Eko Refinery and Petrochemical Company has appealed to the Federal Government to support local refiners with sovereign guarantees loans for the completion of their modular refineries.
Mr Emmanuel Iheanacho, the Chairman of the Company, made the appeal in Lagos against the backdrop of local refiners’ inability to secure loans to complete their ongoing modular refineries.
Sovereign guarantee is a promise by the government to discharge the liability of a third person in case of his default which are contingent liabilities of the central and state governments that come into play on the occurrence of an event covered by the guarantee.
Iheanacho said government did not necessarily need to provide its own funding, but give guarantee to any of the local promoter of refining companies that demonstrated that the refinery’s design and programme were viable and “that is the only way to help to secure loan.”
“It simply means government is going to give a sovereign guarantee for any money that is loaned; there is money all over that place, but they are awaiting government to make the move to agree to give sovereign guarantee.“There is no reason why our government will not be assist indigenous refiners with that,’’ he said.
Iheanacho, who is also the Chairman of Integrated Oil and Gas Limited, said that it seemed that government failed to fully appreciate the importance of private sector involvement in modular refineries in Nigeria.
He said that the country was going to save a lot of money that were being lost to shipping crude oil overseas for refining and bringing it back as refine products if we had private sector involvement and people had developed refinery capacity .
“What that means is that we pay lots more from the fuel that we consumed, but if we refine it locally we will see a significant reduction on the transportation cost both on transporting the raw product to refining in abroad and bring it back for consumption in our economy.
“What government ought to have done is to encourage people who bring in viable ideas, like setting up the modular refineries.
“I know that government always talks about licenses where about 42 refineries were given licenses and non has come up to me; it’s not about the licenses that stopping the people, but there are so many issues in getting a licenses and establishing a refinery.
“You have to understand the business of refining, you have to understand the market context you must have been able to articulate the field, from engineering design, detail design and find financing, this is where government should come in,’’ Iheanacho said.
The refiner said that the essence of the sovereign guarantee was to enable local refiners seek loans with foreign investors or banks, adding that there was need for government to stand as guarantors for local refiners.He said that government should really appreciate fully the extra ordinary impact which the development of the indigenous local refiners will have on local economy.
Iheanacho said that the company has gotten an approval from the Department of Petroleum Resources to commence construction of its proposed 20,000 Barrel Per Day (BPD) production capacity modular refinery.
He said that the refinery which was located at Tomaro Island Port, Amuwo Odofin Local Government Area, Lagos worth 250-million dollar (N90 billion).
“We (Eko Refinery and Petrochemical Company Ltd) have gotten the authority to commence construction from DPR which is the final approval, the first is license to establish and the license to construct.
“We are at the fund raising stage and we are going to raise funds wherever we can get it from – within and outside the country.
“One cannot commence construction until the company goes through fund raising stage which is the stage we are now,’’ he added.
Iheanacho also appealed to the government to come up with a policy that would compel financial institutions to make funds available to indigenous players who might intend to build modular refineries.
He said that when his 20,000 barrels per day refinery would reduce importation of refined petroleum products into the country.
“Financial support is one major area we need government’s help, that there is need to have many of the small scale refineries to turn around the economy.
“We can now start exporting more refined products than we are currently importing.“Government should make provision for financing because it is key requirement to do 20,000 barrels per day.“It requires an investment of millions of dollars. We need government to assist modular refinery operators.
“We are not asking to be given grants and handout, but to be assisted in the process of being able to secure financing in major finance institutions,” he said.
Iheanacho said that if government could assist the operators to secure finance, it would go a long way to assist them realise some of the benefits that would drive the country’s economic growth.