The present Nigerian administration has taken the decision to privatize the country’s refineries. The announcement, made through the Ministry of Petroleum Resources in November, begs the question, “Is privatization the answer?” Perhaps yes, perhaps no. Globally, over 130 countries have privatized tens of thousands of firms between 1990 and 2010. Supporters of the process insist that privatization leads to improved firm performance and therefore increased economic welfare.

At the core of this process is the general agreement that beyond a yes or no response as to the advantages and disadvantages of privatization, it is the method or process through which the exercise is carried out that determines how much benefit accrues to the state and the citizens.

The fundamental issue is that the failure of Nigeria’s four refineries embodies the core of the challenges facing the Nigerian state and the Nigerian people.

On the part of the Nigerian state, the failure of the refineries displays a subterranean lack of political will to drive national and economic transformation.

On the part of the Nigerian people, in the absence of a national outcry against the privatization announcement, it is taken that Nigerians themselves wary about the general state of the refineries, have acquiesced to the decision. Therefore, the question that must be answered is, in light of emerging global realities, how structures can be put in place to ensure that the route of privatization will be of immense benefit to the Nigerian state and citizens.

What lessons can Nigeria learn from [privatization around] the world, and especially [privatization in] its African neighbors? First, it should be a matter of serious concern to the Ministry of Petroleum Resources that in Nigeria the number of indigenous firms with sufficient financial muscle to exercise over the infrastructure on sale can be counted on one hand. Nigerians can be and should be allowed to buy into the four refineries. The firm(s) bringing in the technical capacity can own 40 percent or so of the shares while Nigerians should be given the opportunity to own the rest.

Certain studies have shown that firms sold through share issues or IPOs tend to yield higher positive outcomes pre- and post-privatization. Going to the stock market will minimize corruption in the process of sale, and ensure, in some capacity, that post-sale, the foreign companies are held accountable at all times. Foreign direct investment of such magnitude and sensitivity, in the absence of strong domestic competition and government regulation, almost always results in citizen exploitation and cheating the government of its dues.

The hardest part of the privatization process, for the Ministry of Petroleum Resources, will most likely be sourcing the right kind of personnel to lead the process. Beyond the sale of the refineries, it is [also] crucial for the government to establish structures and systems to provide post-privatization monitoring.

Prior to drafting the sale agreement, the government of Nigeria must make certain points clear as to the sale of the petroleum products to be refined. This is another regulatory loophole in the area of workforce retention. Not many of the qualified and experienced Nigerian professionals, that is, the petroleum, mechanical and electrical engineers, are employed in the oil and gas sector within the country, while expatriate rig welders, crane operators, instrument technicians, safety engineers, project managers and environmental advisors, for which Nigerian equivalents abound, fill the staff registers of Shell, Chevron, etc. In the face of the failure of existing legislation to address this very important issue, how does the Ministry of Petroleum intend to correct this anomaly and ensure that the privatization of Nigeria’s refineries will truly benefit Nigerians?

Again, if Nigerians own majority shares in the refineries, these regulatory issues could be more easily dealt with under a citizen watch arrangement. When a sole government agency is burdened with this responsibility, it leaves gaps for abuse and insufficient oversight. An ombudsman, similar to the Communications Commission, might also be necessary for the privatized refineries.

The contemplations expressed herein are far from an exhaustive list of what the Nigerian Government ought to consider in its decisions to privatize the nation’s refineries. The 2014 self-imposed deadline appears to be insufficient time to diligently explore and deliberate issues of pre-sale logistics, policy, regulations and post-sale monitoring. There is no hurry to privatize these refineries. The focal point should be to ensure that Nigerians maximally benefit in the short, medium and long term. 

 (The author is a researcher, writer and public intellectual whose interest is centered around Africa’s advancement.)