The federal government has been advised to legalise and standardise the operations of small-scale or modular refineries with a view to raising the country’s refining capacity by a financial and business consultant, Eben Joels.
Incorporating such small-scale operators in the country’s downstream sector of the oil industry will cut the amount of money currently being spent on the importation of refined products, Joels noted.
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Joels is the Country Lead Partner of Stransact Chartered Accountants, the RSM correspondent firm for Nigeria. Speaking to select journalists on various issues bedevilling the Nigerian economy over the weekend, he noted that the country’s current experience was a sharp contrast with what was obtained in the past, when, if international gas prices rose, Nigeria made a lot of money.
He said, “We still make a lot of money, but today our population is rising and our needs for gas consumption are also rising. We make a lot of money selling crude, and then use the same money importing refined petroleum products, from aviation fuel and diesel to Premium Motor Spirit (PMS). We’re even struggling to meet our bills in importation. Previously, we made a surplus, but there is no more surplus because pricing is international. When prices go up, the cost of importing also goes up.”
The activities of “illegal” refineries have come under scrutiny in recent times following explosions with high levels of fatalities at such facilities in different locations in some oil-producing communities.
Therefore, rather than declaring such modular refineries illegal, Joels said the federal government could work with them to get them investments, standardise their processes and create a modular refinery chain.
He explained that, “The more we import gas as crude oil prices rise, the more our naira falls. The political class needs to be awake.”
Seven years ago, the current administration came into power, and one of the things they promised to Nigerians was to fix the refineries in a one-year short timeline, Joels said, noting that even the Group Managing Director of the Nigerian National Petroleum Company (NNPC) at the time said it was possible to do so in one year.
He further said, “Seven years after, the refineries are not fixed. Instead, the government wants to acquire a stake in the Dangote Refinery. I don’t think the people who run the country take the issues seriously enough to understand that we need to develop our own local refining capacity, even if it means empowering local small-scale modular refineries.”
Joels also commented on what it will take for SMEs to be able to play their roles effectively in the development of the Nigerian economy, noting that a key requirement for this was continuous education to orientate the SMEs on the importance of them developing the right character for business.
He said, “Don’t go with the crowd. Every society and home is built on values. The values that the business holds, it sets out to be, to become, is the strongest thing that helps the business to succeed.
“Capital and every other thing is a plus. Most businesses start without identifying what their values are, so they get into other SME markets because they need to survive and then they do anything and everything anybody in Nigeria would do to survive.
“An SME that wants to go places needs to identity the values it wants to be associated with in business. Those values should be based on the society or immediate environment. You cannot set out to go global and set your operations manual local – there is a mismatch in value alignment.”
He explained that Stransact’s values were part of the things that made it attractive to RSM Global, a legacy firm of over 90 years, covering 108 countries with almost 40,000 employees across 800 offices.
On the challenges threatening the stability of the Nigerian economy, Joels said Nigeria was still a rent-seeking economy “where a lot of rich class became rich by collecting economic rents from others; not from doing anything intellectual or serious. In that environment, it’s only natural that, over time, the people you’re getting the economic rents from will get poorer.
“And those economic rent collectors are not used to working; when they take over industries they will only be able to run them down.”
According to him, unless something miraculous happens, the current generation will never witness another oil boom because the infrastructure that makes the oil boom possible no longer exists.
He also had a word for the monetary authorities on how the naira could be stabilised. He said, “The naira will appreciate if production appreciates and a lot of people earn foreign exchange.”
Already, he observed that a lot of people actually earned foreign exchange in Nigeria, noting that eight years ago things like monetisation of the YouTube or social media accounts for dollars to flow into tour accounts wasn’t as ubiquitous as it was now.
He said, “That tells you that we need to free up our economy so that individuals are able to earn foreign exchange directly. The government needs to relax our exchange controls, remove export restrictions, and make the naira a free market-determined currency and not a government-imposed rate.
“The more we have the government put their hands in things, the more problem we have. If we fix our ability to export without restrictions, remove restrictions around the control of the naira and let it find its true market value, the currency will stabilise and would be a proper measure of the strength of our economy; rather than a situation whereby the value of naira is tied to how much dollar is needed by politicians.”
