Yemi Osinbajo, Acting President of Nigeria, has appointed a new chairman for the anti-graft agency, ICPC. The new chairman is Professor Bolaji Owasanoye.
Professor Bolaji Owasanoye is renowned for his expertise in International Economic Law;Human Development and Social Justice Activism. He has been a Professor of Law for about 15 years with the apex legal academic institution in Nigeria: The Nigerian Institute of Advanced Legal Studies (NIALS) where he served as two-time Director of Research, and the rst to be conferred with the Taslim Elias Distinguished Professor of Law. He has pro ciency in teaching Legal Aspects of External Debt Management, Corporate Law, Legislative Drafting, Human Rights and Strategic Governance amongst others.
The full statement below.
Osinbajo Approved New Appointments
His Excellency, the Acting President, Professor Yemi Osinbajo, SAN, has approved the underlisted appointments in Federal Government Agencies.
A.?Independent Corrupt Practices and Other Related Offences Commission
?(i) ?Prof. Bolaji Owasanoye??-?Chairman
?(ii) ?Dr. Grace N. Chinda???-?Member
?(iii) ?Okolo Titus M.????-?Member
?(iv) ? Barr. Obiora Igwedebia??-?Member
?(v) ?Mrs. Olubukola Balogun??-?Member
?(vi)? Group Captain Sam Ewang (Rtd.) ?- ?Member
?(vii) ?Justice Adamu Bello???-?Member
?(viii) ?Hannatu Mohammed???-?Member
?(ix)? Abdullahi Maikano Saidu??-?Member
?(x)? Dr. Sa’ad Alanamu???-?Member
?(xi)? Yahaya Umar Dauda???-?Member
?(xii) ?Khamis Ahmed Mailantarki? ?-?Member
?(xiii) ?Maimuna Aliyu???-?Member
?(xiv)? Prof. Musa Usman Abubakar? ?-?Secretary
The appointment of the Chairman is for 5 years, while the tenure for all the members is 4 years. Also, these appointments are subject to Senate confirmation.
B.?National Salaries, Incomes and Wages Commission
(i)? Ekpo Nta, Esq?????-?Full-time Commissioner
?(ii) ?Alhaji Dauda Yahaya, mni???-?Full-time Commissioner?
?(iii) ?Hon. Garba Musa Gulma???-?Full-time Commissioner
?(iv) ?Barr. Victoria Nnenna Chukwuani??-?Part-time Commissioner
?(v) ?Mr. Geoffery Yeilong????-?Part-time Commissioner
?(vi)? Prof. Ropo Shekoni????-?Part-time Commissioner
?(vii)? Ahmed Mahmud Gumel???-?Part-time Commissioner
?(viii)?Permanent Secretary,(Estab.) OHCSF????-?Member
?(ix) ?Permanent Secretary, Fed. Min. of Labour & Prod.???-?Member
?(x) ?Comrade Isa Aremu (NLC)???-?Member
?(xi) ?Mr. Chuma Nwankwo (NECA)??-?Member
The new appointments are for a period of 5 years. The Chairman of the Commission is High Chief Richard Egbule, while Mr. E. A. Thompson is the Secretary. Both were appointed in August 2014.
C.?Investment And Security Tribunal
(i)? Siaka Isaiah Idoko??-?Chairman/CEO
(ii)? Jude I. Udunni???-?Full-time Member
(iii) ?Mr. Nosa Osemwengie?-?Full-time Member
(iv)? Abubakar A. Ahmad??-?Full-time Member
(v)? Albert L. Otesile??-?Full-time Member
(vi) ?Emeka Madubuike??-?Part-time Member
(vii)? Kasumi Garba Kurfi??-?Part-time Member
(viii)?Edward O. Ajayi??-?Part-time Member
(ix)? Onyemaechi E. M. Elujekor?-?Part-time Member
(x) ?Mamman Bukar Zargana?-?Part-time Member
This appointment is also subject to Senate confirmation.
E.?In another development, the Acting President, with powers conferred on the President by Recovery of Public Property (Special Provisions) Act Cap R4, Laws of the Federation of Nigeria 2004 has approved the setting up of a Special Presidential Investigation Panel for the Recovery of Public Property. The Chairman of the Panel is Chief Okoi Obona-Obla, Special Assistant to the President on Prosecution. Mr. Akingbolahan Adeniran is the Secretary to the Panel.
(Signed)
Bolaji Adebiyi
Director (Press)
Office of the Secretary to the Government of the Federation.
The most successful or impactful financial technology product, in Nigeria, after Diamond Bank industry-shaping DIBS (Diamond Integrated Banking System), is Remita, an integrated electronic payments and collections platform developed by SystemSpecs, a local ICT powerhouse. While DIBS pioneered a new way of banking, making banking exciting, Remita is redesigning the core architecture of government in Nigeria. Before DIBS, intercity merchants moved cash in bags, exposing themselves to armed robbers, because bank accounts could only be operated in the specific branches they were opened. But when DIBS came, the era of open in any branch, enjoy banking in all branches, of the same bank, was invented. Nigerian banking has never been the same.
Remita is doing likewise, but unlike helping the citizens and businesses access their money irrespective of local domicile, Remita is making government to operate with memory. In the past, government with positive account balance could be taking overdraft in another account, in the same bank, despite having enough positive balance in the other account. Through the Treasury Single Account (TSA), anchored on Remita, government now operates, with clearer visibility. For Remita, it is a moment, unprecedented in the local financial technology space.
Remita is an e-Payments and e-Collections solution on a single multi-bank platform. Today, Remita is in use by many individuals, public and private sector organisations that process over 500 Billion Naira worth of transactions on a monthly basis. Adopted by the Central Bank of Nigeria for the payment and collections of funds on behalf of the Federal Government of Nigeria and used by all 22 commercial banks and over 400 micro finance banks, Remita has significantly assisted to revolutionize the e-payment industry in Nigeria.
Remita also comes with an optional Payroll and HR solution for full integrated processing. Remita, developed by SystemSpecs, and voted many times as Nigeria’s Software of the Year, is indeed a success story and a pride to Africa.
A key component of the Remita N500 billion monthly transaction volume is the TSA, a financial policy introduced by the federal government of Nigeria, to consolidate all inflows from all MDAs (ministries, departments and agencies) into a single account at the Central Bank of Nigeria. Through Remita, the TSA initiative enabled Nigerian government to take full control of its cash assets.
The Remita Moments
This is what Remita gets from the federal government of Nigeria, according to the Vanguard which partly supports an entry in Wikipedia.
In a letter reportedly written to President Muhammadu Buhari by John Obaro, Founder and Managing Director of SystemSpecs, developers of the Remita application, the allegation that SystemSpecs pocketed 25 billion Naira was refuted. Obaro explained that the one per cent commission was negotiated prior to the signing of the contract; and the one per cent commission was shared by SystemSpecs, participating commercial banks and the Central Bank of Nigeria in the ratio of 50:40:10 respectively. According to findings by PremiumTimes,’Remita’ is not “an agency” but an application/software for executing payment instructions and collection of government revenue
If you do the maths, it does imply that Remita generates more than N2.5 billion monthly for SystemSpecs (500 billion monthly transaction, mainly through government with commission of 1% and receiving 50% of that 1%). So, the annual revenue from Remita comes down to N30 billion. It is very safe to assume that Remita commands more than 90% in profit since banks do the jobs; all it does is to provide the code. Using that, Remita could be generating N27 billion of profit yearly. (Note: the N500 billion was in 2016. I do expect this volume to have increased as more entities are moved into Remita by the government.)
That is why Remita is the most successful product, in profitability, in the Nigerian financial sector, ever. There is no record of any technology that has generated that level of margin and volume mix within years of launch in the history of Nigeria. Remita is having its moments; the glory is on SystemSpecs.
The impact is huge and let me explain, comparing with the total market valuation of some banks in Nigeria, using Bloomberg Markets which captures the data daily. As of today, here is the state of selected banks.
Wema Bank Plc: N20.4 billion
Unity Bank Plc: N7.13 billion
Fidelity Bank Plc: N32 billion
FCMB: N25 billion
Skye Bank: N9.4 billion
Sterling Bank: 29.4 billion
Now, you can see who is really doing banking and making money. Oh yes, banking is necessary, but banks are not really that important, if you want to join the club. Remita can buy most Nigerian banks with its annual profit. This is what the fintech (financial technology) entrepreneurs see and the reason the sector is heating up with many players. The value creation does not belong to the people on suits, exclusively.
Beyond Government: Journey to Africa
Remita has since moved beyond serving government. It is aggressively working to win startups, SMEs and companies of any size. It understands that government partnership will not be enough, because what is outside is certainly substantial. The Management of this product believes the product is on a mission: build a pan-African brand that commands presence in key markets in the continent. They are marketing, promoting and pursuing new market segments for a product that is largely bigger than the owner. Remita is SystemSpecs and, I predict, it will not be long for SystemSpecs to be renamed Remita.
But there are others with ambitions. This business is not just Remita. Interswitch, Paystack, Fluuerwave and other payment companies are aggressively competing. I do think that the winner will be anchored on technology and service. Remita is far ahead. Paystack crossed N1 billion worth of monthly transaction last month, Remita processed more than N500 billion worth,monthly, last year.
Nigerian ICT legend, John Obaro, Founder of SystemSpecs
The competition will be intense and many fintech companies will have to consolidate in the next five years. According to Disrupt Africa, Africa has more than 300 fintech entities. That is more than needed. I expect Remita to be one of the winners. It begins with a huge advantage: free cash from its federal government of Nigeria contract. That provides it capital to fund expansion. Moving into small African countries will be very catalytic for it now fintech is still at infancy in Africa. It cannot afford to make the mistake of Interswitch which wasted time before it began to execute its African strategy.
The Remita Limit
While Remita sounds very exciting, the core of its opportunity is the contract it has with the Nigerian government. It can be switched off if a new government seeks new terms or decides to work with another partner. This is the Remita risk. It has to think beyond what it does today, to build a solution that will unite Africa, and offer something none has been able to do in Africa.
In this videocast, I discuss the need to build a truly pan-African digital remittance/transfer banking product which is agnostic of location or currency in Africa. None of the products we have today meets that standard. Largely, I envisage a situation where all you need to buy and sell across Africa is one bank account in just one African Union country. With that, you do not have to even think about the specific currency of that account as technology will seamlessly make it possible to access other African markets for payments, transfer, etc. The banks or fintech companies must still comply with all regulations related to inter-national transfers, forex ,etc. The only difference is that customers will not see them as they will be hidden with technology.
Rounding Up / Remita Bank
As I conclude this piece, I hear Remita bank: an internet-only banking institution that will have zero branch network. This bank will deliver service and help pioneer digital lending, and other digital banking services in Nigeria, at cost model that will beat traditional banks. SystemSpecs has the money to get a license, because it has to diversify from its one-contract product, even as it seeks for alpha from other areas. It’s Remita – remitting value.
According to the Guardian, the Nigerian Government plans to join the European Union-driven Digital Single Market by setting up one in Nigeria.
Federal government through the Ministry of Communications is set to unveil Digital Single Market in Nigeria in collaboration with the European Union Commission.
Adebayo Shittu, minister of Communications, made this disclosure in Lagos at the 2017 Information Communication Technology & Telecommunication Expo (2017 ICTEL Expo) held at the Eko Hotel & Suites….
Towards achieving this, the minister stated that he had instructed that a committee is raised comprising the Ministry’s agencies and the Nigerian Computer Society on the new Digital Single Market paradigm ahead of the EU/Africa Summit holding November 2017 in Addis Ababa, Ethiopia.
The Digital Single Market is an initiative by the European Union to deepen the region’s digital business. The goal is to accelerate digital opportunities and enhance Europe’s competitiveness in the global digital economy. Since it was unveiled, it has explored how to integrate Africa in this ecosystem, which brings digital marketing, e-commerce and telecommunication together..
A Digital Single Market (DSM) is one in which the free movement of persons, services and capital is ensured and where the individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence….
The program has three core pillars:
Access: Access to online products and services
Environment: creating the right conditions and a level playing field for digital networks and innovative services to flourish;
Economy & Society: maximising the growth potential of the digital economy.
The EU is creating a digital single market
Largely, the vision is noble and there is certainly nothing bad about joining such initiatives, for Nigeria. No one will argue against the need to access more goods and services digitally. Likewise, it makes sense to provide the enabling environment for the growth and success of digital services through better digital networks. The EU’s plan to grow its digital economy is what it has do.
But I have issues: implementing this DSM initiative could distract Nigeria from focusing on the key elements needed for a thriving digital economy which must be fixed for local digital innovation to blossom. Indeed, joining the DSM could be a distraction, clouding our quest to deal with the root issues that stifle the growth of the sector. Even if we go ahead and join, it is very imperative that we deal with many factors currently affecting our digital economy.
Nigeria’s Core Issues Before DSM
At this moment, there are core issues Nigeria should focus as it works with partners like EU. It is not really certain if EU will help since it did note that it may not be offering any financial support to Nigeria anymore.So, the implication is that only Nigeria can find the strategy to fix the challenges that affect its digital economy. As I have noted in my works in the Harvard Business Review, finding solutions to the following will help our digital business.
Nigeria’s Minister of Communications, Adebayo Shittu
Distrust : Providing mass campaign to educate the Nigerian people that trade and commerce can take place digitally is needed. One of the biggest challenges today is that people have not fully embraced online business in Nigeria. Government has a role to play to change that, through incentives, that can do what America did by waiving all taxes when products are paid online.
Cost of broadband: Our broadband cost remains high for most people to do meaningful things online. Government should focus on how to solve this local problem through incentives that can help bring cost of broadband down.
Logistics: We have no postal system and without it, Nigerian e-commerce will struggle for years. Joining DSM will not fix this problem.
Literacy rates: Even if all the infrastructure and integration issues are fixed, illiterate citizens may be unable to participate directly on the digital economy. Without investing in the education of our citizens, the pool of potential participants in the digital economy will not improve. EU had noted that it will not bring any funding, so Nigeria has to fix these issues by itself especially when funding is required.
Others: I will not waste time discussing funding, electricity and the typical challenges.
What Nigeria Needs To Do
As I noted above, Nigeria has to waive all taxes when things are bought online. That is one step to get people to start using online as a medium of commerce. I also propose for Nigeria to sell its nationwide postal rights to a private sector to provide postal system; in other words, privatize the postal system and allow private sector to run it. As it works on the postal system, it needs to invest to educate its citizens on digital literacy. In most villages, primary school teachers do not know how to use personal computers. They need to be educated so that their pupils can be informed. With these enablers, DSM will also benefit from Nigerian participation.
NIMC Card [Source: NIMC|Besides the above suggestions, we need to ensure that the National Identity Management Commission (NIMC) has the resources to finish its works of capturing the identity of every Nigerian. That is the core enabler that will drive the digital economy Nigeria desperately needs. NIMC has the Management to execute. We do know that, despite the importance of this Commission, it remains severely underfunded.
[NIMC Vision].. to provide sustainable world-class identity management solution to affirm identity, enhance governance and service delivery in Nigeria by 2019.
[NIMC Mission]…to establish and regulate a reliable and sustainable system of National Identity Management that enables citizens and legal residents affirm their identity in an environment of innovation and excellence
It is very important that Nigeria looks at this DSM market from the lens of getting in not to be a mere consumer, but rather, to also be a creator. As noted, “The European Digital Single Market would become one of the most valuable trade markets in the world for online businesses”, but it can only work for those prepared as creators and not just buyers.
Rounding Up
Our government has a duty to ensure that Nigeria is connected to other nations. But in this Digital Single Market, the nation may not necessarily get net benefit since the enablers that will help Nigerian companies to compete are severely lacking. Focusing on how to deal with those issues will be more catalytic than the government making it far easier for Europe to win our local customers. Europe Union is a friendly institution to Nigeria but in this case, we do not need to just join because it has invited us. Our focus, at this moment, should be dealing with the root causes that inhibit our digital economy, and fixing then. Europe will eat our launch, pushing their wares to our consumers because our creators do not have the enablers, yet, to add more creative value in the market structured to empower Europe.
Nigeria does showcase sparks of brilliance though, most times, it rarely remembers to replicate the best things. In one entity, National Petroleum Investment Management Services (NAPIMS), Nigeria demonstrated that it is indeed a nation of great people. Nigeria designed a great structure that made it possible for it to unlock value despite apparent lack of technical and financial capacities.
The National Petroleum Investment Management Services (NAPIMS) in the Exploration & Production (E&P) Directorate is the upstream arm of NNPC that oversees the Federation investment in the Joint Venture Companies (JVCs,) Production Sharing Companies (PSCs) and Services Contract Companies (SCs).
NAPIMS is, therefore, set up to earn margin arising from investments in the JVCs, PSCs, SCs, with the multinationals and also protect the nations strategic interests in the JCVs [sic].In addition, NAPIMS engages in frontier exploration services in basins where the multinationals hesitate to venture, like the Chad Basin.
Simply, NAPIMS is the investment arm of the Nigerian people since oil & gas dominates our foreign exchange. As elegantly noted in its mission statement – “to be a world-class oil investment management outfit” – NAPIMS ensures that Nigeria gets value in strategic partnerships with Shell, ConocoPhillips, Eni, Mobil and other major (upstream) oil companies. Through NAPIMS, Nigeria runs many joint ventures with these energy companies, working to maximize Nigerian returns.
Why I like NAPIMS Model
The NAPIMS model is very unique and there is no other structure like that in Nigeria. In short, Nigeria got NAPIMS right, but failed to replicate a really great working system in other areas. I like the structure of NAPIMS because of the following key reasons:
It makes sure Nigeria is de-risked in oil & gas business. Through the JV, NAPIMS makes money only after the energy companies have taken the risks and succeeded. In other words, if they go there and lose money, NAPIMS will not lose. But when they make money, they have to share with the Nigerian people.
Through NAPIMS, Nigeria does not need to have technical capabilities before it can unlock values in its upstream energy business.The global energy giants are responsible for developing and utilizing their technical know-how to unlock the crude oil value in the nation.
With the NAPIMS Model, Nigeria does not need to have the cash before oil mining can happen. The global partners will be responsible for the financial investments.
Sure, I do agree that if Nigeria should develop the necessary technical and financial capacities, the nation would be creating more value from its oil and gas reserves. But expecting Nigeria to do that will miss the point. We did not run electricity well, we failed in telecommunications, and we continue to struggle in clean water supply. So there is nothing that can support the thesis that if there were no Shell, Mobil etc that Nigeria would be an oil producing country. That we have allowed the energy entities to make money seems to be the only pragmatic model, because in other simpler things, we could not deliver. So, NAPIMS formation was a clever way to overcome Nigeria’s stasis in execution.
FIIRO DG updates Nigeria’s former President Obasanjo on the parastatal’s works (source: Fiiro)
Yes, with NAPIMS, we avoided the problems of inefficient Water Boards, NEPA (or its incarnates), and NITEL and delivered a top-class upstream energy business that has funded Nigerian budget for decades. That is the beauty of NAPIMS; very ingenious.
NAPIMS Model for Government Research Institutes
Nigeria funds many research institutes including Electronic Development Institute Awka (ELDI), Federal Institute of Industrial Research, Oshodi (FIIRO) and Raw Materials Research and Development Council (RMRDC).. While we may not have invented computers, some of these government agencies are actually inventing. However, they do not innovate because they have nothing (of value) commercialized. (Innovation = Invention + Commercialization). Without the element of sales/commercialization, they are merely filing up government shelves with ideas. That is the nation’s weak link: inventing without any plan to innovate.
I have a suggestion, Nigerian government should work to liberate these agencies by deploying the same model it has used effectively in NAPIMS. This is what I suggest:
Establish a new unit, not a new agency or commission, within Nigeria Export Processing Zones Authority(NEPZA) to coordinate how inventions from these government agencies can be commercialized through joint ventures with private companies. The unit will represent the Nigerian people as it negotiates with the investors. Call this unit National Research Outcome Investment Management Services (NROIMS).
NROIMS will coordinate with all government labs and research institutes to collect new research outcomes which are ready for commercialization. It will then package them, closing deals with private sector where possible. It will hold small equity, only activated on profit-sharing since it will not invest any money in new ventures. We suggest NROIMS will take 10% profit for ten years. Government has to make the JV terms very palatable for the partners while requiring that they must commercialize under defined terms or they will lose their rights to the inventions.
NAPIMS model will unlock value in the country by providing a vehicle for private companies to explore research outcomes which can be commercialized. NROIMS will work to market and promote the inventors locally and internationally to ensure Nigeria does not end its research policy at discovery, without any element of commercialization.
Case Study: Unlocking FIIRO
FIIRO is a federal government parastatal with the mission “to conduct and promote market-driven research and development (R&D) for the industrialization and socio-economic development of the country”. Over the years, it has created many technologies with most of them not commercialized. Though it has a technology transfer office, a nationwide consolidated system will help bring efficiency in cases where complementary technologies can be integrated from other national institutes.For example, ELDI Awka could have developed an embedded electronics technology which could be used with FIIRO Fruit Washer, to improve its efficiency.
FIIRO Fruit Washer
Rounding Up
Nigeria should not just focus on discovery, neglecting commercialization as it works to redesign its economy through diversification. Our science and technology policy rarely gets up to the level of taking ideas to markets. Our nation has to correct that issue for us to make progress. Yes, we are good in sending satellites in the space before we even plan what to do with the downlink signals. We budget money for research with no apparent strategy on what to do with the outcomes. If we can borrow a model that actually worked, the NAPIMS model, we can redesign our science and technology research for market impact. Now is the time for Nigeria to think seriously about commercializing the little efforts we are making. The Nigerian people are looking for the products in our markets.
Many people are pushing for modular refineries in Nigeria. It is indeed a very exciting business, on the face of it: Nigeria needs fuel to run our generators and drive our cars. And with our refineries not producing the capacity the nation needs, we have been importing for years. Indeed, government will like to substitute the imports with locally refined products especially in this age of foreign exchange scarcity. It makes economic sense because Nigeria has the crude oil and we have no business importing refined products.
That is the optimistic exuberance why most people are getting into this. According to the Vanguard, Nigerian National Petroleum Corporation (NNPC) expects about 20 investors to pump in $20 billion in the business.
THE Nigerian National Petroleum Corporation, NNPC, has commenced move to attract 20 companies to make substantial investment worth $20 billion in order to meet the Federal Government’s target of increasing refining capacity in the country.
Investigations showed that the apex oil corporation has, in the past few weeks, been engaging with the investors in order to inform, educate as well as assist them to prepare various packages required in the process of applying for licence. On completion of the engagement, the promoters of the modular refineries would be equipped with vital knowledge to submit their applications to the Department of Petroleum Resources, DPR, that is vested with the responsibility to issue such licenses.
It is indeed an exciting sector. This article provides a good rosy picture for Dangote Refinery, which is certainly the one that matters at the moment, as it is already building, to begin operations in 2019.
THE 650,000 barrels per day Dangote Refinery has been projected to hit 50 per cent capacity utilisation by 2020. The capacity utilisation of the Lagos-based plant, scheduled to come on stream in 2019, would rise to 90 per cent by 2030.
PriceWaterCoopers, in its latest report, Modular refineries: Merits and challenges, made available to Vanguard, stated that the feat would make West Africa to become a great refining hub in Africa.
The report, which puts existing refineries at 20 percent utilization, stated that Nigeria and West Africa have a deficit of 113,000 barrels per day, bpd. “Nigeria’s refineries continue to operate at abysmally low utilisation rates. 8.5 percent combined utilisation as at 2016 and 37 percent as at 2017. Refineries have been forced to halt operations multiple times as crude supply lines have been routinely targeted by militant groups.
That is a very interesting projection. And that makes sense because Nigeria presently imports most fuels. So, with local demand, Dangote Refinery will not have any problem in getting to near-capacity utilization; our national refineries are largely non-functioning.
Then read this from Quartz newsletter:
This week the UK became the fifth country—after the Netherlands, Norway, India, and France—to commit to selling only electric cars in the near future. It will do so starting in 2040, while Norway and India are more ambitious, aiming for 2025 and 2030 respectively.
As battery prices fall, it’s clear that electric cars are the future. How soon we get there will depend on how serious we are about reaching emissions goals set under the Paris accord….
If any country seems to be on track in this regard, it’s China. In 2016, the country registered 350,000 electric vehicles (the US was a distant second with 160,000). It has tax exemptions in place worth $6,000 to $10,000 per car. It boasts 150,000 charging stations, with 100,000 more coming in 2017 (the US has just 16,000). And it has plenty of spare capacity to power all these vehicles, with its thermal power plants running only half the time.
Tour of Dangote Refinery by Nigerian leaders [Source: LN News}
Comments
From these two bits of news, one can deduce as follows:
The future of refineries cannot be assured because batteries and electronics will get cheaper, as always. The implication is that fossil-powered cars will be the alternative cars in most parts of the rich world by 2040. If that happens, the fossil-powered cars may not even be produced. Understand that the market for Nigeria, unless we can get more people into upper middle class, may not be too huge for GM, Toyota, Ford etc to be making cars they cannot sell in U.S., Japan, Western Europe, and other rich countries. (I make this statement believing that making electric cars will be cheaper than fossil-powered cars within 15 years, for comparative cars.)
So, if the rich world pivots to electric, the end of fossil-cars can happen. That will affect the refinery businesses in Africa. It is important to note that this will not happen overnight; we have about two decades on this, in Africa.
Most refineries in leading economies will struggle because of many factors: electric vehicles, car-sharing (lesser on the road), vehicle energy usage efficiency, solar etc. So, the implication is that any projection in long-term, based on today’s refined-product demand will be careless; one has to consider the technology trajectory and how it will affect demand. This is where I see challenges for small refineries in Nigeria because demand will drop and price must crash for a product that is largely undifferentiated.
Sure, refineries are not just there to produce petrol for cars. However, in Nigeria, that is the main demand driver. The generators are there but I expect solar to have a good take on that within a decade. In other words, solar will become a good source of energy for most homes or government will figure out the electricity problem.
Investing in Modular Refineries
Refining is a commoditized business where scale matters more than anything. If Dangote Refinery takes off, as expected, it will be the industry leader. If that happens, it will have a huge advantage on building the necessary distribution facilities first. Should you need to come, say five years, after Dangote Refinery begins operations, you need to carefully analyse how soon you can recoup your investment before an expected fundamental industry-level redesign begins to affect demand. The five year projection is based on my model that NNPC may finalize all permits by next year and it will take each company 3-4 years to build.
Besides, if electric cars become far cheaper than fossil-powered cars, petrol demand will struggle. And since electric car penetration is always correlated with solar electricity home usage, we can also see more homes and offices getting electricity from solar at the same time they are driving electric cars. This means that if that happens in Nigeria, we may not even need generators.
So from the electric cars and generators, we will see multi-pronged challenges for refiners, depressing earnings for a commoditized product. We may end up having only the expected industry leader, Dangote Refinery, winning and every other participant largely struggling.
Rounding Up
Refinery business is not trading, it takes years to recoup the investments and as you work on the break-even analysis, consider the technology impact and the fact that we already have a category leader. In the short-term, modular refinery makes business sense in Nigeria. But after the next two decades, it may be worthless.That understanding should help to ascertain if the business is worth the risk.
