Olu Falae Urges FG: Repair and Privatize Refineries for Efficient Operation

In a recent exclusive interview with Infostride News, Olu Falae, a distinguished economist and former Minister of Finance, Budget, and National Planning, articulated a compelling solution to Nigeria’s longstanding energy challenges. Falae urged the government to take decisive action by repairing and subsequently selling its underperforming refineries to private enterprises capable of efficient management.

During the interview on Thursday with Infostride News on Channels TV, Falae expressed skepticism about the government’s ability to run the refineries effectively. He emphasized the need to avoid political interference in the operation of these critical facilities. Falae suggested that offloading the refineries to private entities with expertise in refinery operations could pave the way for a more sustainable and less politically influenced fuel pricing system.

“My belief is that Nigeria’s problem with fuel and its price will be substantially resolved when we can repair and recommission our refineries and sell to companies that know how to run refineries. We should not try to run them ourselves because if we try to do so, politics will intervene and we will mismanage them. I am sorry to say this,” Falae remarked during the interview.

The Oluabo of Ilu-Abo in Ondo State remained resolute in his stance, asserting that selling the refineries to capable operators would significantly reduce the reliance on foreign exchange, particularly in the context of the fluctuating dollar exchange rate. He envisioned a scenario where privatized refineries would refine Nigerian crude oil for domestic consumption, thereby alleviating the pressure on foreign exchange.

“So, we repair them and sell them to those who can manage refineries. And then, they will use those refineries to refine Nigerian crude oil and sell them to those of us here in Nigeria. That reduces the influence of the dollar exchange rate substantially. I am almost certain that the day we do that, the price of fuel will come down almost substantially. I do not doubt that,” Falae added.

Delving into the backstory, Nigeria, as the most populous country in Africa and a significant oil producer, has grappled with the inadequacy of government-owned refineries located in Warri, Port Harcourt, and Kaduna. Over the years, the country resorted to fuel imports to meet local demand, engaging in a multi-billion dollar exchange of crude for gasoline, subsequently subsidized for the domestic market.

The combination of the coronavirus pandemic and the Russia-Ukraine war compounded the strain on foreign exchange, leading to President Bola Tinubu’s decision to terminate the subsidy regime upon his inauguration. This move resulted in a threefold increase in the price of fuel, sparking widespread concern and debate.

Addressing this development, Falae underscored his belief that Nigerians should not be subjected to purchasing crude oil at international market prices. He argued passionately for a pricing model based on the cost of production, plus a reasonable profit margin for the producers, leveraging Nigeria’s abundant natural endowment of crude oil to stimulate development.

As Nigeria grapples with the complexities of its energy landscape, Olu Falae’s insights serve as a thought-provoking proposal that challenges traditional approaches, urging a strategic shift toward privatization and localized pricing mechanisms to foster economic sustainability and energy self-sufficiency.