.00
22 Integrated Oil & Gas 190,846361.00 1 3,252,055,429.00
23 integrated Resources Ltd 13,395,101.00 1,166,486,995.00
24 Ipman Investment Ltd 113,252,677.00 7338,589,178.00
25 Knightsbridge 62,705,372.00 1,685,869,439.00
26 Linetrale Oil Subly and Trading Company 18,015,790.00 1,213,903,930.00
27 Lingo Oil & Gas Company Ltd 13,939,286.00 1,201,297,922.00
28 Lloyds Energy Ltd 62,144,967.00 4,370,512,172.00
29 Lotto Oil & Gas Ltd 19,019,719.00 1,427,429,910.00
30 Maizube Petroleum Ltd 63,474,066.00 5309,407,903.00
31 Matrix Energy Oil & Gas Ltd 150,999,206.00 11,211,040,786.00
32 Menol Oil & Gas Ltd 65,226,3590) 4,333,348,489.00
33 Mob Integrated Services 71.716,695.00 5,066,786,851.00
34 Mobil Oil Nigeria Plc 47.223,884.00 2,660,968,597.00
35 Mut-Hass 12,895,905.00 1,102,084,041.00
36 Nadabo Energy Ltd 40.608,289.00 2,660.902,801.00
37 Nasaman Oil Services Ltd 49,691,912.00 3,441,253.193.00
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38 Naticel Petroleum Ltd 66,768,117.00 5,276,169,320.00
39 Nepal Oil & Gas Serv. Ltd 30,975,102.00 2,353,911,978.00
40 NIPCO Plc 126,161,617.00 7,838,353,057.00
41 Oakfield Synergy Network Ltd 13,798,245.00 988,920,219.00
42 Obat Oil & Petroleum Ltd 16,707541.00 1,321,256,085
43 Ocean Energy 18,999,680.00 1,778,180,051.00
44 Oilbath Nigeria Ltd 13,414,605,000 1,019,644,138.00
45 Ontario Nigeria Ltd 61.927,588.00 4,248,727, 148.00
46 Origin Oil & Gas Ltd 39,368,193.00 4,141,367,099.00
47 Petro trade Energy Ltd 12,088,200.00 908,805,371.00
48 P.O.N Specialised Services 17,985,850.00 1,413301,932
49 Phoenix Oil Company Limited 24,201,544.00 1,827,838,204.00
50 Prudent Energy & Services Ltd 18,318,267.00 1,360,898,638.00
51 rocky Energy Ltd 19,837,274.00 1,620,110,167.00
52 Ryden Oil Ltd
6,033,043.00
451,150,983.00
53 Sea Petroleum & Gas Co. Ltd 59,841,476.00 1,019,571,609.00
54 Sedec Energy Ltd 19,915,805.00 845,226,771.00
55 Setana Energy Ltd 44,833,464.00 2,791,264,070.00
56 Shorelink & Gas Services Ltd 63,767,177 5,056,009,002
57 Shield Petroleum Company Nigeria 26,409,962.00 1,502,198,610.00
58 Sifax Oil & Gas Company Ltd 42,928,502.00 3,589,063,041.00
59 Sirus Energy Resources Ltd 21,505,864.00 5,056,009,002.00
60 Somerset Energy Services Ltd 39,649,669.00 2,172,206,037.00
61 Stonebridge Oil Ltd 20,187,353.00 1,784,158,258.00
62 Sulphur Streams Ltd 55,281,456.00 4,758,693,054.00
63 Swift Oil Ltd 66,649,190.00 5,062,403,555.00
64 Taurus Oil & Gas Ltd 84,028,035.00 6,472,821,001.00
65 Techno Oil Ltd 6,137,738.00 547,179,34100
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Source: Adapted from House of Representatives Ad-hoc Committee Report (2012:168-171), http://www.africa-confidential.com/resources/1/uploads/documents/Farouk_Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
Also indicted by the committee’s report was NNPC to refund N310bn for subsidy
fund fraudulently claimed for kerosene, and another N285bn for fuel importation above
the recommendation of PPPRA, while the PPPRA is to refund N312 bn. “The former
Accountant General of the Federation approved the payment of N999m in 128 times
within 24 hours, totaling N127.8bn to beneficiaries yet to be disclosed”. These money has
to be refunded, the Ad-hoc committee insisted (HRACR, 2012:176).
This made the Acting Chairman of EFCC, Mr. Ibrahim Lamorde, to swing into
action for the prosecution of these fuel subsidy suspects. According to EFCC
spokesperson, Mr. Wilson Uwujaren, “EFCC has invited oil marketers to appear before it
with documents evidencing all transactions they did with the Petroleum Products Pricing
Regulatory Agency (PPPRA) and the Nigerian National Petroleum Corporation (NNPC)”
(Soniyi, 2012:2).
On Thursday July 26, 2012, the EFCC started prosecuting the first twenty (20)
suspects at Ikeja and Lagos Judicial Division respectively over $6.8 billion fuel subsidy
66 Tonique Oil Services Ltd 65,055,054.00 3,827,112,622.00
67 Top Oil & Gas Development Company Ltd
98,806,004.00 7,367,662,306.00
68 Total Nigeria Plc 38,269,427.00 1,931,075,306.00
69 Valcore Energy Ltd 113,176,522.00 8,709,548,082.00
70 Vivendi Energy Ltd 13,279,490.00 1,127,773,642.00
71 Yanaty Petrochemicals Nigeria Ltd 75,482,740.00 4,682,342,275.00
Total 3,262,960,225 230,184,605,691.00
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fraud. The suspects arraigned comprise six oil companies and 12 individuals. The
companies involved are: “Nasaman Oil Services, Eternal Oil And Gas Plc, Ontario Oil
and Gas Plc, Nadabo Energy Limited, Pacific Silver Line Limited, Axenergy Limited and
Fago Petroleum And Gas Limited. The 12 individuals arraigned are: Mamman Nasir Ali,
Christian Taylor, Mahmud Tukur, Ochonogor Alex, Walter Wagbatsoma, Adaoha Ugo-
Ngadi, Fakuade Babafemi Ebenezer, Jude Agube Abalaka, Abdulahi Alao and Oluwaseun
Ogunbanbo” (Abdulah et al 2012:1). “They face between 7 years and 20 years
imprisonment and to refund N304bn, which was alleged to have been illegally taken from
the federal government coffers contrary to section 8, punishable under section 107 of
Advance Fee Fraud and other Related Offences” (Abdulah, et al, 2012:1).
July 31st 2012 witnessed the arraignment of Oluwaseun Ogunbambo and Habila
Theck at the Ikeja High Court who are being prosecuted for N979.6 million fuel subsidy
fraud. After the preliminary hearing, the trial judge-Adeniyi Onigbanjo adjourned the case
to April 10th 2012. Since April till date, the case is on-going.
Similarly, at Ikeja High Court presided over by Justice Habeeb Abiru on October
5, 2012, the EFCC again arraigned another 10 oil subsidy suspects. They were: Anosyke
Group of Companies Ltd, Ifeanyi Anosike, Dell Energy Ltd, Emeka Chukwu and Ngozi
Ekeoma. Others were Downstream Energy Sources Ltd, Alhaji Adamu Aliyu Maula,
Rocky Energy Ltd, George Ogbonna and Emmanuel. Anosyke Group of Companies,
Ifeanyi Anosike, Dell Energy Limited, Emeka Chukwu and Ngozi Ekeoma were arraigned
on an eight-count charge bordering on conspiracy to obtain by false pretence, forgery and
altering documents to the tune of N1,537,278,880.82, being payments fraudulently
received from the Petroleum Support Fund for the purported supply of 15, 000 metric
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tonnes of premium motor spirit. Downstream Energy Sources Limited, Alhaji Adamu
Aliyu Maula, Rocky Energy Limited, George Ogbonna and Emmanuel Morah were
similarly arraigned on an eight-count charge bordering on conspiracy to obtain property
by false pretence; conspiracy to forge documents, forgery and altering documents to the
tune of N789,648,329.25, being payments fraudulently received from the Petroleum
Support Fund for the purported supply of 14,273,0227 litres of premium motor spirit.
The EFCC alleged that all the defendants at various times forged different bills of
laden for premium motor spirit, PMS, not supplied all, in a bid to claim the Federal
Government subsidy on fuel. All the suspects separately pleaded not guilty to the charges.
The court could not grant them bail as most of them had not filed any application before
the court. The court subsequently adjourned the matter till 19 October 2012 for hearing on
bail (Ojelu and Ohiero, 2012:1).
Also, Federal Capital Territory (FCT) High Court witnessed yet another
arraignment of two oil subsidy suspects on May 31st 2013, on an 18-count charge of
conspiracy. They were alleged to have fraudulently obtained N1.4 billion from the federal
government as subsidy for the importation of premium motor spirit. The accused are
“Helyn Anine, Chizobam Ben-Okafor and their company, Pon-specialized services
limited. Justice Olasunbo Goodluck of FCT High Court adjourned the June 4th after she
said the ruling was not ready” (Daily Independence, 2013:4).
Furthermore, on June 18th, 2013, a federal High Court in Lagos arraigned other
suspects, Samuel Owa and a cargo surveyor, Oassisi Wajutom, and their companies, Stone
Bridge Oil Ltd and Vibrant Ventures Ltd. The Special Fraud Unit (SFU) accused Owa and
his company of fraudulently obtaining N1.7 billion from the federal government in the
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pretext of importing and discharging 145,000 metric tons of petrol. It also alleged that
Wajutom and Vibrant Ventures aided Owa and his company to obtain the money. The
“prosecution had claimed that Owa and the others contravened the Provisions of Section 8
(a) of the Advance Fee Fraud and Other Related Offences Act, Cap. A6, Laws of the
Federation of Nigeria, 2004 (NAN)” (Daily Independent, 2013:5). Unfortunately, Justice
Ibrahim Buba dismissed “the four-count charge proffered against Owa and a cargo
surveyor, Oassisi Wajutom, and their companies, Stone Bridge Oil Ltd. and Vibrant
Ventures Ltd on the condition that the prosecution failed to establish its case beyond
reasonable doubts. The case was officially closed on February 21st, 2014” (Daily
Independent, 2013:5).
Similarly, the case instituted by EFCC at Lagos High Court in Igbosere tagged
ID/122c/2012 against Omogbenigun, his company, Integrated Resources Limited, Mba
and his Pinnacle Oil and Gas Firm has been withdrawn by the EFCC. The EFCC alleged
that they conspired on different occasions to fraudulently collect over N2bn from the
Federal Government under the Petroleum Support Fund, purporting the money to be
payments for importing certain litres of petrol. The four were charged with four counts of
conspiracy to obtain property by false pretences. The anti-graft body said the offences
were contrary to Section 8 and 1 (3) of the Advance Fee Fraud and other Fraud Related
Offences Act 2006 (Adesomoju, 2012:1). According to EFCC:
The withdrawal of the charges against Pinnacle Oil and Gas Plc and others was deliberate. In the face of fresh evidence, the commission felt the need to firm up the charges, fully convinced that it is better to consolidate the charges ahead of formal arraignment than to start making amendments thereafter.” (Adesomoju, 2012:2).
Since 2012, the prosecution is on-going, adjournments going from year to year.
Instead of having convictions, some of the oil subsidy cases are being dismissed as can be
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seen above. This made some civil society organizations to raise alarm, urging the EFCC to
do a thorough job to stem the corruption in the petroleum industry. For instance,
according to a civil rights organization, Africa Networks for Environmental and Economic
Justice, and a Management Consultancy Firm, Agama Nigeria Limited berated EFCC over
poor subsidy fraud prosecution. They insisted that the EFCC must do a thorough
prosecution of fuel subsidy fraudsters to stem the tide of corruption in the petroleum
industry. According to the organizations:
The purpose is to raise awareness about the general and specific cases of corruption and malpractice in the oil and gas sector and put pressure on the government to do more to bring perpetrators to justice. We are embarking on this project to promote greater enforcement of anti-corruption laws, public awareness of enormity of the problem, reduced corruption among citizens and government agencies, greater transparency and accountability in the oil subsidy regime. The anti-graft agencies should not shirk their responsibilities but should ensure thorough prosecution. That is the best way to fight corruption and not in the media (Olokor, 2014:1).
They further noted that sometimes the prosecution would continue to be absent in
court. Where is it done that an organization prosecuting a thief would not be in court.
Does that show seriousness? Judges have raised this issue for long and it is not a very
good development as far at the anti-corruption crusade is concerned.
Also, the Soyinka Centre for Investigative Journalism (WSCIJ) petitioned the
EFCC over the alleged non-implementation of some recommendations of the Technical
Committee on payment of fuel subsidy in the Country. The Centre stated that:
the Federal Government had carried out what it described as selective implementation of the technical committee’s report leaving the aspect that dealt with prosecution of corrupt officials or those that were indicted by the report…They said that, “you investigate all companies in the report that breached the various rules governing fuel subsidy administration; investigate further all companies mentioned in the report
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and their directors and officers, that committed offences. That you prosecute all companies and their relevant directors and officers in the report whose participation in the fuel subsidy regime allegedly violated Nigerian criminal laws; including but not limited to the EFCC Act. That you recover the excess payment of N422,542,937,668.59 in subsidy payments obtained under false pretence by petroleum marketers that the report details; as well as excess payment of N14.021 billion from defaulting marketing and trading companies. That you take steps towards recovering excess payment of N17.037billion based on the inclusion of the $10 trader’s margin. That you prosecute the relevant PPPRA officials responsible for the lapses in the subsidy administration process. That you investigate the reported N331,547,318,063 worth of kerosene subsidy payments made between June and December 2011, among others (Falana et al, 2014:1).
But most scholars feel that the EFCC should not carry the whole blame. The nature
of Nigeria corrupt judiciary and Nigerian government selective prosecution of some fuel
subsidy suspects, as examplified in the above cases, should be taken into consideration as
well. For instance, Prof. Itse Sagay reacting on the court injunction granted by a federal
High Court sitting in Abuja restraining the federal government from acting on the report
of the Farouk Lawan-led committee, said:
The whole process of prosecuting companies and individuals indicted in the subsidy report could come to a half if they got court injunctions to stop its implementation…the court injunctions would not only stall it, they would likely frustrate it and at the end of the day the report might not be fully implemented. It is a dangerous development and being in the domain of the judiciary, which is independent of the Executive, the Federal Government cannot stop the courts from granting the injunctions. The only way out is for the National Judicial Council and the Chief Justice of Nigeria to step in and state that any suspicion of a case of corruption would be regarded as misconduct and the judge would be sanctioned. Otherwise, these people would stuff the judges with the billions they have stolen and stop the whole process (Okpi, 2012:1).
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Corroborating the above statement, Monday Ubani of the Nigerian Bar
Association (NBA) Ikeja Branch, Lagos blamed “the bar for its complicity in the fight
against corruption. Though fashioned along the British model, the Nigerian legal system
has since been unduly compromised and polluted with an excruciating level of corruption.
The Bar and the Bench are both culpable” (Guardian, October 11, 2013:5).
In the same vein, EFCC Chairman, Ibrahim Larmorde, lamenting why it is difficult
to convict these oil subsidy thieves said:
The judiciary had frustrated the EFCC’s efforts to arrest and put on trial the chief architects of crime because the judiciary acted in concert with criminals and their defence lawyers to use the legal process to avoid prosecution or to delay trial. Lamorde illustrated how high profile criminals used the legal process to forestall their trial and prosecution (The Sun, 2013:6).
He further noted that they will file a case, but the judge will overrule them. They
will go to the Court of Appeal and lose there. But they will still go to the Supreme Court.
At the Supreme Court when they lose, they will be asked to go to the trial judge for the
case to continue.” He explained that his organisation has adopted an unusual strategy to
trap the shifty criminals. “Unfortunately,” he said, “these are people who have the
resources to drag these cases indefinitely and perpetually.
Furthermore, the President of the Nigeria Bar Association (NBA), Joseph
Bodunrin Daudu , provided a more dramatic and damning assessment of the judiciary.
According to him:
There was a growing perception backed up by empirical evidence that justice is purchasable and it has been purchased on several occasions in Nigeria. We are reaching the point in time where accusations of corruption in the system will be at its loudest (The Sun, 2013:5).
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He further noted that the public is not only dissatisfied with the performance of the
judiciary but it is also entirely upset with the quality of judicial verdicts and the integrity
of some of the men and women who serve in the judiciary.
In its effort to clean up the alleged massive corruption in the judiciary, the
Economic and Financial Crime Commission (EFCC) is currently investigating some high-
profile judicial officials for alleged corrupt practices. According to EFCC spokesman,
Wilson Uwajaren, in a press briefing stated that:
The Commission has, in the past few weeks, stepped up investigation into cases of alleged corruption in the judiciary. As we speak, some prominent judicial officers have been quizzed while others have been invited for interrogation (Okpi, 2012:2).
However, there are doubts why EFCC cannot successfully prosecute these fuel
marketers thieves. First, almost all of them are barons or ‘Godfathers’ of the ruling
People’s Democratic Party (PDP), who contributed financially to the emergence of the
incumbent President. Second, the fact that the law has made provision for granting of bail
to people caught on oil marketing fraud weakens the legal procedure for bringing to
justice those caught in the act. Third, the connivance of corrupt security agents to secure
bail for oil marketers thieves when they are caught makes it difficult to convict them.
5.3 THE FUEL IMPORTATION PROBES AND IDENTIFIED CHAL LENGES
The identified challenges by these probes, which militated against the development
of new refineries in Nigeria, is still a pointer to the patronage structure that characterizes
the Nigerian fuel importing licenses by Nigerian ruling class. The Nigerian ruling elites
have discovered that subsidy and weak market regulation create enormous distortions and
opportunities for corruption on importation of fuel. They quickly under different company
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guises entered into fuel importing business whether qualified or not and buy fuel at the
international market price and sell them on the Nigerian market at the subsidized price and
PPPRA reimburses these companies for the difference through the Central Bank of
Nigeria (CBN). These payments are deliberately delayed for months to create incentive
for high-profit rackets by these companies from Nigerian government. Allegedly, these
independent marketers collect the subsidy reimbursement on imported products and then
reimport the same products so as to receive the subsidy refund again or sell them for much
higher prices on the black market or abroad (Gilles, 2009). In view of this enormous
capital the ruling elites make on fuel importation, then it constitutes a severe threat to
refineries development in Nigeria.
In relations to identified challenges unraveled by these probes, which constituted a
great obstacles to refineries development, are contained in the report of KPMG
professional services and the House of Representatives Ad-hoc Committee which
showed incidences of complete breakdown of PSF guidelines on prequalification and
monitoring by fuel marketers which has been turned to avenue of all forms of government
patronage through PPPRA. As reported by KPMG professional services, (2010:26),
The process of selecting suppliers for importation of products is documented but the documented procedures are not adhered to. We observed that the Evaluation committee only recommends prices for the importation of petroleum products while actual allocation of importation contracts (especially volumes) appear to be at management’s discretion. Evaluation of quotes/bids from suppliers appear to be a redundant process because agreed product import prices are based on projected in-house estimate irrespective of prices quoted by suppliers.
They further observed non compliance with the approved policies/procedures.
Besides, they observed that “contracts for the importation of petroleum products were
awarded to companies/suppliers not listed in the approved prequalification list used for the
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fourth quarter of 2008 importation tender. Astana Oil Corporation Limited, Natural
Energy and Oando” (KPMG Professional Services, 2010:27). In the same vein, the House
of Representatives Ad-hoc Committee reported that:
The PSF scheme became a free for all manner of companies engaged in every conceivable business and not necessarily “oil marketing/trading company”, as required by the PSF guidelines. Before this period, a potential importer must have a history of oil marketing or investment in the industry (such as storage facility of minimum of 5000MT and retail outlets). The instinctive increase in importers (and in the products) did not take into consideration the country’s consumption level and failed to consider that any excess product that was not used attracted subsidy payment, thereby altering the objective of scheme to become a limitless drain on the economy. PPPRA became overwhelmed by the sheer number of marketers (from 6 to 140), monitoring and evaluating this number of importers was virtually impossible for an inefficient agency such as PPPRA (HRACR, 2012:79).
The House of Representatives Ad-hoc Committee observed that the PPPRA
mandate to monitor and verify data on petroleum products reception and distribution at
jetties and depots was completely abandoned. They further observed that the agency never
believed in the regulations it set or, at best, pursued it with nonchalance. Failure of the
agency to achieve the objective of verification resulted in certain marketers taking
maximum advantage of the situation. Besides, there were “instances of the turning of
importation by PPPRA into a Bazzar, illegal payments to itself by PPPRA, extra-
budgetary expenditures, illegal deductions for kerosene subsidy, and payment above
PPPRA recommended figures by NNPC, inefficient and fraudulent system of kerosene
distribution by pipeline products marketing company (PPMC) and several other acts of
malfeasance attest to this”(HRACR, 2012:119).
Equally, the report of both probes, especially that of the House of Representatives,
showed incidence of greed, corruption and sabotage by marketers in collusion with the
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operators of the downstream oil sector in strangulating the existing four (4) refineries
despite the repeated TAM. For instance, the HRACR (2012:204) revealed that “the state
of our refineries is nothing to write home about as it appears that greed, corruption etc
among operators in the downstream sector colluded to strangulate the refineries despite
their total installed refining capacities of 446,000BPD”.
Also, the report of both probes as well showed incidence of pipeline vandalization
which incapacitated the existing four (4) refineries. This deliberate vandalization of
pipelines is done through the concerted efforts of government officials, downstream sector
staff and importers of petroleum products so that they can continue to import fuel.
According to the report of the KPMG professional services (2010:34),
Product losses due to incessant pipeline vandalism continue to hinder the transportation of petroleum products. Petroleum products losses through pipeline vandalism stood at 110.38 metric tons in 2009 and the monetary value was estimated at N8.1bn.
The KPMG Professional Services (2010:29) further reported that low capacity
utilization of the four (4) refineries in 2008 and 2009 was estimated at 25.3% and 11.2%
respectively. The low capacity utilization was attributed to partial/complete shutdown of
processing plants at the refineries as well as pipeline vandalism.
Furthermore, the report also showed incidence of 445,000bpd allocation to NNPC
to refine for local consumption as being sufficient to provide the nation with forty million
litres per day for PMS and no need for government to grant importation or pay subsidy.
The above fact is captured by the House of Representatives Ad-hoc Committee report,
thus:
With regards to the 445,000bpd allocation to NNPC to refine for local consumption, the committee established that the allocation is sufficient
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to provide the nation with forty million litres per day for PMS and ten million litres of HHK. The above can be achieved conveniently through
- SWAP arrangement, - Offshore process, - Outright sale of the 445,000bpd and or partial sale of the excess
from the local refining capacity of 53%. Therefore, there is no reason for government to grant subsidy importation to any other marketers (HRACR, 2012:185-186).
The report, as well, showed incidence of Rilwanu Lukman (Ex-petroleum Minister
2007-2009), under late President Yar’ Adua administration (2007-2009), a major exporter
of crude oil (Afren Ltd) and importer of fuel, who insisted on no TAM to protect the
lucrative interest of the marketers. This was succinctly captured at an oil and gas
conference in 2008. According to Rilwanu Lukman:
Government was no longer prepared to spend any more on rehabilitation of the refineries. He pointed out that so much money had been spent in the past, which he alleged was mismanaged by those entrusted with responsibilities of managing the refineries. We are not ready to put any money into the refineries again. No more. Our refineries have not been well run in the past. They have been mismanaged and the problem was compounded by the regulatory agencies and that is why we want to address the issue. If we have the correct ambience, people will come to build new refineries. (Nwachukwu, 2012:3).
In the same vein, the HRACR (2012:192) noted that “the practice whereby PPPRA
as a regulator in the petroleum downstream sector being supervised by the Ministry of
Petroleum Resources whose minister (Rilwan Lukman) is the chairman of the Board of
NNPC (a major importer/participant in the PSF scheme) negates the principles of checks
and balances and international best practices” (emphasis added).
Furthermore, the committee established that NNPC deducted directly “the sum of
NG N408.255 billion (in addition to the payment of NG N81.648 billion by CBN) in
2009, the sum of NGN 407.801 billion (in addition of the payment of NGN402.423 billion
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by CBN) in 2010, and the sum of NGN 847.942 billion (in addition to the payment of
NGN844.944 billion by CBN) for 2011 contrary to section 162 of 1999 Constitution (as
amended) “(HRACR, 2012:97). In the same vein, KPMG professional services (2010:33)
discovered as well that N25bn was deducted as subsidy estimate for September 2009 from
domestic crude scale proceeds while PPPRA approved a subsidy of N23bn. N35bn was
also deducted as subsidy estimate for November 2009 but PPPRA approved a subsidy of
N21.3bn. Other deduction for these two months amounted to N14.9bn. however, only
N4.2bn was swept into the federation account by NNPC as adjustment for subsidy
claimable in the two months. The office of the Accountant General, Director General
Budget, Audit firms, Attorney General etc are not spared by the House Probe, as they
were discovered to be working in concert with the cartel of importers. It said: “the
payment of N999,000,000 in 128 times within 24 hours (12th and 13th January, 2009) by
the office of the Accountant General of the Federation should be further investigated by
relevant anti-corruption agencies” (HRACR, 2012:197-198). All these have unraveled the
dirty deals of oil marketers and increase pressure on the government of the day to new
refineries development in Nigeria (Otuaro, 2014: interview). `
The above sleazy deals that have been going on in the importation of petroleum
products are probably why the much-touted new refineries development that is expected
to take care of all the major grey areas in the nation’s oil industry has continued to be
delayed by all the parties involved. In fact, it became clear that importation of fuel was
designed by the ruling elites to be a drain-pipe for looting Nigerian and a source of ill-
gotten wealth for their relatives and cronies.
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5.4 THE FUEL IMPORTATION PROBES AND STRUCTURAL CH ALLENGES
Despite the above identified challenges in fuel importation probes, which
undermined the building of new refineries in Nigeria, there are structural challenges which
militated against the building of new refineries which were conspicuously silent or not
highlighted by these fuel importation related probes. They are: the report of composition
of petroleum matters board based on private economic interest; reports of government
policy of subsidy and fuel regulated pricing scaring investors in the development of new
refineries; lack of autonomy of NNPC to carry out some independent reforms; lack of
downstream technological capacities by Nigerian engineers; politicization of Petroleum
Industry Bill (PIB) in the Nigeria National Assembly since 2009 because of one of its
contents – liberalization of the downstream oil sector and government policy of leaving oil
companies in charge of transferring technical know-how. No wonder, Shaibu (2014:
interview ) observed that all those fuel related probes were mere scratching of the surface
that have not defined the challenges hindering the development of refineries in Nigeria.
However, the Nigerian politics, because of her monocultural economy, has
evolved directly from the struggle by various interest groups to get access to oil revenue.
Once political power is achieved, the next in line is the composition of petroleum matters
board based on private economic interest. This was succinctly attested to by Thurber et al
(2010:38), who among other things, stated that:
Top jobs in NNPC are dispensed to politically favoured individuals… rotation of NNPC Board members are often on a regional basis in line with the regional structure of Nigeria’s patronage network. The GMD of NNPC changes with presidential transition and sometimes more frequently, making it difficult to effect sustained positive change within the organization.
Gboyega et al (2011:17) supported the above view point when they stated thus:
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Political power and access to petroleum revenues have been boisted through control over appointments to positions in petroleum management. In line with the patronage-based political power, appointments into the petroleum ministry and NNPC are highly coveted. Appointments are closely monitored politically to see which ethnic group is gaining ascendancy and at whose expense. The sensitivity of appointment into the top echelons of the NNPC was highlighted in July 2009 when the government announced dismissal of the corporation’s top management staff and the replacements. Of the 11 new heads of departments announced in the reorganization, 7 were northerners and 4 were southerners. This generated many adverse comments from southerners, especially those from the Niger Delta.
Worse still, since 1999, under the uninterrupted democratic dispensation, all the
subsequent heads of government in Nigeria have their oil Minister from his region. For
instance, Obasanjo 1999-2007 (South), had Funsho Kupolokun (GMD) from the South,
Yar’Adua 2007-2009 (North), had Rilwanu Lukman (Minister) North; under Jonathan
2009- till date (South), has Alison Madueke (Minister), from the same state with the
President.
Also, there has been government policy of subsidy and fuel regulated pricing, which
has been scaring investors in the building of new refineries in Nigeria. Since prices of
petroleum products are not controlled by the forces of demand and supply, prospective
investors shun refinery projects in Nigeria for fear of losing their capital. The above
concern is captured by Balouga (2012) who strongly argued that if there were no policy
reversals and the introduction of uniform pricing of petroleum products, Shell Petroleum
Company would probably have had additional refineries across the country. Perhaps, this
would have been followed by Chevron, ELF. etc, all having functional refineries.
According to him:
Government control of petroleum product prices has been a major issue before now, especially in the fact of the unprecedented failure by
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government to get existing refineries working to full capacity. For many years now, and with the near- total collapse of the refineries, Nigeria, a major producer of crude oil in the world has depended on the importation of petroleum products to meet its domestic needs. Investors, who had wanted to invest in the establishment of refineries, were scared away by what they saw as unfriendly pricing, leaving product marketers with low or no margins, except when government stepped in with a heavy subsidy that ate deeply into its treasury (Balouga, 2012:31).
Corroborating the above statement, Ohuabunwa quoted in Eme et al (2011),
believes that the most reasonable thing is to fully deregulate the downstream oil sector and
allow forces of demand and supply to determine the prices at which petroleum products
should be sold. He argues that deregulation would encourage competitions, which would
ultimately bring down the price of petroleum products. According to him:
Under the new dispensation, importation of petroleum products would be put on open license for any operator that wants to venture into it, as against selecting a few firms to do so; this would bring about competition in the market and force price down… adding that the only way Nigeria can solved refinery problem was by deregulating it. Unless this is done, the country’s four (4) refineries may not work, because those bleeding the economy under the subsidy regime would not let it work. But if it was a private refinery, it would work. Number two, if we do not allow prices to be deregulated, new investment would not come. The reason they would not come is nobody would like to put up investment in an atmosphere where he cannot recover it in good time. Till date, about 18 or 20 license for refineries have been issued, but none of them is forthcoming (Ohuabunwa quoted in Eme et al, 2011:11-12).
In the same vein, the report of a study commissioned by the incumbent Minister of
Petroleum Resources, Diezani Alison-Madueke, early in 2012 in a bid to find solutions to
fix Nigeria’s four refineries, indicated that unless fuel subsidy is scrapped, the government
will not be able to attract the investment it needs to get the refineries working. The report
further said current plans to repair dilapidated refineries will most likely fall, because the
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government will struggle to mobilize funds and vested interest will try to thwart its efforts.
According to the report:
The regulated pricing policy of the Federal Government for petroleum products is the most widely adduced single reason by prospective investors for the lack of investment in the new refineries in Nigeria in recent years… why is it that people are not building refineries in Nigeria, yet it is a big business? It is because of the policy of subsidy and that is why we want to get out of it (Agande, 2012:5).
The report further stated that the North American country has 16 functional refineries that
are performing at optimal capacity because all the refineries in Canada are privately
owned.
Corroborating the above statement, Ngonadi, Otuaro and Nwaebubebe (2014:
interviews) believe that:
Nigeria does not want to believe in reality. Government buys fuel from international market at N1.30 or N1.40 per litre. And pays N45 as subsidy and sells to Nigerians at N97. With this current situation in Nigeria, refineries will be operating at a lost. New investors cannot venture into investing into new refineries because they will lose. If government removes fuel subsidy, a lot of refineries will come into existence.
They further stated that there is no fixed price of petroleum product in the world.
Also, there is no fixed price of crude oil. A lot of factors affect it. It can be war, weather,
international relations etc. Therefore, it will be better to remove fuel subsidy and allow
forces of demand and supply to control the prices in the market.
Similarly, Nwachukwu (2011), observed that even when the federal government’s
policy four years ago that investment in the downstream sector, particularly in refinery
projects, would be the condition for issuance and renewal of concessions and oil licenses,
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yet none of the International Oil Companies (IOCs) operating in Nigeria has indicated
interest to build a refinery in the country. According to him:
If Nigeria government is serious about getting investors to build refineries in the country, the first step should have been the deregulation of the downstream petroleum sector. Fine, government said the passage of the Petroleum Industry Bill (PIB) will pave way to full deregulation of the downstream sector, but what progress has government made in the direction? The PIB has been with the National Assembly since 2009 and everything is now at a standstill. So it is important that all obstacles to investment in refineries, including factors that would hamper their operation as business concerns be removed. When this is done, the IOCs and others can now have the guarantee that they will recoup their money (Nwachukwu, 2011:2).
Furthermore, lack of NNPC autonomy to carry out independent reforms has
continued to be among the serious challenges confronting the development of new
refineries in Nigeria, which was conspicuously ignored in the fuel importation related
probes. The situation in Nigeria over the years is that the government, through various
laws that are non-democratic in nature, have taken over the full control of the oil industry.
This has been done in such a way that every accrual from the oil wealth goes into the
coffers of government, with the federal government controlling the production and sales
figures, government controlling the agencies that deal directly with the MNOCs, and all
the agencies that are involved with the accounts of oil wealth in the country (Omoweh,
2006).
Gboyega et al (2011:16) supported this view when they stated that:
Since the 1970s when oil became prominent in the economy, the federal government has maintained a strong hold on oil and gas industry, passing many laws giving it exclusive rights to deposits. Among such laws are the Territorial Waters Act, Exclusive Economic Zone Act, Land Use Act, Oil Pipelines Act, Petroleum Act, Mineral and Mining Act.
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These laws are reinforced by some sections of the constitution. While guaranteeing citizens protection from compulsory acquisition of their property by government without compensation.
Through these decrees and laws, the Nigerian government took over the entire
affairs of NNPC which are being managed by a board of directors, appointed by the
President of Federal Republic of Nigeria. “The board was made up of an alternate
chairman, a managing director, and the permanent secretaries of the federal ministries of
National planning, finance and three other members elected from the private sector”
(Chima et al, 2002:17). This eroded the autonomy of the oil industry and makes it difficult
for NNPC to effect sustained positive change within the organization. From the above
clarification, it is quite clear that the president of each successive administration, as
explained above, changes anybody in the oil industry through the minister of petroleum
who is his/her appointee and a member of Nigeria Federal Executive Council (FEC).
There is also the lack of downstream technological capacities by Nigerian
engineers, especially in the servicing and maintenance of the four (4) downstream
refineries in Nigeria, which has posed one of the greatest challenges in the development of
new refineries in Nigeria. This obvious fact was conspicuously omitted by these fuel
importation related probes. This lack of technological capabilities makes Nigeria depend
on foreign manpower for virtually everything which leads to enormous capital flight out
of the shores of Nigeria. For instance, the dominant foreign servicing and maintenance
companies of Nigeria refineries are: “French IOCs, Total that was paid $39.7m for the
rehabilitation of the four refineries, and included in 1999 budget” (Nwokeji, 2007:35).
Chrome oil services based on Sao Tome which handled TAM on old and new Port-
Harcourt Refineries during Obasanjo era. According to expert in the industry, “the nation
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was ripped off to the tune of about $100 million as inflated payments in this contract
alone” (Busch, 2007:7). In fact, “public funds running into $1.78bn in the last twelve
years have been invested in carrying out Turn Around Maintenance (TAM) without
anything to show for it” (Tribune, Saturday 24 December, 2011) and nobody or company
has been arraigned for prosecution. This money will be enough to build modular refineries
with capacity of 30,000bpd of $200 million dollars in each of the 36 states of the
federation with some money still remaining (Oluwafemi, 2014; Pemu, 2014 and Okoro,
2014: Interviews).
The PIB which consists of nine (9) parts and 495 sections suppressed in the
Nigerian National Assembly since 2009, is also one of the greatest challenges hindering
the development of new refineries in Nigeria. The PIB, among other things, advocates for
the liberalization of the Nigerian oil sector. This bill was not in any way highlighted by
any of the fuel importation related probes. The fundamental objectives outlined in the bill
are: Increased crude oil capacity; gas sector development; transparency and good
governance; community development; Nigerian content enhancement; Independent and
commercialized NNPC; Reform of institutional framework; regulatory and policy making
efficiency; resolution of funding issues through the creation of independent joint ventures
(I-JVs) and Transition of self-sustaining I-JVs (George-Hill, 2010:142). Following the
above objectives of the bill which will adversely affect the dominant class, the bill has
been suppressed since 2009.
Ordinarily, the state’s interests in the downstream oil sector should be seriously
striving to obtain technology on the best possible terms. Instead, the Nigerian state
colludes with the MNOCs to block the acquisition of technology to maintain and
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consolidate the capitalist mode of primitive accumulation through oil lifting licenses
(Import/export). As such, the business of transferring technology and technical know-how
is left in the hands of MNOCs. This issue was explicitly ignored by the subsequent fuel
importation related probes. However, the oil industry remains in this critical position
because, in the transition of Nigeria from colonization to independence in 1960, political
power was transferred to compradors, that is, those state officials who use their public
offices for personal gain. These compradors (indigenous ruling class) have been
hobnobbing with oil multinationals to protect their interests at the expense of the
development of refineries which will benefit the masses. This fact was attested to by
Turner (1980:217), who stated that “the transfer of know-how to Nigerian oilmen has
been blocked by oil companies and by state compradors. This is a spin-off of comprador-
oil company resistance to local involvement in exploration/production of the downstream
activities”.
Also, the recent efforts to use the local content (LC) policy to acquire technology
for indigenous capabilities have not yielded any positive change. This is regrettable
according to Ezirim (2013:59) because:
The government has allowed these big players (MNOCs) in the industry to dictate how the sector is run to the extent that government lacks the capacity to enforce the local content drive that should ensure that Nigeria’s petroleum technology development is not undermined.
Aturu (2012) supported the above view point when he argues that there is nothing
wrong in the state inviting investors to explore and exploit oil in the face of
underdeveloped technical capacity and insufficiency of funds. According to him:
What is indefensible is that 53 years after the discovery of oil in Oloibiri in 1956, the participation of Nigerians is still abysmally low, so much so that even government in formulating its local content policy in the oil
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industry which it defines as the utilization of the Nigerian human and material resources in exploitation and exploration of the Nigerian hydrocarbon resources cannot but lament (Aturu, 2012:106).
Similarly, the senior staff association of workers in the oil industry PENGASSAN
(2009) accused the Nigerian government of lip service in the enforcement of local content
policy. They accused the government of colluding with the oil companies to marginalize
Nigerians, thus:
The attainment of local content policy has continued to elude Nigeria due to the lackadaisical manner and official comprises of the weak and indulging legal and institutional frameworks coupled with official compromise of the immigration departments in the expatriate registration and renewal services. It took exception to the way Nigeria Immigration Services (NIS) aided by the encouragement of frivolous and absurd monthly returns filed by some oil and gas companies to continually justify expatriate applications which in most cases create a lot of disconnect with the Department of Petroleum Resources (DPR) and National Petroleum Investment Management Services (NAPIMS), adding: Don’t be surprised that some of the understudy names in such monthly returns employees are low cadre, ghost workers and employees of the company, whereas there are qualified Nigerians being denied opportunities in such company (Funimo, 2009:7).
The LC Act, signed into law in April 2010, places the obligations of the up and
downstream oil sector on MNOCs to ensure that 70% of their personnel are Nigerians and
from the local host community. The policy was targeted at transforming the oil industry
through the development of indigenous capabilities in the areas of manpower development
in oil production, installations of oil facilities and servicing and maintenance of oil
facilities in the up and down stream oil sector of Nigeria. But the non-challant attitude by
Nigerian government to enforce LC policy gave these MNOCs leverage to shortchange
Nigeria in the oil and gas sector. For instance, available figures indicate that:
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While Nigerian Agip Oil Company has 1452 permanent junior and senior employees, 3221 are contract/casual employees. For Chevron, there are 562 permanent, and 2830 casual, while in the case of shell petroleum Development Corporation, there are 3625 permanent as against 17,000 contract/casual employees (Adewumi and Adenugba, 2010:67).
In the same vein, there has been a warning strike by NUPENG on July and August,
2013 in Nigeria over complete negligence of LC policy by these MNOCs. NUPENG
accuses the MNOCs in Nigeria that “close to 90 percent of Nigerians working in the
petroleum industry are either contract, causal or outsourced workers with conditions of
work not commensurate with industry standard and best global practice” (Young, 2013:8).
This implies that 10% of Nigeria’s labour force is engaged full time in the sector.
From the foregoing discussion, it is quite evident that the thriving impact of
globalization which benefited the dominant class in a fuel-import dependent economy is
responsible for the failure of fuel importation probes to adequately define the challenges
hindering the development of refineries in Nigeria. This dominant class interest is
responsible for the political manipulation of the legislatures who only identified the
cosmetic challenges leaving the structural challenges that constitute the greatest threat to
the development of refineries in Nigeria. This interplay of politics and economics in the
oil sector by the dominant class in Nigeria are responsible for the lack of proper definition
of the challenges hindering the development of refineries by different fuel importation
probes in Nigeria. This explains why Nigeria is fuel-import dependent because it benefits
the dominant class. The findings of the study therefore validate the hypothesis that fuel
importation probes failed to adequately define the challenges hindering the development
of new refineries in Nigeria. The nature and dynamics of Research and Development
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(R&D) in oil sector and Nigeria’s Petroleum Technology Development, form the thrust of
the next chapter.
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CHAPTER SIX
RESEARCH AND DEVELOPMENT (R&D) IN OIL SECTOR AND NI GERIA’S
PETROLEUM TECHNOLOGY DEVELOPMENT
6.0 INTRODUCTION
This chapter will try to test the hypothesis which is to ascertain whether the
expatriates’ dominance of fuel importation and distribution undermined the integration of
R&D in Nigeria’s Petroleum Technology Development since 1999. The study discovered
the common interest of the dominant class and the multinational oil corporations
(MNOCs) in the Nigerian oil sector. This mutual interest of both parties in the oil sector is
protected using the instrument of the state. This resulted in the neglect of Nigeria’s
Petroleum Technology Development, with its attendant consequences of neglecting
building of new refineries in Nigeria. This is clearly examplified, as shown in the below
pages, by the supply of fuel to NNPC by MNOCs; supply of fuel to most of the
Nigerians Independent marketers by MNOCs; expatriates control of the largest national
distribution of fuel; and takeover of majority of fuel importation and distribution by
MNOCs, generated relegation of Nigeria’s R&D of applied research projects and
technical services for the up and downstream oil sector; domination of R&D by MNOCs
in petroleum industry in up and downstream sectors; government policy not encouraging
applied R&D in Nigeria’s oil industry; and PTDF assisting Nigerians to acquire
knowledge instead of assisting them to apply knowledge in the oil industry.
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6.1 THE STATE AND SUPPLY OF FUEL TO NNPC BY THE MULTINATIONAL
OIL CORPORATIONS (MNOCs) IN NIGERIA
The dominance of expatriates in Nigeria’s oil and gas sector is very evident in the
importation of fuel to NNPC by foreign manpower despite almost six decades of oil
exploration and production in Nigeria. This accounts for why MNOCs refused to invest in
the downstream oil sector of Nigeria, principally, to maintain their traditional culture of
exporting raw materials (crude oil) from Nigeria and importing finish products (fuel) into
Nigeria. As aptly noted by Ubah (2011), International Oil Companies (IOCs), who have
operated in the country for more than five decades, should be held accountable for the rot
in the downstream sector of the oil and gas industry, a trend that has led to the collapse of
the four state owned refineries, thus culminating in the nations being a net importer of
petroleum products. According to him:
The IOCs have enjoyed various rebates, tax holidays and incentives from government, but had refused to reciprocate government’s good gestures by investing in the establishment of any refinery in the country. Some of the multinationals include Shell, Chevron, Total, Texaco, Exxon Mobil and Agip. It is my belief that if the multinational who have operated in the country for more than five decades, have complemented government efforts by setting up refineries in Nigeria, things would have been very different, rather than the prevailing situation where we are depending on importation of petroleum products from them to meet domestic demands (Ubah, 2011:2).
These MNOCs have been able to dominate all aspects of the oil industry in Nigeria
including importation of fuel with the active collaboration of the ruling Nigeria elites who
are hobnobbing with them to protect their interest in the oil industry. This explains why
the government has allowed these big players in the industry to dictate how the sector is
run to the extent that government lack the capacity to stop over-dependency of Nigeria
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economy on fuel from these MNOCs. Moreover, their dominance ensures that NNPC and
independent marketers in Nigeria depend on MNOCs for fuel products.
As a result of this, Nigeria becomes hotspots for all kinds of marketing Oil Company
from Europe and America scrambling to bring fuel in Nigeria. No wonder, the former
executive Secretary of the PPPRA, Mr. Reginald Stanley, observed that “every criminal
that was sacked in Europe as an oil trader was bringing products into Nigeria. These
companies have no integrity. They can bring in offspee materials; they can bring in sand
and declare it as petrol. So we must insist on integrity” (Nwachukwu, 2013).
Following the outlined criteria for MNOCs who wants to bring fuel in Nigeria
detailed in chapter four, NEITI audit (2006:74) report documented that the below MNOCs
have been supplying fuel to NNPC since 1999. They are:
• Total
• Bp
• Shell
• Chevron
• Glencore
• Addax
• Calson/Hyson
• Napoil
• Trafigura
• Acadia
• Vitol
NNPC supplied over 80% of petroleum products sold to Nigeria market in 2006,
while the major and independent marketers contributed the remaining 20%. This fact was
attested to by Asaolu et al (2010) who stated that “as private sector participation has
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grown in the government’s scheme, NNPCs share of imports has fallen from over 80% in
2006 to 65% for PMS and 83% for HHK in 2008”. This supply of petroleum products by
NNPC reflected on the huge amount of PMS deducted annually from PSF account
between 2006-2010. This can be seen in tables 6.1, 6.2, 6.3 and 6.4 of PSF payment
summary below:
Table 6.1: 2006 PMS payments summary S/N Marketer Amount
(Billion Naira) % Contribution
1. NNPC Sub Total 134,487 88.48%
2. Oando Plc 8.617 5.6%
3. Mrs. Oil & Gas Ltd 6.102 4.02%
4. Chevron Nig. Plc 1.531 1.01%
5. Total Nig. Plc 1.249 0.82%
6. Other Marketers’ Sub Total 17.501 11.52%
7. Total 151,988 100.00%
Source: Adapted from PPPRA Report on the Administration of Petroleum Support Fund (PSF) 2006-2008, http://www.petroproglobal.com/.../Report%20on%20the%20Administration%20of%. 10/04/2014
From the above table 6.1, NNPC imported 88.48% of PMS, of which 134.487bn of
PSF was paid. Oando Plc imported 5.6%; Mrs. Oil and Gas Ltd 4.02%; Chevron Nigeria
Plc 1.01%; Total Nigeria Plc 0.82% and other independent marketers 11.52% amounting
to N151,988bn which is 100%. The above statistics show that MNOCs dominated in the
supply of fuel to NNPC in 2006.
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Table 6.2: 2007 PMS payments summary
S/N Marketer Amount (Billion Naira)
% Contribution
1. NNPC Sub Total 139.813 74.35%
2. Oando Plc 13.292 9.51%
3. Mrs. Oil & Gas Ltd 13.211 9.45%
4. African Petroleum Plc 7.876 5.63%
5. Total Nig. Plc 5.348 3.83%
6. NIPCO Plc 2.437 1.74%
7. Chevron Nig. Plc. 2.380 1.70%
8. Triquest Energy Plc 1.516 1.08%
9. Mobil Oil Nig. Plc 1.161 0.83%
10. Sigmund Communnecci Ltd 1.010 0.72%
11. Other Marketers’ Sub Total 48.230 25.65%
12. Total 188.043 100.00
Source: Adapted from PPPRA Report on the Administration of Petroleum Support Fund (PSF) 2006-2008, http://www.petroproglobal.com/.../Report%20on%20the%20Administration%20of%. 09/04/2014.
Table 6.2 shows that NNPC in 2007 imported 74.35% of PMS, of which
N139.813bn of PSF was paid. There was a slight decrease of 14.13% from that of 2006.
This, of course, shows the complete domination of MNOCs on the supply of fuel to
NNPC in 2007.
198
Table 6.3: 2008 PMS payments summary
S/N Marketer Amount (Billion Naira)
% Contribution
1. NNPC Sub Total 157.329 61.385
2. African Petroleum Plc 21.431 8.36%
3. Mrs. Oil & Gas Ltd 18.657 7.28%
4. Oando Plc 17.593 6.86%
5. Triquest Energy Ltd 7.910 3.09%
6. Folawiyo Energy Ltd 4.497 1.75%
7. Integrated Oil & Gas Ltd 3.896 1.52%
8. Rahamaniyya Oil & Gas 3.826 1.49%
9. Total Nig. Plc. 3.679 1.44%
10. NIPCO Plc. 3.576 1.40%
11. Mobil Oil Nig. Plc. 3.459 1.35%
12. Imad Oil and Gas Ltd 3.384 1.32%
13. Sigmund Communnecci Ltd 2.469 0.96%
14. Conoil Plc 1.991 0.78%
15. Capital Oil & Gas Ltd 1.509 0.59%
16. Chevron Nig. Plc. 0.798 0.31%
17. AMG Petro-Energy Ltd 0.295 0.12%
18. Tonique Oil Services Ltd * *
19. Northwest Petroleum &Gas * *
20. Other Marketers’ Sub-Total 98.976 38.62%
21. Total 256.305 100.00%
Source: Adapted from PPPRA Report on the Administration of Petroleum Support Fund (PSF) 2006-2008, http://www.petroproglobal.com/.../Report%20on%20the%20Administration%20of%.09/04/2014.
199
In 2008, Table 6.3 shows that NNPC imported 61.38% of PMS, and 157.329bn from
PSF was paid. There was a slight decrease of 12.97% from that of 2007 which is 61.38%.
The above, as well, shows that NNPC collected the highest subsidy money in 2008 to
replace its huge amount spent on importation of fuel from MNOCs.
Table 6.4: 2010 PMS payments summary
S/N MARKETERS QUANTITY (MT)
QUANTITY (LTRS CONTRIBUTION %
1. NNPC 506,939.43 679,805,778.31 58.17
2. AFRICAN PETROLEUM PLC 46,500.01 62,356,512.08 5.34
3. AITEO ENERGY
RESOURCES LTD
21,453.87 28,769,641.01 2.46
4. CONOIL PLC 32,542.62 43,639,656.43 3.73
5. DEE JONES PETROLEUM &
GAS LTD
14,378.02 19,280,918.12 1.65
6. FOLAWIYO ENERGY 32,140.56 43,100,488.28 3.69
7. MOBIL OIL NIGERIA PLC 7,975.27 10,694,842.43 0.92
8. MRS. OIL AND GAS LTD 49,632.18 66,422,656.06 5.68
9. NORTHWEST PETROLEUM
& GAS LTD
13,917.87 18,663,863.67 1.60
10. OANDO NIGERIA PLC 32,289.46 43,300,162.39 3.71
11. RAHAMANIYYA OIL AND
GAS LTD
10,493.38 14,071,803.62 1.20
12. SAHARA ENERGY
RESOURCE LTD
59,107.02 59,266,002.15 5.07
13. TOTAL NIGERIA PLC 59,107.02 79,262,515.16 6.78
Subtotal(Others) 364,525.77 488,829,061.40 41.83
Total 871,465.20 1,168,634,839.71 100.00
Source: Adapted from PPPRA (2010) Facts on Nigerian Downstream Petroleum Industry: A monthly review of operational activity, http://www.abcpages.de/www/downstream+nigerian+petroleum+sector, 09/04/2014.
Table 6.4 as well shows that NNPC imported 58.17% of PMS in 2010, which
amounted to 679, 805, 778.31 quantity litres. There was a slight decrease of 3.21% from
200
that of 2008 which is 61.38%. Summarily, the above tables 6.1, 6.2, 6.3 and 6.4 show the
contributions of NNPC to Nigerian market under PSF scheme which was 91.75% in 2006;
74.35% in 2007; 61.38% in 2008 and 58.17% in 2010 respectively. This gives a total of
134.487 billion in 2006, 139 in 2007 and 157.329 in 2008.
However, after the probe by the House of Representatives Ad-hoc Committee in
April 2012, which exposed the lapses in fuel importation between 2009 to 2011, the
PPPRA in April, 2013 reduced the percentage of fuel import by NNPC. According to
PPPRA Former Secretary, Mr. Reginald Nnamdi,
NNPC now import 33 per cent of petroleum products into the country while major/independent marketers are responsible for the remaining 67 per cent. The general belief is that major and independent oil marketers are doing about 50 per cent of the fuel importation. But the importation records just released by the PPPRA showed that the marketers were currently handling 67 percent, meaning that that NNPC’s import quota had dropped by 17 per cent to 33 per cent (Oketola, 2013).
The PPPRA Boss further said that “NNPC share will be sourced from the foreign
manpower since they expect nothing from the local refineries until they are fully
revamped” (Oketola, 2013:1). This implies that there is total dependency of NNPC on fuel
from MNOCs.
Obviously, from the above analysis, it is crystal clear that MNOCs dominated, in all
its ramifications, the supply of fuel to NNPC between 1999 to 2013.
6.2 SUPPLY OF FUEL TO INDEPENDENT MARKETERS IN NIGERIA BY FOREIGN MANPOWER
The concept of independent petroleum products marketing was introduced in
Nigeria in 1978 to break the monopoly enjoyed by the major marketers who dominated
the marketing and distribution of petroleum products in different parts of Nigeria. These
201
independent marketers were initially registered with NNPC and later came to be registered
with Pipeline Products Marketing Company (PPMC), established in 1988, to ensure,
among other things, the availability of petroleum products to sustain our industries, run
automobiles and for domestic cooking. Figure 6.1 shows detail of NNPC downstream oil
sector distribution chain. This started of course, from NNPC to PPMC with their
respective depots, where marketers draw petroleum products down to dealers and retailers
and finally to consumers.
Figure 6.1: The Oil and Gas downstream value chain
The PPMC, a subsidiary of the NNPC, is generally responsible for the
management of the pipeline networks and overall distribution of refined products in the
NNPC
PHRC (1) PHRC (2)
WRPC KRPC IMPORT
PETROLEUM BROKERS
PPMC
DEPOTS DEPOTS DEPOTS DEPOTS
MARKETERS MARKETERS
MARKETERS
MARKETERS
DEALERS & RETAILERS
DEALERS & RETAILERS
DEALERS & RETAILERS
DEALERS & RETAILERS
CONSUMERS
Source: Adapted from Agusto & Co, (2008:28). Industry Report/Oil and Gas Downstream, www.agusto.com/research.php, 09/04/2014.
202
country and associated depots. It also oversees the overall processes involved in the
marketing and distribution of products it is pertinent at this point to note that independent
marketers from 1988 to 2006 only depended on NNPC for purchasing and marketing of
petroleum products in Nigeria. NNPC has numerous depots spread over the country for
easy evacuation of fuel by independent marketers. Table 6.5 shows the holding capacities
of NNPC depots in Nigeria.
Table 6.5 Holding Capacity of NNPC Depots in Nigeria
Depot PMS DPK AGO ATK TOTAL
Benin 60,700 28,700 32,000 - 121,400
Ore 25,700 6,000 10,600 - 42,300
Mosimi 163,400 76,000 127,200 57,600 424,200
Atlas 48,000 34,000 32,300 - 114,300
Cove 10,300 1,900 12,300 1,900 26,400
Lagos 102,800 28,700 40,500 - 172,000
Sat. 32,500 6,800 20,200 - 59,500
Ibadan 45,500 30,000 30,000 - 105,000
Ilorin 24,000 15,000 24,000 - 53,000
Suleja 60,000 22,500 63,000 - 145,600
Minna 24,400 9,100 20,000 - 53,500
Kano 72,900 8,700 43,200 - 124,800
Gusau 10,000 2,300 7,200 - 19,500
Jos 20,200 15,900 18,500 - 54,600
Gombe 39,000 21,900 24,000 - 84,900
203
Maiduguri 59,300 28,100 34,300 - 121,700
Yola 99,000 49,000 64,500 - 213,700
Makurdi 56,200 26,000 29,500 - 111,700
Enugu 40,200 20,100 40,000 14,500 103,200
Aba - - - N/A 14,500
Calabar* N/A N/A N/A N/A -
Ikeja * N/A N/A N/A N/A -
Warri* - - - - -
Kaduna* - - - -
Port-
Harcourt
N/A N/A N/A N/A -
Total 974,500 430,700 673,700 74,000 2,152,500
Keys: *Denotes Refinery depots were tankage is not strictly dedicated to finished products; **At Ikeja, tank-farm belongs to the major marketers companies N/A= Not Available Source: Vision 2010(1997:331). Report of the Vision 2010 Committee, Vol. II, Book 2.
These registered independent marketers are usually given a license to lift fuel from
the above depots for storage and sales. It is important at this point to note that fuel at these
designated depots comes in two ways. First, through importation from NNPC and
secondly from processed fuel from the four refineries in Nigeria. “The storage
infrastructure, which consist of 22 loading depots linked by pipelines of various diameters
ranging from 0.2 to 0.5 meters, has combined installed capacities of 1266890 Premium
Motor Spirit (PMS), 676400 Dual Purpose Kerosene (DPK), 1007900 Automotive Gas
Oil (AGO), and 740000 Aviation Turbine Kerosene (ATK)m3 tonnes” (Special
Committee on the Review of Petroleum Product Supply and Distribution, 2000:201).
204
The phenomenal growth of independent marketers from 1988 to 2006 of above
4,000 have made petroleum products to reach the rural communities in Nigeria, as against
the practice of the rural communities travelling to the urban centres to buy fuel from the
major marketers who usually concentrate their filling stations in the cities. By reaching to
these remote areas, the independent marketers, have fulfilled one of the conditions for the
establishment of the scheme by Nigerian government in 1978. The above view was
attested to by Ekerete (2003:80) who observed that:
Independent marketers obtain supply of petroleum products from the NNPC depots all around the country. Their functions included the provision of petroleum products to meet the ever-increasing demand, to reach to rural communities not easily reach by the marketers and most importantly to serve as a competitor to break the monopoly of the more financially stable major marketers and provide consumers a wide choice
Kupolokun (2006:4) corroborated the above view when he argued that:
In the past years, the downstream sector of the petroleum products started under a market structure in which price were determined by the interplay of the forces of supply and demand. Then, the product market was dominated by the multinational oil companies until 1973 when the government introduced uniform pricing of petroleum products in order to ensure even distribution of products nationwide. In 1975, the Petroleum Equalization Fund (PEF) was established to deal with the problem of cost differentials arising from the transportation of petroleum products to various parts of the country, based on the uniform pricing policy. The introduction of the independent marketer’s scheme in 1978 broke the dominance of the multinationals.
Edoreh (1997) shared the above view by observing that in 1979, a year after the
scheme of independent marketers was introduced, there were not more than 20 (twenty)
independent marketers. By 1993, the number had risen to 1000. Today, the indigenous
independent marketers are well over 7,948.
Similarly, Ekerete (2003:89) subscribed to the above view when he contended that:
205
The appointment of independent marketers by the government is a right move in the right direction. These marketers share of the business mainly in the distribution of PMS (Petrol and HHK (Kerosene) in the rural and riverrine areas, which had been neglected by major marketers. Though the scarcity of petroleum products is still experienced in the country, the blame inclines more to NNPC and PPMC but this did not completely exonerate the marketers who are accused of product adulteration, diversion, hoarding and smuggling across the country’s boarder for higher profits. Independent marketers though more in number than their major counterparts generally have outlets with low storage capacity.
In the same vein, Ehinomen et al (2012:233) observed that as “a measure of the
growing involvement of the indigenous petroleum products marketers in the economic
development process of Nigeria, it is interesting that in 1981, they accounted for less than
half- per cent in terms of volume of petroleum products marketed in Nigeria”. By 1998,
they had captured about 25 per cent of the market. Today, they account for nearly 40 per
cent of the volume of products marketed in country.
He further observed that these indigenous independent marketers are competing with
the established big (foreign) multinational enterprises usually referred to as the major oil
marketers comprising:
- Mobil Oil Nigeria Plc
- Mrs. Nigeria Plc
- Total Nigeria Plc
- Conoil Nigeria Plc
- African Petroleum Plc
These six major oil marketers control about 60 per cent of the market (Ehinomen,
2012:233).
Following the Obasanjo’s reform agenda in 2000 of the downstream oil sector, the
importation of petroleum products was extended to independent marketers, thus,
206
abolishing the monopoly of NNPC on importation of fuel and the introduction of PPPRA
in 2003 to oversee the management and administration of importation of refined
petroleum products in Nigeria. Starting from 2006, different independent marketers
registered with PPPRA for the importation of fuel. 6 registered in 2006, 36 in 2007, 49 in
2009 and 128 in 2011. Detail of the above marketers from 2006-2011 are documented at
the PPPRA directory under the PSF scheme as shown in Appendix IV. Worse still, these
independent marketers constitute themselves into a “Cabal” who are product of corruption
and are engaged in all manner of shady deals. However, some of them marked with
asterisks such as NNPC, Conoil Plc, Mrs. Oil Nigeria Plc, Mobil Oil Nigeria Plc and Total
Nigeria Plc are not independent marketers, but major marketers. Others not mentioned
above are independent marketers.
All these marketers participated in the PSF scheme and source their petroleum
products from foreign man power. Statistics of foreign countries where these independent
marketers import fuel and the quantity of petroleum are not properly and systematically
documented by PPPRA and other governmental agencies, but PPPRA documented PMS
country’s origin for 2010, while HRARC in the course of their probe documented from
2009 -2011, as shown in tables 6.7 and 6.8 respectively.
207
Table 6.6: Volumes imported by NNPC/independent marketers based on source (summary in 2010) S/NO. COUNTRY ORIGIN PMS (LTRS) HHK (LTRS)
1 NNPC/PPMC (Sources not
available) 679,805,778.31 168,121,684.00
2 BELGIUM 50,462,441.49 0
3 ESTONIA 36,138,728.35 0
4 FRANCE 107,960,853.40 0
5 ISRAEL 28,769,641.01 0
6 LATVIA 25,445,458.91 0
7 LITHUANIA 10,694,842.43 0
8 NETHERLANDS 188,604,619.40 0
9 UNITED KINGDOM 40,752,476.40 0
TOTAL 1,168,634,839.69 168,121,684.00
Source: Adapted from PPPRA Monthly Review of Operation Activities, 2010, http://abcpages.de/www/ downstream+nigerian+petroleum+sector, 05/06/2014.
From table 6.6, independent marketers in 2010 imported 50, 462,441.49 PMS litres
from Belgium, 36,138,728.35 PMS litres from Estonia, 107.960,853.40 from France,
28,769,641.01 from Israel, 25,445,458.91 from Latvia, 10,694,842.43 from Lithuania,
188,604,614.40 from Netherlands and 40, 752,476.40 from United Kingdom.
Data in table 6.7 details some other foreign countries not captured in table 6.6, where
independent marketers in Nigeria sourced refined petroleum products between 2009 and
2012. These additional countries are Venezuela and India. Others are captured in table 6.7.
208
Table 6.7: PMS Country of Origin in Nigeria and Other Transactions from 2009-2012
PD
T
Da
te o
f D
isch
arge
MV
BL
Po
rt o
f D
ate
Co
un
try
ori
gin
Ma
rke
t o
f o
rig
in
Mo
the
r ve
sse
l
Da
ug
hte
r ve
sse
l
Por
t of t
rans
hipm
Ent
.
DV
BL
Dat
e
Dis
cha
rge
Je
tty
De
po
rt
Sh
ore
ta
nk
Qty
Sta
rt p
eri
od
En
d P
PMS 1 3/2/09 28/12/10 Amua - Bay
Venezuela A-Z Pel
MT Alpine Magnolia Sea
MT Okhotsk
Offshore Lagos
6/2/1 1 Integrated Oil Jetty Apapa
Ever Oil 9,601,9 15.00
I4/I2/ 10 15/1/11
HHK 25/4/09 17/3/09 Amua - Bay
Venezuela A-Z Pel
MT Faithful
MT Pokatfinn
Offshore Cotonou
4/4/09 Waziri Jetty Apapa
A-Z Depot
6,064,6 25.00
1/3/09 31/3/09
HHK 26/4/09 17/3/09 Amua - Bay
Venezuela A-Z Pet
MT Faithful
MT Arcturus
Offshore Cotonou
1 0/4/09 Waziri Jetty Apapa
A-Z Depot
6,163,5 78.00
1/3/09 3J/3/09
HHK 7/5/09 17/3/09 Amua - Bay
Venezuela A-Z Pet
MT Faithful
MT Treasure
Offshore Cotonou
1 0/4/09 Waziri Jetty Apapa
A-Z Depot
6.163, 578.00
1/3/09 31/3/09
FMS 3/8/10 29/6/10 Amste- rdam
Nether Lands
A-Z Pet
MT Baltic Faith
MT Valor Offshore Lagos
27/7/10 Ibru Jetty Ibafon
Integ rated
11,081, 131.00
1 7/7/10 15/8/10
209
PMS 18/8/10 29/6/10 Amster-dam
Nether Lands
A-Z Pet
MT Baltic Faith
MT Valor Offshore Lagos
27/7/10 Ibru Jetty Ibafon
Integ rated
15,980, 418.00
14/7/10 15/8/10
PMS 26/8/10 29/6/10 Amster-dam
Nether- Lands
A-Z Pet
Ml Baltic Faith
MT Valor Offshore Lagos
5/8/10 Ibru Jetty Ibafon
Integ rated
9,319,9 20.00
14/7/10 15/8/10
PMS 28/8/10 29/6/10 Amster- dam
Nether- Lands
A-Z Pet
MT Baltic Faith
MT Valor Offshore Lagos
22/8/10 Ibru Jetty Ibafon
Integ rated
3,815,2 55.00
14/8/10 15/9/10
PMS 21/1/11 28/12/10 Amster- dam
Nether - Lands
AP MT Citron MT Crete Offshore Lagos
16/1/11 Ibru Jetty Ibafon
Zenon 21,733, 518.10
14/12/10 I5/J/1I
PMS 4/2/J 1 28/12/10 AP MT Citron MT Ocean Pearl
Offshore Lagos
13/1/11 Ibru Jetty Ibafon
Zenon 16,360, 806.77
14/12/10 15/1/11
PMS 15/11/10 23/10/10 Ghent Belgium AP MT Tristar Dubai
MT Nicos To mas os
Offshore Lagos
11/11/10 Ibru Jetty Ibafon
Zenon 21,526, 983.50
14/10/10 15/11/10
PMS 23/11/10 23/10/10 Ghent Belgium AP MT Tristar Dubai
MT Crete Offshore Lagos
13/1/11 Ibru Jetty Ibafon
Zenon 20,996, 835.00
14/10/10 15/1 1/10
PMS 10/1/10 18/11/09 Paldiski Estonia AP MT Chance
MT Vera Cruz
Offshore Cotonou
27/12/09 Ibru Jetty Ibafon
Zenon 21,434, 243.00
15/10/10 18/10/10
210
PMS 10/1/10 18/12/09 Paldiski Estonia AP MT Chance NA Offshore Cotonou
27/12/09 Ibru Jetty Ibafon
Zenon 17,081, 990.00
15/10/10 18/10/10
PMS 23/10/11 11/1/09 Sikka India Folawiyo Energy
MT NS Asia MT Manuela Bottigueri
Offshore Lome
20/10/10 Yinka
Folawiyo Jetty
Folawiyo 41,974, 360.00
16/9/11 22/9/11
PMS 23/10/11 11/1/09 Sikka India Folawiyo Energy
MT NS Asia MT Kronborg
Offshore Lome
20/10/10 Yinka Folawiyo Jetty
Folawiyo 41,414, 436.. 5 8
16/9/11 22/9/11
PMS 14/5/11 23/4/1 1 Amster-dam
Nether Lands
Folawiyo Energy
MT
Silvaplana
MT High Enterprise
Offshore Cotonou
8/5/11 Yinka Folawiyo Jetty
Folawiyo 41,414, 254.00
20/4/1 1 28/4/1 1
PMS 18/5/11 23/4/11 Amster-dam
Nether Lands
Folawiyo Energy
MT
Silvaplana
MT High
Enterprise
Offshore Cotonou
11/5/11 Yinka Folawiyo Jetty
Folawiyo 41,166, 192.00
20/4/11 28/4/11
PMS 22/5/11 23/4/1 1 Amster-dam
Nether Lands
Folawiyo Energy
MT Silvaplana
MT High Prosperity
Offshore Cotonou
16/5/11 Yinka Folawiyo Jetty
Folawiyo 41,220, 354.00
20/54/1 1 28/4/11
PMS 3/7/09 18/6/09 Amster-dam
Nether Lands
Folawiyo Energy
MT Wildebeest
NA NA 18/6/09 Nispan Jetty
Folawiyo 45,154, 621.00
1/6/09 30/6/09
PMS 16/6/09 31/6/09 Rotter- dam
Nether Lands
Folawiyo Energy
MT Admiral
NA NA 31/6/09 Nispan Jetty
Folawiyo 46,417, 450.00
14/6/09 15/6/09
Source: Adapted from House of Representatives Ad hoc Committee Report (2012:139-140), http://www.africa-confidential.com/resources/1/uploads/documents/Farouk_ Lawan_Subsidy_Probe_Report.pdf. 05/01/2014.
211
However, following the indictment of most of these marketers by the House of
Representatives Probe in 2012, the PPPRA pushed 97 briefcase importers away from the
downstream oil sector. The PPPRA later pruned down to 32 the list of companies in the first
quarter of 2013 with NNPC getting the highest allocation -33 per cent. The remaining 31
companies comprising major and independents marketers share 67 per cent (Otedola, 2013).
Table 6.8 shows major/independent marketers outlined by PPPRA in the first quarter of 2013.
Table 6.8: Major and Independent Marketers Outlined by PPPRA in the First Quarter of 2013.
S/N COMPANIES
1. AITEO ENERGY
2. ASCON OIL
3. AVIDOR OIL AND GAS
4. A-Z PETROLEUM
5. BOVAS NIG. LTD
6. CONOIL PLC
7. DEE JONES PETROLEUM AND GAS
8. DOZZY OIL AND GAS
9. FOLAWIYE ENERGY
10. FRESH SYNERGY LTD
11. FORTE OIL PLC
12. FIRST DEEPWATER DISCOVERY LIMITED
13. GULF TREASURE LIMITED
14. HEYDEN PETROLEUM
212
15. IBAFON OIL LIMITED
16. INTEGRATED OIL AND GAS INDUSTRIES
17. IPMAN REFINING AND MARKETING LTD.
18. MOBIL OIL PLC
19. MRS. OIL AND GAS LIMITED
20. MRS. OIL NIG. PLC.
21. NIPCO PLC
22. NORTHWEST PETROLEUM AND GAS LTD
23. OANDO PLC
24. OBAT PETROLEUM LTD
25. RAINOIL LTD
26. RAHAMANIYYA OIL GAS
27. SAHARA ENERGY LTD
28. SHORELINK OIL LTD
29. SWIFT OIL LTD
30. TECHNO OIL LTD
31. TOTAL NIGERIA PLC
Source: PPPRA, Monthly Press Conference, April 26, 2013
The PPPRA to ensure full availability of fuel in Nigeria and the challenges marketers get
accessing credits from banks, has increased the number of PSF participants to over 40. Efforts to
get the additional new members of independent marketers registered by PPPRA prove abortive.
According to unanimous PPPRA official (2014: Interview), the government still recycles those
indicted independent marketers with new company names and new addresses and may be
213
reluctant to release them to the press because they are strategic partners for presidential re-
election. This poses great challenges to new refineries development. However, the official
release from PPPRA gathered by This Day Newspaper in February, 2014 stated that:
The first import permit handled by Stanley, former PPPRA Secretary in the first quarter of 2012, the number of participating companies was reduced from 128 to 42, before it was further reduced to 39 in the third quarter of 2012. The volume of imported products also dropped from 5.036 billion litres in the first quarter of 2012 to 4.20 billion litres in the third quarter of 2012. But due to growing concerns that the inability of these accredited importers to access credits from the banks could fuel another crisis in the system, the PPPRA has expanded the list to over 40 participating companies since 2012 (Alike, 2014:6).
The forgoing shows that independent marketers in Nigeria sourced almost all their
petroleum products from the above mentioned foreign countries. The four local refineries which
would have served as an alternative have been incapacitated by the above independent marketers
to promote fuel importation, which guarantees fast money for them to the detriment of Nigerian
economy.
6.3 CONTROL OF LARGEST DISTRIBUTION OF FUEL IN NIG ERIA BY FOREIGN
OIL COMPANIES
After almost half a century of oil exploration and production in Nigeria, the expatriates
still control the largest distribution of fuel in Nigeria. Until 1973 when the government
introduced uniform pricing of petroleum products nationwide, the petroleum product distribution
chain in Nigeria was completely dominated by the multinational oil companies. These MNOCs
that dominated the distribution of petroleum products and their retail outlets as at September,
1980 are shown in Table 6.9 below.
214
Table 6.9: Multinational Oil companies and retail outlets in 1980.
S/N OIL COMPANIES RETAIL OUTLETS
1. Mobil 338
2. Texaco 400
3. AP 225
4. Total 300
5. National 280
6. Unipetrol 250
7. Agip 195
8. Elf 30
Source: This Week, September, 29th 1986
Some of these companies have changed name, merged and increased number of retail
outlets’ presently. For instance, Mobil (Now Exxon Mobil), Agip and Elf (now Total), Shell
Company of West Africa (now Conoil), African Petroleum (now Forte Oil), Gulf Oil to Chevron
Oil (now Mrs Oil Nigeria) and Unipetrol Nigeria Plc and Agip (now Oando).
Today, the major marketers comprising of six major marketing companies, control the
largest distribution of fuel in Nigeria. These six major marketers are:
• Mobil Oil Nigeria Plc
• Total Nigeria Plc
• Oando Nigeria Plc
• African Petroleum Nigeria Plc
• Texaco Nigeria Plc
• Conoil Plc
As it is always the case with researchers in Nigeria’s oil and gas industry, statistics of
distribution of PMS in Nigeria’s market are not systematically documented either by NNPC, its
215
subsidiary or any of the government agency. But, we started seeing documentation of PMS
distribution in government agencies from 2008. “This lack of record keeping contributed in no
small measure to the decadence and rots the House of Representatives Ad-hoc committee found
in the administration of the PSF scheme during their probe” (HRACR, 2012:5).
According to figure 6.2 on industry report on oil and gas downstream sector in 2008,
“the major oil marketing companies dominated the industry as they account for over 71% of total
petroleum products sold, and have been in the business for much longer than independent
marketers who contributed only 29%” (Agusto & Co, 2008:29).
Figure 6.2: Market share of total sales in 2008
In 2009 also, the Nigerian stock exchange reported the dominance of these six oil majors
in the Nigerian market accounting for 75% of petroleum product distributed in Nigeria.
According to them:
Source: NNPC Statistical Bulletin, 2008
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The Petroleum Marketing Sector as classified by the Nigerian Stock Exchange operates in the downstream sub-sector. These firms engage in importation and distribution of refined petroleum products, lubricants, insecticides and the likes. There are six petroleum marketing companies listed on the floor of the stock exchange in Nigeria. These firms are: Total Oil Nigeria Plc, Mobil Oil Nigeria Plc, Chevron Oil Nigeria Plc, Oando Plc, Conoil Plc, African Petroleum Plc and Eterna Plc. The dominance of these firms in the market has made the Petroleum Marketing Industry market in Nigeria an oligopolistic one. This is obvious as only few marketers (6 major marketers quoted on the floor of the Nigerian Stock Exchange) control about 75% of petroleum products distribution nationwide. (Petroleum Marketing Sector Report, 2009:2).
Figure 6.3 shows the 75% representation of major marketers vis-à-vis independent
marketers on the distribution of petroleum product in Nigeria in 2009.
Figure 6.3: Market share of total sales in 2009
Source: Nigeria Stock Exchange Report 2009
In corroborating this, data in Table 6.11 on distribution of petroleum products in 2009
from NNPC shows that major marketers distributed 1,543,754 fuel, independent marketers
distributed 643878 and NNPC filling stations sold 140,131 of petroleum products. All the above
PMS distribution is stated quite explicitly in the below Table 6.10.
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Table 6.10: Distribution of Petroleum Products by Companies in first quarter of 2009
Companies Products ‘000 Litres PMS DPK AGO FUEL OIL African Pet 454,054 36,985 26,918 N/A
Conoil N/A N/A- N/A- N/A
Mobil 92,594 1,783 2,004 -
Chevron 183,005 4,884 17,578 132
Total 426,613 11,387 52,930 2,311
Oando 211,357 30,861 47,912 2,345
NNPC Retail 140,131 21,338 23,667 -
Major Markets 1,543,754 107,238 171,009 5,182
Independent markets 643,878 89,876 89,837 49,943
Aggregate 1,702,060 161,320 216,395 53,198
Source: NNPC and Mars Research Computation, 2009.
For the period of 2010 and 2011, the distribution of petroleum products were fraught with
endemic corruption and entrenched inefficiency. Much of the PMS claimed to have been sold by
independent marketers was actually not sold. This led to public outcry which precipitated the
probe of House of Representatives Ad-hoc Committee on fuel subsidy in 2012, which indicted
most of these independent marketers for fraud. Most of them are today, as earlier stated in the
previous chapter, facing different charges in different courts in Nigeria being instituted by anti-
corruption agencies, EFCC.
This negatively impacted on the correct volume of PMS distributed in Nigeria by
major/independent marketers between 2010 and 2011. For instance, the data made available by
PPPRA in 2010 erroneously placed independent marketers above major marketers in distribution
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of PMS in Nigeria. According to the data, major marketers such as AP sold 100,191,274;
Chevron 102,633,763; Conoil 44,934,313; Mobil 47,127,713; Oando 115,032,681 and Total
89,496,949 (PPPRA, 2010:4). The total fuel sold by these six major marketers stood for
499,414,693, while the independent petroleum marketers sold 511,993,675 and finally NNPC
sold 21,560,602. This implies that the independent marketers distributed more fuel than the
major marketers in 2010. Full details of these sales by major and independent marketers as
explained above, are shown in table 6.11.
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Table 6.11: market share of local deliveries/sales by marketers groups (litres and Percentage) MARKETERS PMS % AGO % HHK % ATK %
AP 100,191,274 8.14 11,257,513 3.74 3,260,674 1.86 8,595,017 17.94
Chevron 102,633,763 8.34 6,469,056 2.15 1,515,899 0.86 7,852,334 16.39
Conoil 44,934,313 3.65 20,117,800 6.68 7,985,080 4.55 3,821,000 7.97
Mobil 47,125,713 3.83 969,000 0.32 416,340 0.24 0 0
Oando 115,032,681 9.34 16,158,251 5.36 1,884,300 1.07 2,363,500 4.93
Total 89,496,949 7.27 11,515,047 3.82 3,403,200 1.94 10,905,281 22.76
IPMAN 511,993,675 41.59 197,883,575 65.68 146,816,117 83.59 14,383,072 30.01
NNPC 219,560,602 17.84 36,901,581 12.25 10,346,587 5.89 0 0
SUM TOTAL 1,230,968,970 100 301,271,823 100 175,628,197 100 47,920,204 100
Source: Adapted from PPPRA (2010) Facts on Nigerian Downstream Petroleum Industry: A monthly Review of Operational Activities, http://abcpages.de/.../downstream+nigerian+petroleum+sector 05/4/2014.
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However, from NNPC statistical bulletin in 2010 quoted in Ehinomen and Adeleke
(2012:239), “67 per cent of the total sale of petroleum products are usually undertaken by
the major (foreign multinational) Oil Companies in 2010, while the independent
marketing companies (indigenous) usually sell the remaining 33%”. In 2011 and 2012,
“these six majors marketers form about 70% of the distributive trade while independent
marketers take care of the rest” (Udoh, 2013:1). In 2013, according to the PPPRA,
“NNPC now imports 33 per cent of petroleum products into the country while
major/independent marketers are responsible for the remaining 67 per cent” (Oketola,
2013:1).
On the part of retail facilities which contribute to the sales of petroleum products,
the PPPRA conducted a census in 2006 of the whole retail outlets in the six geo-political
zones owned by major marketers and independent marketers in Nigeria. This is
represented in Table 6.12 and 6.13.
Table 6.12: Nationwide retail outlets 2006 census summary of distribution by zone
Geo-political zone Marketer type Major
Marketer type Independent
Total No. of outlets
North Central 355 1318 1673 North East 163 726 889
North West 265 1023 1288
South East 194 1227 1421
South-South 224 1519 1743
South West 1017 2135 3152
Total 2218 7948 10166
Source: Adapted from Petroleum Products Pricing Regulatory Authority, http://www.pppra.nigeria.org. 05/08/2013.
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Table 6.13: Nationwide retail outlets 2006 census summary of distribution by state
State Number of Outlets
Major Independent Total
Abia 46 461 507
Adamawa 42 104 146
Akwa-Ibom 25 484 509
Anambra 27 141 168
Bauchi 23 149 172
Bayelsa 5 45 50
Benue 54 255 309
Borno 37 253 290
Cross River 26 148 174
Delta 10 250 260
Ebonyi 13 98 111
Edo 75 307 382
Ekiti 28 123 151
Enugu 53 269 322
Federal Capital Territory 42 110 152
Gombe 19 58 77
Imo 55 285 313
Jigawa 24 75 99
Kaduna 75 258 333
Kano 75 201 276
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Kaduna 31 165 196
Kebbi 24 158 182
Kogi 42 169 211
Kwara 53 245 298
Lagos 462 306 768
Nassarawa 37 118 155
Niger 76 208 284
Ogun 193 560 753
Ondo 89 285 374
Osun 83 359 442
Oyo 162 502 664
Plateau 51 213 264
Rivers 83 285 368
Sokoto 18 99 117
Taraba 23 91 114
Yobe 19 71 90
Zamfara 18 67 85
Total 2218 7948 10166
Source: Adapted from petroleum Product Pricing Regulatory Authority, http://www.pppra.nigeria.org, 5/08/2013.
From the above Tables 6.12 and 6.13, the major marketers control 2218 while the
independent marketers have 7948 outlets. The NNPC has 14 mega stations nationwide.
But the independent marketers having the highest number of retail outlets more than the
major marketers, do not translate to control of largest distribution of fuel in Nigeria. The
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six major marketers control the largest volume of fuel distributed in Nigeria based on the
above statistics we outlined.
The phenomenal growth of retail facilities by these major marketers from 2006
census to 2008 of additional 142 retail facilities are shocking. Table 6.14 shows detail of
the six oil major marketers and the additional retail facilities based on 2008 data.
Table 6.14: Major Players Retail Facilities
COMPANY NO OF RETAIL OUTLETS (DEPOT)
MOBIL 228(4)
OANDO 485(6)
TOTAL 500(5)
CHEVRON 381
AP 500
CONOIL 266
TOTAL 2,360
Source: Agusto & Co (2008) Industry Report/Oil and Gas Downstream, http://www.agusto.com/research. php. 10/04/2014.
At this juncture, it is pertinent to state that these multinational oil marketers belong
to a trade association called the Major Oil Marketers Association of Nigeria (MOMAN).
Each of these major marketers has exclusive technical partnership with overseas
associates. Product license agreements provide them with technical information relating to
blending, distribution and marketing of industrial lubricants. In addition, the agreement
grants them access to modern technology and manufacturing process that meet
international standards. “The foreign partners provide technical knowledge to support
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research and development and also provide operational back up as may be necessary for
the products” (Agusto and Co, 2008:29).
Also, the major marketers have good credit standing on account of the credit
position of their major shareholding companies. Their relationships with related
companies in the upstream sector also improve their market perception and it is relatively
easy to obtain credit when necessary. In addition, “being quoted on the stock market (six
of them) provide them ready access to the capital market” (Agusto & Co, 2008:30). Table
6.15 provides a summary of each company’s business operations and line of product.
Table 6.15: Basic information on major players
Company Major shareholder No of
Employees
Related Parties
total Total Societe Annoyme 45.24%
Elf Aquitaine S.A. 16.48%
Enifor Limited 8.12%
483 • Total Outre Mer
• Total International
• Elf Petroleum
• Total Lubrifiants
Oando Ocean and Oil Investment Limited
24.45%
432 • Oando Supply and
Trading Limited
• Oando Trading
Limited
• Oando Energy
Services Limited
• Oando Gas and
Power
• Gaslink
• Oando Lekki
Refinery Company
• Oando Properties
• Oando Exploration
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and Production
Mobil Mobil Oil Corporation USA 60% 219 • Exxon Mobil
Corporation USA
Conoil Conpetro Limited 74.40% 341 • Conoil Producing
Limited
• Equitoria Trust Bank
Limited
• Globacom Mobile
Limited
• Vixen Enterprises
Limited
• Southern Air
Limited
Chevron Chevron Corporation 60% 258 • Chevron Nigeria
Holdings Limited
• Texxaco Overseas
Holdings Inc
• Chevron Texaco
Global Trading
AP Asset Management Nominees
Limited 16.19%
Zenon Petroleum and Gas Limited
30.34% ZSL A/C FOZ 11.71%
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Source: Agusto & Co (2008) Industry Report/Oil and Gas Downstream, http://www.agusto.com/research .php. 10/04/2014.
From the above analysis, it is clear that MNOCs control the largest distribution of
PMS in Nigeria despite the corrupt distortation of facts between 2009 to 2012 by PPPRA
as clearly stated in the above chapter. However, since most of the Nigerian ruling elites
have shares in most of these MNOCs, these foreign oil companies will still be controlling
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the largest importation and distribution in Nigeria for a long time (Shaibu,2013 and
Emiko, 2013).
6.4 EXPATRIATES DOMINANCE AND THE CHALLENGES OF INTEGRA TION OF
R&D IN NIGERIA’S PETROLEUM TECHNOLOGY DEVELOPMENT, 1999 -2013
For the greater part of the last four decades, the multinational oil corporations in
Nigeria dominate the up and downstream sector of oil and gas industry. With particular
reference to downstream oil sector, virtually everything that is needed is imported from
abroad. NNPC does not appear to give serious attention to R&D which is the main avenue
for stopping the above importation of technology from abroad. The NNPC directors, who
represent the ruling elites, are interested in accumulation of wealth for their masters, the
effect of domination of expatriates’ in fuel importation and distribution with its
consequent undermining of R&D in Nigeria’s petroleum technology development, are not
their concern. This explains why the downstream oil sector has remained in a pitiable state
since 1960 (Akinyede, 2014: interview). This, of course, has posed the greatest challenges
for R&D and its consequent integration in Nigeria’s petroleum technology development.
What, then, is R&D? Is it really necessary for technological development?
According to Manual (2012:8) Research and Development (R&D) is defined “as a
creative work undertaken on a systematic basis in order to increase the stock of
knowledge, including knowledge of man, culture and society, and the use of this stock of
knowledge to devise new applications”. R&D produces technology, which is a form of
knowledge that is used to enhance the productivity of the factors of production, to spur
economic growth, address societal concerns such as health and environment, and
ultimately improve living standards (OECD, 2003).
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Similarly, Kim (2011) in agreement stated that one of the most efficient methods
to raise competitiveness in an economy for continuous economic growth emanates from
R&D activities. R&D involves both absorbing existing knowledge created from outside
the country as well as creating new knowledge directly. The critical role of technology
and innovation suggest why the developed and emerging countries must continue to
increase their spending on R&D activities. Helpman (1997) corroborated the above fact by
concluding that total factor productivity of a country depends not only on how much R&D
it does, but also on how much R&D is done in other countries with which it engage in
trade and investment based on the cross-country survey carried out.
In the same vein, Akinwale et al (2012) stated that it is no longer news that R&D
does not play a simple role in the development of a country. The world leaders as well as
the emerging economies have engaged in various in-depth R&D activities which enabled
them to continuously improve the standard of living of their citizen and protecting them
against terrorism/war. According to them:
In three decades, Korea was able to achieve what it took more than a century for the Western industrial countries to accomplish as a result of rigorous efforts concentrated on R&D and innovation. Advanced countries like UK and United States emerged from an agrarian economy into an industrial superpower in the 19th and 20th century respectively as a result of serious investment in R&D (Akinwale et al, 2012:908-909).
Griliches and Clark (1984) presented the results of a study of productivity growth
and R&D in the 1970s using data on narrowly defined “business units” within a firm. The
data used were drawn from the PIMS project of the strategic planning institute (SPT) in
USA and the results show that there is a significant relationship between R&D and the
growth of productivity using total factor productivity as the dependent variable, the
estimated marginal product or rate of return is about 18 per cent. This is collaborated by
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OECD report (2001) that argued that R&D helps increase the rate of innovation in larger
countries, while in smaller countries, it may primarily facilitate the transfer of technology
from abroad. The country studies conducted suggest that a 1% increase in the stock of
R&D leads to an average rise in output between 0.05 to 0.15%.
Furthermore, Adiele (2009:20), observed that:
It is through R&D that raw materials are transformed into industrial materials; equipment is modified, adapted or new one generated to suit the environment for better operation; process is modified to accept abundantly available internal resources, skills are improved for greater efficiency which culminate in higher LOD and improved productivity.
Given the above outlined relevance of R&D for domesticating technology for
enhance economic development, the MNOCs in Nigeria deliberately and wisely sideline
Nigerians to maximize the profits that arise from R&D innovations. Even the passing into
law of local content Act 2010 in Nigeria which is defined as, the development of local
skills, technology transfer, and use of local manpower and local manufacturing, did not
stop expatriates domination in oil and gas industry. The above point was attested to by
Joab-Peterside (2012), who, among other things, stated that:
After 53 years of oil production, Nigeria is lagging behind other oil-producing nations such as Brazil and Malaysia in areas of local content and cross-sectorial linkages. Thus the oil sector has remained virtually an enclave with little or no linkage with the rest of the domestic economy. Due to the technical nature of the oil industry, the sector’s direct contribution to the overall level of employment has continued to remain low. Also, not only does the sector export virtually all its output, it also imports virtually all its requirement (Joab-Peterside, 2012:61).
He further noted that the oil industry has resulted in little or no
technological transfer since virtually all the expertise and technical personnel
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required for up and downstream operations are imported, because the required
training of local personnel has been rather ineffectual owing to the great secrecy
which surrounds oil operations.
The above view corroborated with that of Akhaine (2012:39), who observed
that:
The Nigerian state by virtue of its sole reliance on oil is a rentier state. The state collects rents from sales of oil and is merely distributed through the bureaucratic mill from where it is appropriate, misappropriated and stolen outright, unlike Algeria and Angola. Local Content to the production process is negligible. It explains the dependency on expatriates in the sector and the country’s continuing reliance on import of refined oil products into the country to the detriment of the country’s current account balance.
Similarly, Chima et al (2002) evaluates the strategy and effort of training adopted
by Nigerian government as a means of transferring the acquisition of oil technology by
Nigerians. They argued that the assessments of the nature of the transfer and acquisition of
oil technology in the Nigerian oil industry show that learning of technology was initiated
and achieved through the Petroleum Technology Development Fund (PTDF). The fund
provided scholarships for Nigerians to study engineering and technology courses within
the country and abroad. In relation to technology development, they observed that:
Foreign oil company management resists the transfer of technology for use in the processing of crude and gas into petroleum product as part of its effort to avoid displacement in the upstream and downstream areas. If an oil exporting government establishes an export refinery, not only does the oil companies lose a portion of their crude supply and get displaced in the refining industry, but their international product markets may be penetrated and taken over by the “newcomer” state oil company. This threat to market control is especially serious since state oil corporation have access to crude at no more than the set production, and therefore can afford to engage in price competition (Chima et al., 2002:21).
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The local content which is an effort at the domiciliation of most of the operations
of oil and gas activities in Nigeria showed how abysmally low the level of participation of
indigenous personnel had been over the years in the oil industry. Akinyosoye (2009)
captured these concerns thus:
The official figures of 15% local content by the Directorate of Petroleum resources (DPR) in 2009, which though doubtful, shows that the problem is a serious one when compared with other oil and gas producing countries with far lower reserve base like Brazil (75%), Norway (40%), and Indonesia (20%) (Akinyosoye, 2009:159).
He noted that the Nigerian local content is defined as the total composite value
added in the country’s oil and gas activities by using Nigerian labour, goods and services
without compromising health, safety and environmental standards. He further noted that
the law seeks to measure the percentage of the money retained in the domestic economy
from the oil and gas operations in the country. The basic premise for the local content
advocacy is to establish and sustain effective links between the industry and other sectors
of the economy to ensure that Nigeria derives maximum economic benefits from the
operations of her oil and gas industry. What, then, are the challenges of integration of
R&D in petroleum technology development in Nigeria? They are:
Government Policy: The first challenge of R&D integration in Nigeria’s oil and
gas industry is that government policy does not encourage R&D in Nigeria. Till date,
there is no law in Nigeria requiring MNOCs to adopt innovations generated by Nigerian
universities and R&D institutions. The law requiring MNOCs to contribute to the R&D
activities in Nigeria are not strictly monitored. Besides, poor funding of R&D sector, with
less than the required UNESCO approved 1% of the Federal Government Gross Domestic
Product (GDP) each year speaks volumes of Nigeria government neglect. Since 1999, the
R&D sector has not been able to get the required funding needed to place it at par with
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other sectors, and therefore inhibits, not only its contributions to R&D in Nigeria, but also
undermines the sector’s competiveness globally. For instance, “Nigeria’s R&D allocation
is US$0.582 billion (PPP) in 2007 which is approximately 0.0004% of the world’s
expenditure on R&D as at 2011. This figure represents 0.2% of R&D expenditure as
percentage of the national GDP” (African Innovation Outlook, 2010). Compare this, for
instance, with countries like “South Africa that commits 0.73% of its GDP in 2001 and
0.93% in 2007; Tunisia 0.53% in 2001 and 1.02% in 2005; Uganda 0.4% in 2008;
Mozambique 0.51% in 2008; Botswana 0.53% in 2008 etc” (UNESCO, 2010:280).
Therefore, for R&D to make a meaningful progress in oil and gas industry, the Nigerian
government policy must be tailored towards making sure that the MNOCs contribution
towards the development of R&D in Nigeria universities and R&D institutions are
monitored. Also, MNOCs should be compelled to adopt innovations generated by the
above institutions.
Petroleum Technology Development Fund (PTDF): PTDF also constitutes another
challenge of R&D integration in Nigeria’s oil and gas industry. “PTDF was formerly
known as the Gulf Oil Company Fund Act. It was established by Act 25 of 1973 as
amended in Cap 15 of 2000 to replace the former Gulf Oil Company Training Fund Act
1964 for the purpose of training and educating Nigerians for the oil and gas industry.
Between 1973 and 2000, PTDF functioned as a desk in the Department of Petroleum
Resource (DPR), but finally made a full fledge government agency in September 2000”
(Saheed, 2013:2249). However, since the inception of PTDF in 1973, it has done little or
nothing to enhance technological development. The mission of PTDF is stated as:
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To train Nigerians to qualify as graduates, professionals, technicians and craftsmen in the fields of engineering, geology, science and management in the oil and gas industry in Nigeria (www.ptdf.gov.ng).
Also, the mandate of PTDF is stated as:
The fund shall be dedicated for the purpose of development, promotion and implementation of petroleum technology, manpower development through research and training of Nigerians as graduates, professionals, technicians and craftsmen in the relevant fields in the industry (www.ptdf.gov.ng).
Furthermore, the vision is stated also as:
To serve not only as a vessel for the development of indigenous manpower and technology transfer/ acquisition in the petroleum industry but also to make Nigeria a human resource centre for the West Africa sub-region (www.ptdf.gov.ng).
From the above mission, mandate and vision, it is quite clear that PTDF is not
properly organized or focused. Whereas it is supposed to facilitate petroleum technology
development through knowledge acquisition and capability-building, the agency
incorporates itself as an arm of the ministry of education freely sponsoring knowledge
acquisition. This has made many Nigerians to have uncountable numbers of M.Scs. and
Ph.Ds. in petroleum related courses that cannot transform the oil and gas industry since
‘forty one’ (41) years inception of PTDF. No wonder Adiele (2009:11) noted that “PTDF
appear to be funding knowledge acquisition whereas technology-development is about
application of knowledge”. Acquisition of knowledge (education) is necessary but not
sufficient for improving technology –development. In fact, knowledge without application
is as good as no knowledge in technology-development. That explains why Nigeria
depends on the multinational oil corporations for decades on the servicing and
maintenance of the four state-owned refineries in the downstream oil and gas sector
because of excessive concentration of PTDF on knowledge acquisition instead of
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knowledge application. For instance, table 6.16 details PTDF scholarship scheme overseas
from 2002 to 2010.
Table 6.16: PTDF Programme: Oversea scholarship scheme (OSS) and local scholarship scheme from 2002-2010.
S/N OVERSEA SCHOLARSHIP SCHEME (OSS)
Courses No of participants
1. Engineering 490
2. ICT 130
3. Geology/Geosciences 141
4. Environment Science 108
5. Energy Courses 72
6. Offshore Related Courses 61
7. Others 141
8. Total No. of Beneficiaries Trained 1,143
Source: Muttaqha et al (2010), Appraisal of PTDF Intervention Implementation Strategies: Challenges and Prospects for Sustainable Development pp. 277-307
Also, in the OSS, PTDF says 761 scholars have graduated with M.Sc. and 116
with Ph.D degrees and 341 Masters Degree scholars have completed the programme at the
end of the year 2013, while 287 Ph.Ds would be produced in the next two year (PTDF,
2013).
Data in table 6.17 also shows PTDF local scholarship scheme, that is, in Nigeria
universities. While 50 students were sent to university of Port-Harcourt, 48 were sent to
university of Benin, 40 to University of Ibadan, 40 to University of Nigeria, 39 to
Ahamadu Bello University etc. PTDF said 351 students were awarded local scholarships
in 2013 (PTDF, 2013).
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Table 6.17: PTDF local scholarship scheme from 2002-2010.
S/N LOCAL SCHOLARSHIP SCHEME (LSS)
Universities No of participants
1. University of Port-Harcourt 50
2. University of Benin 48
3. University of Ibadan 40
4. University of Nigeria 40
5. Ahmadu Bello University 39
6. University of Maiduguri 27
7. University of Jos 201
8. Bayero University 20
9. University of Uyo 11
10. Usman Dan Fodio University 10
Total No. of participants Trained 305
Source: Muttaqha et al (2010), Appraisal of PTDF Intervention Implementation Strategies: Challenges and Prospects for Sustainable Development pp. 277-307
PTDF also extends its services to infrastructural development in terms of schools,
road, etc. For instance, the executive secretary of PTDF, Dr. Oluwole Oluleye at the 2013
ministerial platform told his audience that “fund for the establishment of the federal
polytechnic Ekowe and the construction work has progressed from 45 per cent to 90 per
cent completion” (PTDF, 2013). He further stated that in Ekowa, construction of Hostel
‘B’ has reached 94% completed; a library building and construction of road ‘10’ 100%
completed. In 2011, 5 researchers were awarded grants. In 2012/2013, also 5 researchers
were awarded grants (Oluleye, 2013). This has shown that PTDF has abandoned its
mission mandate to perform the function of ministries of education and works. According
to Aliyu and Osifo (2014: Interviews), If PTDF has remained focus to its intended
purpose, without serving as a tool of exploitation by the ruling Nigeria elites, Nigeria
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would have actualized petroleum technological development. The result of all these are
little or no money on R&D in downstream oil sector, thus culminating in a great challenge
of R&D findings and consequent integration in petroleum technology development in
Nigeria.
Relegation Of Nigeria’s R&D: Relegation of the Nigeria’s R&D of applied
research projects and technical services for the up and downstream oil sector is yet
another challenge confronting R&D integration in Nigeria. Investigation has shown that
MONCs in Nigeria are not ready to adopt innovations generated in R&D institutions. For
instance, as reported by Vaaland et al (2012:5401) who carried out an empirical research
on the relationship between MNOCs and Universities/R&D institutions in Nigeria, they
found out that:
Foreign companies are not ready to adopt and support any studies on enhancing competiveness by local peers either by product or process assessments or through questionnaires, interview, field work or any other means of data collection. Many indigenous companies are not conversant of the need for such, while many of the foreign companies are afraid of the effects on their operational interest as they are not sure of what would happen if the results are contrary to required best practice in the industry.
Foreign oil companies want to maintain their levels of retained earnings and
growth through non-price competition. These MNOCs try to avoid any means of
divulging technological information to researchers and R&D institutions in Nigeria to
protect their business interests. This lack of inter-organizational relationship makes
MNOCs to block integration of R&D in Nigeria’s petroleum technology development.
Hence, dominating in production, refining and distribution in Nigeria’s oil sector. Vaaland
et al (2012:5402) goes further to observe in their findings that:
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Both the industry and university/R&D institution respondents express difficulties in building inter-organizational relationships. The interfaces between the graduate students, researchers and local business community are weak, resulting in weak exchange of knowledge and feedback loops. Some of these can be related to either actor bonds and/or resources ties in that the actor bonds suffer from lack of trust. This is manifested through reluctance from the industry to reveal information which may be published and/or used against the interest of some companies.
He went further to say that the acquisition of technology must be through mutual
cooperation between MNOCs and the host country universities and R&D institutions.
That is why the conscious denial of integration of R&D innovations by Oil Multinational
Corporation is the greatest challenge to Nigerian universities and R&D institutions in
Nigeria that keeps the downstream sector paralysed till date. Vaaland et al (2012:5403)
finally arrived at the following conclusion that:
…technology is something which is acquired through joint ventures with foreign companies, and not an issue that Nigerian firms invest in and not an issue for development within Nigerian R&D institutions and universities.
In the area of technical services, the MNOCs deliberately employ Nigerians as
either contract or causal workers. Very few are employed as permanent workers in very
negligible areas. For instance, available figures indicate that:
While Nigerian Agip Oil Company has 1452 permanent junior and senior employees, 3221 are contract/casual employees. For Chevron, there are 562 permanent, and 2830 casual, while in the case of shell petroleum Development Corporation, there are 3625 permanent as against 17,000 contract/casual employees (Adewumi and Adenugba, 2010:67).
Also, there has been a warning strike by NUPENG on July and August, 2013 in
Nigeria over complete negligence of LC policy by these MNOCs. NUPENG accuses the
MNOCs in Nigeria that “close to 90 percent of Nigerians working in the petroleum
237
industry are either contract, causal or outsourced workers with conditions of work not
commensurate with industry standard and best global practice” (Young, 2013:8). This
implies that 10% of Nigeria’s labour force is engaged full time in the sector.
Worse still, these MNOCs wants everything to be imported from their respective
home countries to avoid engaging Nigerians. For instance, an American oil services
company, Magcobar, who engaged the services of an indigenous clay mining company,
Denchukwu, to supply raw material for preparing drilling mud for exploration and production
companies abandoned the use of the local raw materials in preference to imported mud just
about the time the industry was witnessing expansion (Aliyu, 2012:39).
Domination of R&D in Nigeria by Multinational Oil Company (MNOCs):
Accepting the assertion that “MNOCs have dominated both the petroleum industry
and the search for development (R&D) of the technology for the petroleum industry
throughout the world” (Chima et al., 2012:10), this fact is particularly true of Nigeria’s oil
industry where MNOCs have dominated almost all aspects of oil industry including
Research and Development (R&D). The R&D spending of most of the MNOCs with
presence in Nigeria between 2003 and 2009 are outlined in Figures 6.4 and 6.5.
238
Figure 6.4: R&D Spending of Major MNOCs from 2003-2009
Source: Thuriaux –Aleman, et al., (2010: 31). R&D Investment Trends and the Rise of NOCs
239
Figure 6.5: R&D Spending of Major MNOCs from 2003-2009
Source: Thuriaux –Aleman, et al., (2010: 32). R&D Investment Trends and the Rise of NOCs
The above figures 6.4 and 6.5 show that between 2003-2009, BP spent 17% on
R&D, Chevron 18%, Exxon Mobil 9%, Shell 12%, Total 4%, Petrochina 31%, Petrobras
23%, Halliburton 7%, Statoil 11% etc, with the above R&D centers located outside the
shores of Nigeria. These contrasted sharply with 0.2% of Nigeria’s commitment to R&D.
This implies that this meager fund would not be able to fund any research work, let alone,
developing and commercializing any innovation of R&D in Nigeria. Figure 6.5 below
specify R&D of Nigeria by character of work of 2010 data.
240
Figure 6.6: R&D of Nigeria by character of work.
Source: AIO, 2010 Fig 6.6 shows that Applied and basic researches constitute the large proportion of
the R&D activities in Nigeria with 37.8 and 36.1 respectively. While experimental
research is 26.1. This also implies most of the inventions carried out in the academic
laboratories and research institutes have not been patented and commercialized for
industrial usage for onward transfer into the market.
This lack of attention to R&D in Nigeria by the ruling elites as a result of their
common interest with the MNOCs have given these MNOCs leverage to dominate the
R&D, and leaves Nigeria with no option, than to depend on them (MNOCs) for
production, installation, servicing and maintenance of the up and downstream oil sector
since her independence in 1960. For R&D to achieve its intended purpose in Nigeria, the
local content policy passed into law in April 2010 should be pursued vigorously with the
accompanying increase of R&D funding to at least 1% of the G.D.P. by Nigerian
government. This will help Nigeria to achieve her vision 20:2020 of fuel export dependent
(Emiko, 2014: interview).
241
This study shows the protection of common interest of the Nigerian dominant class
and the MNOCs in a fuel-import dependent economy, which accounted for the dominance
of fuel importation and distribution by the expatriates’, which undermined the integration
of R&D in Nigeria petroleum technology development since 1999. This common interest
between the above mentioned parties makes the Nigerian dominant class not to exact
influence on the MNOCs. The Nigerian ruling elites are essentially rent-seekers who lack
the competitive financial capacity to engage the MNOCs as equals in the oil industry. The
consequences of this, is that they are satisfied with the ‘easy money’ they make through
their cronies to whom they award oil blocks and imports fuel from these MNOCs. As a
result of this, these MNOCs in Nigeria have penetrated the executive and the legislative
arms of Nigerian government and have grown accustomed to stopping/blocking policies
that may be detrimental to their overall interest. In fact, state officials are acting the script
of MNOCs inadvertently, thus, merely compradors. This interplay of politics and
economics explains why MNOCs relegate Nigeria’s R&D of applied research project;
frustrate efforts at the passage of Petroleum Industry Bill (PIB); carries their R&D
activities outside the shores of Nigeria and brings them back to service their companies in
Nigeria; frustrate efforts that would mandate them to adopt Nigeria’s R&D and refuse to
transfer oil technology. With the following analysis, this study accepts the hypothesis that
expatriates dominance of fuel importation and distribution undermined the integration of
Research and Development (R&D) in Nigeria’s Petroleum Technology Development
between 1999-2013.
242
CHAPTER SEVEN
SUMMARY, CONCLUSION AND RECOMMENDATIONS
7.1 Summary of Findings
This study set out to evaluate the effects of the political economy of fuel
importation on the development of new refineries in Nigeria between 1999 and 2013.
Existing scholarships highlight the relationship between fuel importation and obstacles of
deregulation of the downstream oil sector. Others stress the impact of fuel subsidy and
government regulated pricing as major factors that discourage investors in the
development of new refineries. However, the neglect of building new refineries has not
been related to the impacts of the political economy of fuel importation in which class
interest and power relation factors of the dominant class was implicated. In this light, the
specific objectives of the study were to:
1. Ascertain whether the allocation of fuel import licenses to independent marketers
discouraged investors in the development of new refineries in Nigeria.
2. Establish whether fuel importation probes failed to adequately define the
challenges hindering the development of new refineries in Nigeria.
3. Determine whether expatriates dominance of fuel importation and distribution
undermined the integration of Research and Development (R&D) in Nigeria’s
Petroleum Technology Development.
Accordingly, the hypothesis that guided the study was that:
1. The allocation of fuel import licenses to independent marketers discouraged
investors in the development of new refineries in Nigeria.
2. Fuel importation probes failed to adequately define the challenges hindering the
development of new refineries in Nigeria.
243
3. Expatriates dominance of fuel importation and distribution undermined the
integration of Research and Development (R&D) in Nigeria’s Petroleum
Technology Development.
The study adopted the qualitative method and applied the ex-post-facto research
design. Data for this study were sourced from official documents, textbooks, journals,
magazines, newspapers and internet documents. In utilizing the sources, the subject of
inquiry and the opinions of experts were located from institutional and official documents
such as the federal ministries of petroleum resources, finance, trade and investment,
economic planning, national planning, Central Bank of Nigeria (CBN), Nigeria Police,
Joint Task Force (JTF), the Nigeria Extractive Industries Transparency Initiative (NEITI)
Abuja, Nigerian Maritime Administration and Safety Agency (NIMASA), Independent
Petroleum Marketers Association of Nigeria (IPMAN), Major Oil Marketers Association
of Nigeria (MOMAN), Depot and Petroleum Products Marketers Association (DAPPMA),
Indigenous Ship Owner’s Association of Nigeria (ISAN), Jetties and Petroleum Tank
Farms Owners of Nigeria (JEPTFON), the Economic and Financial Crimes Commission
(EFCC), the Nigerian Customs Service (NCS), the Nigerian Navy (NN), National Bureau
of Statistics (NBS) and the Nigerian Ports Authority (NPA). Further insight was also
gained through unstructured interviews with some senior management staff of relevant
ministries and security agencies, mainly the ministry of Trade and Investment as well as
Economic and Financial Crimes Commission (EFCC).
The Marxian political economy theory was used as a framework for analyzing
political economy of fuel importation and development of refineries in Nigeria, by
focusing on the class interest and power relations in the fuel-import dependent economy.
244
It resulted in the neglect in the four state-owned refineries in Nigeria. Based on qualitative
description and logical induction, the data gathered were analyzed and presented in the
forms of tables, charts, figures and simple percentages. Where and when necessary,
quantitative data were subjected to statistical analysis with the aid of the statistical
packages for the social sciences (SPSS).
The study found that PPPRA which is vested with the powers of allocating fuel
import licenses is indirectly being controlled by the dominant class, who uses the agency
to allocate import licenses on patronage structure to political loyalists, cronies, relatives
and close associates of powers of the day. Thus, various regimes or administrations at the
centre have exploited this indirect control of PPPRA by federal government to satisfy
private and prebendal interests of the ruling class. This was evident in the manner in
which import licenses were arbitrarily issued to cronies/financiers of the ruling People’s
Democratic Party (PDP), strong members of the opposition parties and to different
companies that did not meet established guidelines for importation of fuel in Nigeria. The
politics of fuel allocation short-changed the Nigerian people by rewarding and
empowering selected groups of highly connected individuals with millions of dollars-
worth of PMS subsidy because of their association with the leadership of the country. As a
result, the fuel importing licenses distribution became an avenue of transferring easy
wealth into the private purses of political loyalists, cronies and relatives from the leaders
of the day.
More importantly, it served as the principal instrument of primitive accumulation
by the ruling class. The ruling class that benefited from the patronage allocation of fuel
importing licenses ensures that the four state-owned refineries do not work through
245
sabotage and rampant pipelines vandalisation. They also ensure that new contracts to build
new refineries are frustrated. In fact, several contracts worth hundreds of millions of
dollars have been given to companies doing maintenance on Nigeria’s refineries over the
last 15 years but with little impact on output. This outrageous act of fuel marketers who
want to remain in importing business by all means discouraged several investors in the
development of refineries such as Femi Otedola, CEO of Zenon Petroleum and Gas, who
initially won the bid to purchase the Port-Harcourt refinery offered for privatization;
MNOCs in the upstream oil sector in Nigeria such as SPDC, Exxon Mobil, Total,
Chevron, Agip etc; Chinese and Indian firms who offered to build refineries; 18 local
Nigerian companies who secured licenses in 2004 to build refineries and Nigerian Joint
Ventures group who offered to build six (6) Modular refineries at the cost of US$4.5
billion between 2006 and 2012.
The study also found that through different fuel importation probes, the ruling
class relaxed the PSF guidelines on the prequalification and monitoring to accommodate
their private economic interests. In fact, several billions of US dollars have been lost
through subsidizing PMS with its attendant negative implications on Nigeria’s economy.
For instance, an estimated US $6.8 billion was lost in graft between 2010-2012. Over
deductions involving NNPC for 2007, 2008 and 2009 totalled N35bn. Pipeline
vandalization; sabotage by marketers in collusion with operators of the downstream oil
sector; diversion of subsidized fuel as much as 24 million litres to neighbouring countries;
and a marketer –Venro Energy Ltd declaring fake bills of laden form ‘m’ No. mf475241,
BA No. 03320104910009 which was used in subsidy scheme by the company without any
vessel actually bringing in petrol into the country.
246
Consequently, these institutional probes concentrated on the lapses in fuel
importation without adequate definition of the structural challenges that hindered the
development of new refineries in Nigeria between 1999-2013. These structural challenges
conspicuously omitted by these probes are: report of composition of petroleum matters
board based on private economic interest; report of government policy of subsidy and fuel
regulated pricing scaring investors in the building of new refineries; lack of autonomy of
NNPC to carry out some independent reforms; less than adequate downstream
technological capabilities by Nigeria engineers; government policy of leaving oil
companies in charge of transferring technical know-how to Nigerians; Politicization of
Petroleum Industry Bill (PIB) in the Nigeria National Assembly since 2009 because of
one of its contents – liberalization of the downstream oil sector and ineffective
enforcement of local content Act of less than 20%.
The study further established that expatriates’ dominated fuel importation and
distribution through supply of fuel to NNPC, supply of fuel to Nigerian independent
marketers and control of 67% of fuel distribution in Nigeria. The result is that this has
undermined the integration of R&D in Nigeria’s petroleum technology development. It
has also made Nigerians to depend almost 100 per cent on imported petroleum products.
Besides, the study further observed that the expatriates and the Nigerian ruling class have
a common interest, thereby ensuring that R&D in Nigeria’s petroleum technology
development do not see the light of the day. Over and above these, the R&D is not
receiving the required encouragement from Nigerian government. For instance, Nigerian
government put in 0.2%, less than 1% of the UNESCO stipulation of GDP, and there is no
247
existing law in Nigeria mandating MNOCs to adopt Nigeria’s R&D. This makes the
MNOCs to relegate Nigeria’s R&D of applied research projects and technical services.
The analysis also ascertained that the dominant class in Nigeria does not want the
P.I.B. sent to the Nigerian parliament since 2009 to be passed into law because it will
affect their crude oil exportation and importation of fuel in Nigeria. The bill, among other
things, advocates for the liberalization of up and down stream oil sector in Nigeria.
7. 2 Conclusion
The above findings clearly demonstrate the negative impact(s) of fuel import-
dependent economy by the oil rich Nigeria. Instead of the ruling class ensuring that
Nigerian refineries are in good condition and new ones built to complement the existing
ones for the service of their citizens, billions of dollars are spent without anything to show
for it. This unfortunate situation owes much to how the Nigerian dominant class due to
class interests and power relation factors, sabotage the refineries to encourage importation
of fuel.
Importation of fuel has been reduced by the various regimes or administrations to
an avenue for primitive accumulation of wealth. The successive civilian administration in
power between 1999 and 2013 used allocation of import licenses to strengthen the wealth,
influence and affluence of their political loyalists, cronies and relatives, while excluding
the citizens and their huge expectations. The expectations of Nigerians were that the
inauguration of civil rule would mark a major departure from fuel import-dependent
economy to fuel export-dependent economy, by enthroning transparency and
accountability in the operations of the downstream oil sector in Nigeria. This, however,
has not been the case in the light of November 2010 and February 2012 revelations of
248
high –level grafts in the importation of petroleum products in Nigeria. The non –
transparent, diversion of subsidized fuel to neighbouring countries and different
unaccountable importation of fuel have created room for chronic opportunism and
conspicuous neglect of refineries development in Nigeria.
This observation underscores the theoretical significance of the study, as it offered
a new insight into the dynamics of political economy of fuel importation and neglect of
new refineries development in Nigeria. The conclusion that emerges from the study,
therefore, is that the allocation of import licenses by the ruling class to satisfy private and
prebendal interests underpinned the neglect of new refineries development in Nigeria.
Therefore, if the pattern of allocating fuel import licenses continues to be rooted in
patronage, clientelism and corruption, refineries development will continue to elude
Nigeria and investors will continue to shun downstream oil sector. Nigerian economy will
continue to be fuel import dependent.
In this light, the study accepts the three hypotheses that the allocation of fuel
import licenses to independent marketers discouraged investors in the development of new
refineries in Nigeria; fuel importation probes failed to adequately define the challenges
hindering the development of refineries in Nigeria, and expatriates’ dominance of fuel
importation and distribution undermined the integration of R&D in Nigeria’s Petroleum
Technology Development.
7.3 Recommendations
In the light of the findings and conclusion, the following recommendations are
proffered:
249
1. The Nigerian government, should as a matter of urgency, advance polices that will
lead to private sector-led development of the downstream oil sector (as in Canada),
where 16 functional refineries are privately owned. As there is no alternative to
deregulation.
2. The Pipeline Products Marketing Company (PPMC) should be equipped with the
modern state-of-the-art devices to protect its facilities and pipelines to eliminate
wastages of locally refined petroleum product arising from vandalism. The PPMC
surveillance system should incorporate community –protection and using
Petroleum Support Fund (PSF) to finance this.
3. The Nigerian government should as a matter of urgency increase her funding of
Research and Development (R&D) which is the main avenue for enhancing
technology-development. The current practice of budgeting 0.2%, less than 1% of
the UNESCO stipulation of GDP has turned Nigeria into fuel import dependent
economy. The increase in R&D will assist Nigeria to achieve her vision 20:2020
of fuel-export-dependent; servicing and maintenance of her 4 refineries; the
modification of her equipment to suit the environment and the development of
skills for greater efficiency which culminate in higher level of technology
development and improved productivity. There should be a law requiring all oil
companies in Nigeria to adopt innovations generated in Nigeria, otherwise, success
will be very difficult.
4. There is the need to comprehensively overhaul the leadership of Petroleum
Technology Development Fund (PTDF) which is supposed to facilitate the
nation’s acquisition of petroleum technology. PTDF should spear-head vigorous
250
R&D on Petroleum Technology–Development; concentrate on downstream
refinery which has been a thorn in the flesh of Nigerians; concentrate on building
capabilities and application of knowledge.
5. The Nigerian government should enforce the local content policy which has been
passed into law since 2010 to stimulate the development of indigenous capabilities
in the petroleum oil industry. The federal government should strengthen the
Nigeria Content Development and Monitoring Board (NCDMB).
6. The Nigerian government should make allocation of fuel import licenses
transparent and patronage free. This should be done through involving some civil
society groups into the selection team of PPPRA to guarantee trust.
7. Government should plan deregulation of the downstream oil sector phase by
phase. Phase one should be getting competent investors to manage the four state-
owned refineries and given them time to put it in order. Phase two should be
having three (3) or four (4) modular refineries arranged by the federal government
with their private organization which should be ready within a given time to meet
the consumption demand of the masses. When all of them are ready, the federal
government should withdraw all the import licenses and allow the NNPC alone to
import if there is shortage. This will cut the activities of the independent marketers
who will try to sabotage the refineries.
8. The National Assembly should enact a comprehensive legislation to be known as
Downstream Revolutionary Act (DRA). The proposed legislation will make it
compulsory for all the Multinational Oil Companies (MNOCs) who intend to
251
invest or have invested in the upstream oil sector to invest in downstream oil
sector too.
9. The Nigerian government, should transform these cottage industries to good
refineries in Nigeria through proper planning which will help to reduce over-
dependency on fuel importation and provide immediate employment to the
teaming unemployed youths in Nigeria.
10. The Nigerian government should unbundle Nigerian National Petroleum
Corporation (NNPC) to make its operations more efficient, transparent and
autonomous through the speedy passage of long awaited Petroleum Industry Bill
(PIB).
11. The Nigerian government can attract local and international investment in new
refineries development through some incentives and by entering into
Memorandum Of Understanding (MOU) with these investors.
12. The Economic and Financial Crime Commission (EFCC), should be further
strengthened to vigorously prosecute all actors involved in the fuel subsidy probes.
13. Finally, the civil societies should be strengthened to challenge obnoxious
government policies that are not of the interest of the masses.
252
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264
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267
APPENDIX I: SUMMARY OF TARGET RESPONDENTS AND LEAD QUESTIONS FOR FIELD RESEARCH
Some lead questions posed to target respondents
1. Do you think the allocation of fuel import licenses to independent marketers are
done in transparent manner?
2. Do you subscribe to the view that what affect and often determine the allocation
of fuel import licenses in Nigeria are the phenomena of clientelism and
prebendalism?
3. Do you think the allocation of fuel import licenses to independent marketers
discourage investors in the development of new refineries in Nigeria?
4. What do you think are the challenges hindering the development of new
refineries in Nigeria?
5. Do you think fuel importation related probes adequately define the challenges
hindering the development of new refineries in Nigeria?
6. What impact(s) has/have fuel importation probes done on refineries development
in Nigeria?
7. How will you rate the impact(s) of the dominance of expatriates on fuel
importation and distribution in Nigeria?
8. Do you think the dominance of expatriates in fuel importation and distribution
undermines the integration of Research and Development (R&D) in Nigeria’s
petroleum technology development?
9. What better ways do you think Research and Development (R&D) can be
handled in Nigeria to actualize petroleum technological development?
10. What can be done to stop policy sabotage in terms of new refineries
development in Nigeria?
Source: Researcher’s Fieldwork 2013-2014.
268
APPENDIX II: PERSONS INTERVIEWED AND CITED
S/N RANK NAME ORGANIZATIONS DATE INTERVIEWED
1. Senior Staff Ngonadi, D.D. Ministry of petroleum 17/06/2014
2. Senior Staff Oluwafemi, U.R. Ministry of finance 01/07/2014
3. Senior Staff Nweabuebe, C. Ministry of Trade and Investment 06/06/2014
4. Senior Staff Akinyede, A. Ministry of Economic Planning 10/2/2014
5. Senior Staff Unanimous Ministry of National Planning 06/07/2014
6. Senior Staff Shaibu, A. Central Bank of Nigeria (CBN) 07/1/2014
7. Senior Staff Otuaro, B. National Refineries Special Task Force (NRSTF)
08/03/2014
8. Senior Staff Aliyu, T.F. Independent Petroleum Marketers Association (IPMAN)
18/5/2014
9. Senior Staff Unanimous Petroleum Product Pricing Regulatory Agency (PPPRA)
13/07/2014
10. Senior Staff Emiko, B. Petroleum and Natural Gas Senior Staff Association (PENGASSAN)
10/05/2014
11. Senior Staff Pemu, F.T. Nigeria Union of Petroleum and Natural Gas Workers (NUPENG)
12/07/2014
12. Senior Staff Osifo, T. Depot and Petroleum Marketers Association (DAPMAN)
13/05/2014
13. Senior Staff Omoruyi, T. Major Marketers Association of Nigeria (MOMAN)
4/4/2014
14. Senior Staff Okoro, J. Orient Petroleum Nigeria Limited 4/06/2014
269
APPENDIX III: LIST OF FUEL IMPORTERS WITH/WITHOUT STORAGE FACILITIES FROM 2006-2012
S/N 0 NAME OF
COMPANIES
ADDRESS STORAGE
CAPACITIES
1 A-Z Petroleum Docyard Road, Apapa -
Lagos
Nil
2 Acorn Pic , Ibru Yard, Ibafo, Apapa -Lagos 6,000,000L
3 AITEO Energy
Resources Ltd
-Abonema Warf, Port Harcourt,
Rivers State -5/7, Dockyard Road,
Apapa, Lagos
95,000MT
210,000 MT
4 Aquitane Oil
and Gas Ltd.
-Ibru Yard, Ibafor, Apapa,
Lagos
Nil
5 Ascon Oil
Company Ltd.
Ibru Yard, Ibafor, Apapa -Lagos 12,700,000L
6 Avidor Oil and Gas Abonnema, Whalf Road, PH,
Rivers State
52,551,055 L
7 Bovas and
Company Ltd
Mosheshe Industrial Area, Kirikiri
Town, Water Front, Lagos
10,000,000 L
8 Capital Oil and Gas
Industries Ltd
Ibru Jetty Complex, Ibafor Lagos
State.
49,618,400L
9 Cita Bulk
Storage
Facilities Ltd
Port Harcourt
International Airport,
Omagwa, Rivers State
Nil
10 Cleanserve
Integrated
Energy
Solutions
Limited
Murtala Mohammed
Airport, Domestic Wing,
Ikeja - Lagos
Nil
270
11 Conoil PLC 1. Apapa - Lagos (23,668,849 L).
2. Murtala Mohammed Airport
Domestic Wing, Lagos
3. Reclamation Road, Port
Harcourt Rivers State.
(19,753,917 L)
4. Nnamdi International Airport,
Abuja.
43,422,766 L
12 Cybernetics
International
Services Ltd.
Along Oghara - Oghareki Road,
Oghara, Delta State
6,4000,000 L
13 Dee Jones
Petroleum
Company
Beachland Estate, Apapa, Lagos. 13,500,000 L
14 Delmar
Petroleum
Company
Delmar Jetty, Off
Rumuopirikom/Rumuolum
eni Road, Iwofe
Nil
15 Eco Aviation
Fuel Support
Services
Limited
(Formerly
Sahara)
Murtala Mohammed
International Airport,
Ikeja - Lagos
Nil
16 Empire Energy
Ltd.
Dumez Luxirious Park,
Kaduna - Abuja
Expressway Abuja,
Suleja
Nil
271
17 Energy
Destinations
Limited
Dockyard Road, Apapa,
Lagos
'Nil
18 Eres N.V.
Nigeria Ltd,
Along Apapa - Oshodi
Express Way, Ibru Yard,
Ibafon, Lagos
Nil
19 EternaPic Ibru Port Complex, Ibafon, Apapa
L.G.A, Lagos
9,630,000 L
20 Eurafric Oil
and Coastal
Service
Limited
Dockyard Road, Apapa,
Lagos
Nil
21 Ever Oil and Gas
Limited
Calabar Free Trade Zone, Cross
River State.
12,544,000 L 1
22 Fatgbems
International Ltd
Kirikiri Lighter terminal II,
Amuwo Odofin, LGA, Lagos.
12,000,000 L
23 First Deepwater
Discovery Ltd.
Ijegun Waterfront, Satellite Town,
Lagos
7,300,000 L
24 First Nigerian
Independent Oil
Company Ltd
Ibru Yard, Ibafon, Apapa, Lagos 17,000,000 L
25 Folawiyo
Energy
Limited
27, Creek Road, Apapa,
Lagos
Nil
26 Forte Oil Pic
(Former AP)
2 AP/Conoil Road, Naval
Dockyard, Apapa, Lagos
(13,500,000 L)
18,500,000 L
272
27 Forte Oil Pic
Aviation
Aviation Terminal
Depot, Murtala
Mohammed
International Airport,
Ikeje - Lagos
28 Forte Oil Pic Federal Light Terminal, Onne,
Rivers State (5,000,000 L)
29 Fresh Synergy Ltd UbioOkpuk/NtanAfia, IkotAbasi
LGA, Akwalbom State.
13,120,000 L
30 Grand
Petroleum and
Chemicals
Calabar Free Trade Zone,
Cross River State.
Nil
31 Gulf Treasures
Limited
Along Apapa - Oshodi Express
Way, Ibru Yard, Ibafon, Lagos
17,800,000 L
32 Hensmor
Nigeria
Limited
Railway Compound,
Dockyard Road, Apapa
Nil
33 Hyden Petroleum
Company Limited
PHCN Compound, Dora, Apapa,
Lagos
4,856,883L
34 Honeywell Oil and
Gas Limited
Imesco Jetty, Marine Road,
Calabar (4,600,000L)
16,895,322 L
35 Honeywell Oil and
Gas Limited
Kayode Street, Apapa, Lagos
(12,295,322 L)
273
36 Ibafon Oil FZE Calabar Free Trade Zone, Cross
River State.
18,086,000 L
37 Ibafon Oil
Limited
Ibru Yard, Ibafon, Apapa,
Lagos Nil
Nil
38 Ibeto
Petrochemical
Industries
Limited
Ibru Yard, Ibafon, Apapa -
Lagos
Nil
39 Index Petrolube
Africa Limited
Mosheshe Industrial Area, Kirikiri
Town, Water Front, Lagos
3,015,930 L
40 Integrated Oil and
Gas
Ibru Yard, Ibafon, Apapa, Lagos 52,000,000 L
41 Kings Crown Oil
and Gas Limited
Calabar Free Trade Zone, Cross
River State
5,000,000 L
42 Lister Oils Limited 21 Creek Road, Apapa, Lagos 16,000,000 L
43 Logistics and
Petroleum
Services
Limited
(Aviation)
Nnamdi Azikiwe
International Airport,
Abuja.
Nil
44 Lubcon Ltd Marina Road, Calabar,
Cross River State.
Nil
45 Masters Energy Oil
and Gas Limited
Aker Base, Oduoha Village,
Rivers State
67,698,000 L
274
46 Matrix Energy Ijalla Village, Warri, Delta State 20,000,000 L
47 Mobil Oil Nigeria
PLC
Murtala Mohammed International
Airport, Ikeja
48 Mobil Oil Nigeria 1, Mobil Road, Apapa, Lagos 22,500,000 L
49 Motifs Nigeria Ltd. 1, POI Reserve Mando Road,
Kaduna
1,800,800 L
50 MRS Oil and Gas 2 Tincan Island Port Road, Apapa,
Lagos (47,000,000L)
57,170,000 L
(47,000,000L)
(10,170,000 L) 51 MRS Oil and Gas
Company Ltd
(Aviation)
Murtala Mohammed Airport,
Domestic Wing, Ikeja - Lagos
52 MRS, Oil Nigeria
PLC
7, ASapata Road, Dockyard,
Apapaf Lagos
53 NIPCO Plc Dockyard Road, Apapa,
Lagos
22,500,000 L
54 Northwest
Petroleum and Gas
Calabar Free Trade Zone, Cross
River State (21,000,000 L)
47,840,000 L
55 Northwest
Petroleum and Gas
Calabar Free Trade Zone, Cross
River State (26,840,0001)
275
56 OANDO Plc
(Aviation)
NnamdiAzikiwe International,
Airport, Abuja
66,000,000 L
57 OANDO Pic
(Terminal I)
Marine Beach, Apapa (16,000,000 L)
58 OANDO Pic
(Terminal II)
Marine Beach, Apapa
59 OANDO Pic Federal Lighter Terminal, Onne,
P.H
(15,000,000 L)
60 OANDO Pic Murtala Mohammed International
Airport, Ikeja
61 OANDO Pic 2, Reclamation Road, Port
Harcourt, Rivers State,
(35,000,000 L)
62 Obat Oil and
Petroleum
Beachland Estate, Apapa, Lagos 21,600,000 L
72 Sahara Energy
Resources Nig. Ltd
Ibru Yard, Ibafon Apapa 6,000,000L
73 Sahara Energy
Resources Nig. Ltd
Port Harcourt International
Airport, Omagwa, Rivers State
6,000,000 L
74 Sea
Petroleum and
Gas
Ibru Yard, Ibafon, Apapa,
Lagos
Nil
75 Shorelink Oil and
Gas
Abonnema Waterside, PH 14,000,000 L
276
76 Spog
Petrochemicals Ltd
Along Apapa OshodiExpress
Way, Ibru Yard, Ibafon Lagos
6,200,000 L
77 Swift Oil Mosheshe Industrial Area, Kirikiri
Town, Water Front, Lagos
7,847,547 L
78 Techno Oil Ltd Mosheshe Industrial Area, Kirikiri
Town, Water Front, Lagos
26,840,000 L
79 Tempogate Oil and
Energy Company
Limited
Calabar Free Trade Zone, Cross
River State.
12,600,000 L
80 Tonimas Nigeria
Ltd
Federal Ocean Terminal (FOT)
Onne, Rivers State.
586,000 L
81 Top Oil and
Gas
Development
Company
Limited
Aumtco Premises,
Northern Bye-pass,
Maitama, Abuja,
Nil
81 Total Nigeria Pic Ibru Yard, Ibafon Apapa -Lagos (13,647,000 L)
82 Total Nigeria Pic Koko Plant, Koko, Delta
51,160,965 L
83 Total Nigeria Pic
(Joint Venture with
Oando)
Marine Beach, Apapa, Lagos
(18,885,966 L)
277
84 Total Nigeria Pic
(terminal II)
6, Bonny Road, Apapa, Lagos
(18,627,999 L)
85 Total Nigeria Pic
(Juhi)
Murtala Mohammed International
Airport, Ikeja
86 Total Nigeria Pic
(Aviation)
NnamdiAzikiwe
International Airport, Abuja:
87 T-Time Petroleum
Services Ltd
Ibru Yard, Ibadon, Apapa 6,309436 L
88 West African
Bitumen
Emulsion
Company
Wharf, Apapa Nil
89 Zenon Petroleum
and Gas Limited
(Terminal I)
Ibru Jetty, Ibafon, Apapa 44,000,000 L
90 Zenon Petroleum
and Gas Limited
(Terminal II)
Ibru Jetty, Ibafon, Apapa
(44,000,000 L)
Source: Adapted from House of Representatives Ad-hoc Committee Report (2012: 48-
57)
278
APPENDIX IV: DIRECTORY OF MARKETS UNDER THE PSF SC HME FROM 2006-2007
1. NNPC *
2. A.S.B INVESTMENT COMPANY
3. ACORN PETROLEUM PLC
4. AITEO ENERGY RESOURCES LTD
5. ALMINNUR RESOURCES LTD
6. AMG PETRO-ENERGY LTD
7. ANOSYKE GROUP OF COMPANIES LTD
8. AQUITANE OIL&GAS LTD
9. ASCON OIL COMPANY LTD
10. AVIDOR OIL & GAS COMPANY
11. AX ENERGY LTD
12. A–Z PETROLEUM PRODUCTS LTD
13. BAYWOOD CONTINENTAL LTD
14. BODEJ INVESTMENT
15. BOVAS & COMPANY LTD
16. BRITTANIA – U NIGERIA LTD
17. CAADES OIL & GAS LTD
18. CAH RESOURCES ASSOCIATION LTD
19. CAPITAL OIL & GAS INDUSTRY LTD
20. CARNIVAL ENERGY OIL & GAS LTD
21. CEOTI LTD
279
22. CHANNEL OIL AND PETROLEUM LTD
23. COLBERT NIG LTD
24. CONOIL PLC*
25. CRUST ENERGY LTD
26. CRUSTSTREAM NIG. LTD
27. DEE JONES PETROLEUM & GAS LTD
28. DOWNSTREAM ENERGY SOURCE LTD
29. DOZZY OIL AND GAS LTD
30. DUPORT MARINE LTD
31. ECO-REGEN LTD
32. ETERNA PLC
33. EURAFIC OIL AND COASTAL SERVICES LTD
34. FARGO PETROLEUM & GAS LTD
35. FATGBEM PETROLEUM CO. LTD
36. FIRST DEEP WATER DISCOVERY LTD
37. FIRST INDEPENDET NIG. LTD
38. FOLAWIYO ENERGY LTD
39. FORTE OIL PLC (FORMERLY AP PLC)
40. FRADRO INTERNATIONAL LTD
41. FRESH SYNERGY LTD
42. GEACAN ENERGY LTD
43. GRAND PETROLEUM
44. HEYDEN PETROLEUM
280
45. HONEYWELL OIL & GAS LTD
46. IBAFON OIL LTD
47. ICE ENERGY LTD
48. IMAD OIL & GAS LTD
49. INDEX PETROLEUM
50. INTEGRATED OIL & GAS
51. INTEGRATED RESOURCES LTD
52. IPMAN INVESTMENT LTD
53. JULY SEVENTH OIL LTD
54. KMCL LTD
55. KNIGHTSBRIDGE
56. LINETRALE OIL SUPPLY AND TRADING
57. LINGO OIL & GAS COMPANY LTD
58. LLOYDS ENERGY LTD
59. LOTTOJ OIL & GAS LTD
60. LUBCON LTD
61. MAIZUBE PETROLEUM LTD
62. MAJOPE INVESTMENT LTD
63. MASTERS ENERGY OIL & GAS LTD
64. MATRIX ENERGY LTD
65. MECURIA GLOBAL ENERGY
66. MEGLAMS OIL & GAS LTD
67. MENOL OIL & GAS LTD
281
68. MEZCOR SA
69. MIDAS OIL & GAS LTD
70. MOB INTEGRATED SERVICES LTD
71. MOBIL OIL NIGERIA PLC*
72. MOMATS OIL & GAS LTD
73. MRS OIL & GAS COMPANY LTD
74. MRS OIL NIG. PLC*
75. NADABO ENERGY LTD
76. NASAMAN OIL SERVICES LTD
77. NATICEL PETROLEUM LTD
78. NEPAL OIL AND GAS SERV. LTD
79. NIPCO PLC
80. NORTHWEST PETROLEUM & GAS LTD
81. NUPENG VENTURES LTD
82. OAKFIELD SYNERGY NETWORK LTD
83. OANDO PLC
84. OBAT OIL & PETROLEUM LTD
85. OILBATH NIGERIA LTD
86. OILFORCE NIG. LTD
87. ONTARIO OIL & GAS NIG. LTD
88. ORIGIN OIL AND GAS LTD
89. PHOENIX OIL COMPANY LTD
90. PINNACLE CONTRACTORS LTD
282
91. PINNACLE OIL AND GAS LTD
92. PRACTOIL LTD
93. PRUDENT ENERGY & SERVICES LTD
94. PVN LTD
95. RAHAMANIYYA OIL AND GAS LTD
96. RAINOIL LTD
97. RYDEN OIL LTD
98. SAHARA ENERGY RESOURCE LTD
99. SEA PETROLEUM & GAS CO.LTD
100. SETANA ENERGY LTD
101. SHIELD PETROLEUM COMPANY NIGERIA LTD
102. SHORELINK OIL AND GAS SERVICES LTD
103. SIFAX OIL AND GAS COMPANY TD
104. SIRIUS ENERGY RESOURCES LTD
105. SIRIUS TAGLIENT LTD
106. SOMERSET ENERGY SERVICES LTD
107. SPOG PETROCHEMICAL LTD
108. SULPHUR STREAMS LTD
109. SUPREME & MICHELLES OILS LTD
110. SWIFT OIL LTD
111. TAHIL &TAHIL NIG LTD
112. TAURUS OIL & GAS LTD
113. TECHNO OIL LTD
283
114. TEMPO ENERGY NIG LTD
115. TONIQUE OIL SERVICES LTD
116. TOP OIL AND GAS DEVELOPMENT COMPANY LTD
117. TOTAL NIGERIA PLC*
118. TRIDAX LTD
119. TRIQUEST ENERGY LTD
120. VALCORE ENERGY LTD
121. VENRO ENERGY LTD
122. VITACAM SERVICES
123. VIVA ENERGY LTD
124. XALON PETROLEUM LTD
125. XAVIER ENERGY LTD
126. YANATY PETROCHEMICALS NIGERIA LTD
127. ZALEX ENERGY RESOURCES LTD
128. ZAMSON GLOBAL RESOURCES LTD
Source: PPPRA Office at Abuja, Nigeria 2013.
