Refining Privatization

　　The present Nigerian administration has taken thedecision to privatize the country’s refineries. The announcement，made through the Ministry of Petroleum Resources inNovember， begs the question， “Is privatization the answer？”

　　Perhaps yes， perhaps no. Globally， over 130 countries haveprivatized tens of thousands of firms between 1990 and2010. Supporters of the process insist that privatizationleads to improved firm performance and therefore increasedeconomic welfare.

　　At the core of this process is the general agreementthat beyond a yes or no response as to the advantages anddisadvantages of privatization， it is the method or processthrough which the exercise is carried out that determineshow much benefit accrues to the state and the citizens.

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

　　On the part of the Nigerian state， the failure of therefineries displays a subterranean lack of political will to drivenational and economic transformation.

　　On the part of the Nigerian people， in the absence of anational outcry against the privatization announcement， itis taken that Nigerians themselves wary about the generalstate of the refineries， have acquiesced to the decision.Therefore， the question that must be answered is， in light ofemerging global realities， how structures can be put in placeto ensure that the route of privatization will be of immensebenefit 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 theMinistry of Petroleum Resources that in Nigeria the numberof indigenous firms with sufficient financial muscle toexercise over the infrastructure on sale can be counted onone hand. Nigerians can be and should be allowed to buyinto the four refineries. The firm(s) bringing in the technicalcapacity can own 40 percent or so of the shares while Nigeriansshould be given the opportunity to own the rest.

　　Certain studies have shown that firms sold throughshare issues or IPOs tend to yield higher positive outcomespre- and post-privatization. Going to the stock market willminimize corruption in the process of sale， and ensure， insome capacity， that post-sale， the foreign companies areheld accountable at all times. Foreign direct investment ofsuch magnitude and sensitivity， in the absence of strongdomestic competition and government regulation， almostalways results in citizen exploitation and cheating the governmentof its dues.

　　The hardest part of the privatization process， for theMinistry of Petroleum Resources， will most likely be sourcingthe right kind of personnel to lead the process. Beyond thesale of the refineries， it is [also] crucial for the government toestablish structures and systems to provide post-privatizationmonitoring.

　　Prior to drafting the sale agreement， the government ofNigeria must make certain points clear as to the sale of thepetroleum products to be refined. This is another regulatoryloophole in the area of workforce retention. Not many ofthe qualified and experienced Nigerian professionals， thatis， the petroleum， mechanical and electrical engineers， areemployed in the oil and gas sector within the country， whileexpatriate rig welders， crane operators， instrument technicians，safety engineers， project managers and environmentaladvisors， for which Nigerian equivalents abound， fill thestaff registers of Shell， Chevron， etc. In the face of the failureof existing legislation to address this very important issue，how does the Ministry of Petroleum intend to correct thisanomaly and ensure that the privatization of Nigeria’s refinerieswill truly benefit Nigerians？

　　Again， if Nigerians own majority shares in the refineries，these regulatory issues could be more easily dealt with undera citizen watch arrangement. When a sole governmentagency is burdened with this responsibility， it leaves gaps forabuse and insufficient oversight. An ombudsman， similar tothe Communications Commission， might also be necessaryfor the privatized refineries.

　　The contemplations expressed herein are far from anexhaustive list of what the Nigerian Government ought toconsider in its decisions to privatize the nation’s refineries.The 2014 self-imposed deadline appears to be insufficienttime to diligently explore and deliberate issues of pre-sale logistics，policy， regulations and post-sale monitoring. There isno hurry to privatize these refineries. The focal point shouldbe to ensure that Nigerians maximally benefit in the short，medium and long term.