The Federal Executive Council on Wednesday approved the plan by the Ministry of Petroleum Resources to rehabilitate the Port Harcourt Refinery with $1.5bn.
The decision was taken at the weekly meeting of the council presided over by the President, Major General Muhammadu Buhari (retd.).
However, some experts in separate interviews with out correspondents faulted the move by the government, describing it as wasteful and senseless.
The Minister of State for Petroleum Resources, Timipre Sylva, disclosed this to State House correspondents at the quit of the meeting at the Presidential Villa, Abuja.
He said the contract for the rehabilitation was provided to an Italian company, Tecnimont spa, which he said gained the bid.
Sylva stated the firm specialises in renovation of refineries.
In naira terms, the $15bn restore value amounts to N568.5bn the usage of the reputable change charge. At the Investors and Exporters window of the foreign exchange marketplace, the greenback exchanged for N379 on Wednesday. The Central Bank of Nigeria also quoted the equal on its internet site. However, it went for N483 at the parallel market.
The Port Harcourt refinery generated total sales of N10.33bn from 2015 to 2019, in step with its 2019 audited financial statements.
The refinery generated 0 revenue in 2019; N1.46bn in 2018; N4.82bn in 2017; N3.37bn in 2016, and N683.52m in 2015.
It, however, mentioned a total lack of N229.14bn inside the five-yr duration. The refinery lost N50.53bn in 2019; N45.59bn in 2018; N53.77bn in 2017; N43.44bn in 2016, and N35.81bn in 2015.
According to the minister, the fund for the rehabilitation would be raised from three assets – the Nigerian National Petroleum Corporation’s Internally Generated Revenue, budgetary allocation and Afreximbank.
The minister stated, “The Ministry of Petroleum Resources provided a memo on the rehabilitation of Port Harcourt refinery within the sum of $1.5bn and it became authorised by way of council today.
“So, we are glad to announce that the rehabilitation of the refinery will commence in three phases. The first phase is to be finished in 18 months, on the way to take the refinery to a production of 90 in step with cent of its nameplate potential.
“The 2d segment is to be completed in 24 months and all the very last stage might be finished in forty four months and consultations are approved.
“I accept as true with that this is ideal news for Nigeria.”
Sylva disclosed that the council resolved that the Federal Government must placed a professional operations and renovation corporation to manipulate the refinery when it has been rehabilitated.
He stated that turned into additionally one of the conditions supplied by using the lenders and so the authorities could not pass returned on it.
The minister brought that discussions have been ongoing on the rehabilitation of different refineries.
“Discussions are ongoing. We need to take separately and I need to guarantee you that earlier than the life of this administration expires, paintings on all of the refineries would have at least commenced,” he said.
He defined that the original builders of the refinery had been not in renovation enterprise, as a result the choice to move for every other firm for the rehabilitation.
He said, “We discovered out from the original refinery builders that they are not within the enterprise of rehabilitating refineries; they may be within the enterprise of building refineries.
“So, they actually pointed us to a rehabilitation employer that we are dealing with now.”
Specifically, on the way to boost the fund for the rehabilitation, the minister stated, “There are numerous additives to the funding: there may be investment from NNPC internally generated revenue; there is funding from the finances and there may be also a debt funding.
“For the creditors, we are dealing with AFREXIM financial institution and they are very committed to us; we've got genuinely concluded discussions with AFREXIM.”
Sylva assured stakeholders that the rehabilitation might be in keeping with the provisions of the neighborhood content material law.
“The Nigerian Content Development and Monitoring Board is fully part of the contracting method and has safeguarded the interest, correctly, of our neighborhood contractors. So, our local humans will be absolutely involved with the Tecnimont spa,” the minister stated.
On if the rehabilitation of the refinery turned into due to labour unions demand that deregulation of petroleum price should come after refineries rehabilitation, he stated: “First, I am now not privy to one of these settlement that deregulation ought to handiest take vicinity after the refineries were fixed. That changed into at no time a part of our settlement.
“But of path, this authorities, from the very starting, has been in the manner of solving and rehabilitating these refineries.
“So, it is not due to our discussion with Labour, however it is virtually the desire of the administration to ensure that our refineries work.”
Project wasteful, mindless, executive beating useless horse, say experts
However, an economist with the Lagos Business School, Dr Bongo Adi, said the rehabilitation was not a smart selection considering the modern-day circumstances going through the existing management which turned into riddled in debt.
He stated, “It isn't always a smart choice due to the fact, on the only hand, we've got government harping on the finances deficit. There has been discussion on how to plug that deficit. Then on top of that, we've got overseas account deficit where our exports are manner less than our imports that's a part of the reason why the trade fee is taking a large knock currently.
“Government is in a very hard situation to fund finances and provide fundamental desires for the human beings, so looking for avenues to do carry out every other responsibility can be costly.
“We see authorities nonetheless looking to use the price range it does no longer have that is like flogging a useless horse. We have visible so much cash going into refineries over the years and all the numerous turnaround maintenance. None of them has yielded expected benefits. The refineries have been moribund for years.
“There is nothing to show that authorities can gain something by using plugging finances into the refineries. It is a waste of time, assets and now not a smart thing to do.”
Adi encouraged that the government sell the refineries off and use the money to do something else.
He said, “My take is that government need to genuinely privatise the refineries, sell them off and use the ones funds to spend money on process advent possibilities for teeming wide variety of youths.
“As it's miles proper now, embarking on the assignment is a white elephant one and the cash will now not be accounted for on the end of the day.
“A few humans believe no quantity of turnaround would be had to rehabilitate the ones refineries due to the fact the technology utilized in its production is obsolete and it's far extra steeply-priced to maintain.
“That approach no sum of money will convey them returned to again to function nicely. It isn't rational. The nice component is to promote it off to the non-public quarter to expand.”
A former Chairman, Petroleum Club, Lagos, Dr Godwin Ihetu, expressed challenge that the rehabilitation of the refinery would take nearly 4 years, announcing, “It doesn’t make feel; how a whole lot does it take to build one new refinery?”
Ihetu, a former coping with director/leader government officer of Nigeria LNG Limited, stated, “What I become thinking changed into that they could privatise the refinery and then permit the brand new owners to rehabilitate, rather than pronouncing they would rehabilitate and then sell. When? Who will buy it?
“But if they have chosen that the fine manner is to rehabilitate it themselves, then that is ok considering the fact that they have got awarded the contract. Technimount is a famous engineering organization.”
An energy professional, Mr Bala Zakka, stated it was now not too overdue to refine petroleum products in Nigeria.
He said, “What the authorities is doing now could be what they ought to have completed years lower back.
“There is not any financial sense in Nigeria promoting uncooked materials just to head and purchase completed items from the identical raw substances.
“If they system internally and that they distribute finished goods internally all of the exchange rate differentials can be stored. All the problems with touchdown costs can be stored.”
He added, “We are already on the wrong track and it isn't always too overdue to start refining. It is better to be past due than never. It is better to be past due than be on a trajectory that will take you in your waterloo.”
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The President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, said the flow with the aid of government to rehabilitate the refinery turned into so as but stated that private investors must be allowed to take part.
He stated, “If the refinery in Port Harcourt may be rehabilitated and it really works and is derived on flow in a swift way, that will be a welcome idea.
“But we as an association, due to the fact something they are refining is for the retail outlets; we want to companion them to ensure that we're at the equal web page.”
He brought, “This is to make sure that there might be some personal region enter and recommendations. So we applaud the government for taking that selection, even though it is less difficult said than accomplished.”
Gillis-Harry said petrol retail outlet owners could be glad if invited to invest within the facility.
Also speakme at the development, the General Secretary, National Union of Petroleum and Natural Gas workers, Olawale Afolabi, said the approval turned into a confirmation of the sooner discussions among government and labour.
He stated, “Port Harcourt goes to kick-off as they promised and that is the demonstration they’ve proven with that approval.
“Remember in December ultimate yr, the authorities and labour installation specific committees and one among them is the steerage committee for the rehabilitation of the four refineries.
“So the approval you are seeing today is one of the steps toward reaching this and making sure that our refineries are intended to work once more. We are in support of the move.”
When informed that the government had earlier indexed refineries as a part of assets to be sold to fund the usa’s price range, Afolabi replied, “Don’t move there but.
“Let us get the refineries back. We don’t need to invest. Let us wait until the refineries are rehabilitated. When they need to promote it, they will meet us there.”
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