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Nigeria’s Regulatory Framework (2)

 

In the last four weeks in this column, we have been discussing management of peum refining, specifically, grassroots refining. We had argued robustly for the legitimization of grassroots refining carried out by families and other small scale players in the industry who ae currently tagged and categorized as illegitimate refineries. They are not tagged illegitimate because they burst pipes and steal crude which they then ingeniously refine. They are criminalized mainly for their principal business – refining: their refining of crude oil for premium motor spirit (petrol) and allied petroleum products: these activities of theirs are not licensed, to date, by government. Theirs is therefore an undercover ‘illegitimate’ business, albeit run by hundreds of operators, from the creeks all the way into Northern Nigeria, all along the petroleum pipelines, which is the source of their primary raw materials, crude oil, which crude is meant, originally, for the three big ‘legal’ refineries in Port-Harcourt, Warri and Kaduna.

Our prognosis is that President Muhammadu Buhari should, one, decriminalize ordinary local/grassroots/rural/creek people’s refining of crude into motor spirits and other petroleum products. That government should stop throwing the baby out with the water. These local grassroots refiners who use local technology should be seen and recognized as ingenious, not criminals.

Two, government should supply them with crude oil. Not for free, but at a cost close enough to the amount we supply big local legal refineries in Warri, Port-Harcourt and Kaduna. These local/grassroots refiners would pay. They can pay. Theirs is a lucrative business and money-driven. So they can afford the cost of the crude oil, which is the raw material of the small scale refineries.

Three, government should encourage them to unionize, for discipline and best practice as well as for the purpose of their preventing further pipeline vandalisation. They are on ground: they know who is vandalizing or who is capable of vandalizing pipelines. Once you make these potential heroes of our petroleum economy legitimates, they will monitor and secure the pipelines free of charge. If we don’t legitimize them, we continue to make it more and more impossible to secure the pipelines, especially in the creeks and deep forests, North and South of Nigeria.

Four, aggressively increase the number of these grassroots local petroleum refiners and help them to improve on their existing technology, which costs nothing to the government. Instead of shutting them down in hundreds, let us increase them in thousands. I am envisaging increasing them to at least 100,000, each capable of producing 2,000 litres (10 drums) of motor fuel a day. That is, altogether, 200,000,000 million litres, daily, more than quadruple Nigeria’s current daily need. We can export the rest. Each grassroots refinery producing 2,000 litres has a turnover of not less than 100,000 naira a day and 36,500,000 naira a year per refinery. At a production wage bill of 10%, that is 3,650,000 naira in new jobs and taxable incomes per refinery. On a wage bill of 25,000 naira per month, which is far more than the current national minimum wage of 18,000 naira, each decriminalized grassroots refinery can employ about 15 young Nigerians each. If government accepts our proposal/suggestion to increase the number of these local grassroots petroleum refiners to 100,000 this year 2016, that is 1,500,000 (one million five hundred thousand) youths taken off the labour markets. Nigerians and Africans are communal. If you provide jobs for 1.5 million Nigerians, you would have fed 15 million people. You would have also created a multiplier effect for the economy, because most of the incomes of this grassroots indigenous petroleum workers will be invested back into the local economy. Add to this the taxes that would be paid by these local petroleum workers, which, at just 10%, would bring into government coffers not less than N365, 000,000,000 (three hundred and sixty five billion naira) minimum, in taxes, to various governments in the country.

In part one of this article and in this part two, we have set the stage for the main thrust of our argument, to wit and specifically, that our government and law makers should make an urgent legal/regulatory reform to make it possible for the Department of Petroleum Resources (DPR), Nigeria’s petroleum regulatory agency, to implement the above suggestions. I believe that from our analysis and submissions so far, we have proven the case for law and regulatory reform in the petroleum upstream sector. We only need to reiterate that if the above steps are taken, that is, if  the hitherto illegal grassroots refineries are legalized, multiplied, unionized and supplied with crude oil, it will translate to billions of naira in new taxes to government at all levels. This is in addition to its ensuring and assuring security of petroleum pipelines at little or no cost to government.

Finally, after the above suggestions have been implemented, the few true criminals, vandals, would emerge and be isolated for prosecution and incapacitation as majority of legitimate grassroots petroleum refiners would naturally embrace the proposed new legal/regulator regime that would legitimized them. Indeed, the union of hundreds of thousands of new legitimate grassroots petroleum refiners would ensure that the illegitimates/vandals among them are exposed: it is in their business/financial interest to do so. And it is in Nigeria’s economic interest to make this happen by legalising, multiplying and unionising the hitherto illegal grassroots petroleum refiners North and South of Nigeria

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