former minister : Nigeria can cut enormous cost and rescue naira with local refineries

A former minister of interior Captain Emmanuel Ihenacho, spoke with DAVID OGAH and TEMILOLUWA ADEOYE about the situation of the oil sector in Nigeria. He said that government should provide enabling environment for the emergence of private refineries.

He said, It is very important for us to optimise the benefits we derive from oil trade by ensuring there is proper integration of the transport element of maritime into the oil trade. One of the issues we have talked about for years is that we sold oil on Free On Board (FOB) basis and by so doing; we allowed vessels under other national flags to carry the crude. In so doing, we lost a lot of benefits, because our oil has zero value. What gives it value at the international market is when you have appended transport to it, and you can lift it from our oil wells and take it into the market.

So, selling oil on an FOB Basis doesn’t really help us. It would be very nice, if there were maritime businessmen with the capacity to run international ships, who can make available their vessels for carrying crude to the refineries. The same thing goes for when the goods are refined to be brought back to the country. Currently, we depend on vessels that belong to non-Nigerians. It would be nice and beneficial, if we had an arrangement, where ships owned by Nigerians bring refined products back to the country.

Also in terms of looses, the former minister said; “We are losing a lot. The transport element is a significant element of cost in terms of the volume of oil we consume. The value chain starts from when the oil is produced and lifted from oil wells and taken to the refinery. Another opportunity for value addition is when the oil is brought back after being refined. It is the total of all these cost that we incur as consumers of the end product. So, if we were to find a solution, it is either we allow the oil to be carried by Nigerian vessels or we create the situation, where we can refine the oil on Nigerian soil. Then we can completely cut the cost of transporting the oil there and bringing it back again and the only beneficiaries would be the consumers, the Nigerian people”

On the effect of job creation, he said;

The shipping business is one that has a multiplier effect. There are major benefits that are lost in terms of income not spent and forgone job opportunities. We can only capture these things, if we have proper policy provision that recognises the interrelationship between oil, and its eventual transportation back to Nigeria for consumption. We need to make adequate provision for empowering Nigerians to provide the transport in this stream. One of the key problems we have identified in times past is that of money to buy ships, because shipping is a capital-intensive business. The more the money required to buy the vessel, the more foreign money required to buy the input, get the bunkers, spare parts and all those things.

Again, these are the things that have to be provided for. But the good part is that even if we require foreign money to do all of those things, the earnings that will come from successfully operated Nigerian shipping business is also denominated in foreign currency. So, at the end of the day, we stand to gain positive benefits through our ability to invest in shipping..


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