For over five years since the first announcement of the licensing of private refineries, the nation has waited endlessly for their eventual take-off. While the licensees kept reassuring of their seriousness, there is virtually nothing on the ground to demonstrate their readiness to build.

While the dithering continued, Nigeria's foreign reserves continued to dip as government continued to dip its hands in the till to shore up local demand for imported refined products.

Last week, government reversed a policy decision which has been a disincentive for the licensees to build. It was the removal of the $1 million non-refundable deposit as a pre-condition for approval to build any 10,000-barrel capacity local refinery. This reversal of policy comes ahead of a November deadline for the beginning of the full deregulation of the downstream sector expected to see Nigerians buying petroleum products at rates dictated by international market forces. Minister of State for Petroleum Resources, Odein Ajumogobia who announced the policy shift said the measure was to attract both local and foreign investors to buy into the refining sub-sector.

It is disheartening that Nigeria continues to use the top-down approach to governance, where the leadership assumes it knows what the people want without first consulting them. The $1 million deposit was, ab initio, unnecessary given that the country is seeking to woo investors to its local production sector to boost local supply, creating jobs and even making room for export and foreign exchange earnings. This removal is therefore intended to encourage the emergence of locally-built refineries and an opening to build capacity and enable self-sufficiency.

It is a normal part of governance all over the world that government gives incentives to investors ready to commit to local development. It is commendable that government has finally shown its ability to reason and encourage private-sector led initiative aimed at increasing its capacity building potential. It is also encouraging that this is coming at a time when some of the few surviving companies operating in the country are winding down their operations.

Nigeria could have saved huge sums in foreign exchange if it had taken this decision earlier and by now its planned total de-regulation of the downstream sector will not appear as an albatross. Rather, it has opened its borders to uncontrolled importation of refined products while selling its crude in the international market. No country serious about development can afford to open its borders to unbridled importation when it has the capacity to produce locally. What reasonable governments do is to check the balance between local production and local demand and to open up importation space to bridge the shortfall until it can meet all its demands and even export. This would have saved jobs, increased earnings and saved foreign exchange.
While reversal of policy is commendable, government needs to tackle the problem of inconsistency in policy. Our acquiescence to Nigeria being a dumping ground for refined products has culminated in low capacity utilisation and the recent troubles in the finance sector. Banks preferred to grant loans to importers of refined crude instead of giving such loans to productive sectors of the economy. One of the fallouts of this misguided policy is the ongoing crisis in the banking sector. We therefore suggest that in addition to the removal of this clog, small though it is, government should introduce some level of tax incentives to further encourage the licensees to speed up local production. Most importantly, we hope that when the refineries are finally built, government would have declared a state of national awakening on the power sector such that they can function without delay.

It is also important that the authorities hasten the process of bringing back normalcy in the oil producing region. This will reassure the investors whose interest in setting up private refineries may have been dampened by the way that Niger Delta unrest has led to pipeline vandelisation which is responsible for the start and stop operations of existing government owned refineries.