It’s been a very exciting journey. I left university in 1987. I worked briefly for a company called PricewaterhouseCoopers. Then joined another company called Ascon oil Company Limited and worked there for about five years, learned the business, and then by 1997, I left Ascon Oil and started Rainoil. Rainoil, which we have run for about 24 years now, is a company that we started from scratch, from ground zero. Over the past 24 years, we have grown to become one of the very significant downstream oil and gas companies in the country.
As of today, we own a 50 million-litre capacity petroleum storage depot in Oghara in Delta State. We own another 50 million-litre capacity petroleum storage depot in Calabar in Cross River State; and a 50 million-litre capacity petroleum storage depot in Ijegun in Lagos State.
We have an 8000-metric tonne Liquefied Petroleum Gas facility also in Lagos State. We have a fleet of more than 150 tank trucks to distribute petroleum products across the country. We have about 100 petrol stations also spread across the country, and we also own a ship. We are providing direct employment to more than 1,200 Nigerians.
Why did you venture into oil and gas?
When I was in university, I used to tell myself that I would like to trade. I’ve always loved the art of trading. As a kid growing up, I loved the art of counting money. I used to joke with my friends in university that I would like to sell cement when we left school. But most importantly, I worked for another downstream oil and gas company. For the five years I spent in Ascon Oil, I saw the business and understood it. I knew where the opportunities were, and I felt it was something I could do. I incorporated Rainoil in 1994, then I was 28, so that was when I started planning to, at least, get out to do something for myself. Between 1994 when I incorporated the company, to 1997, I tried to raise the needed capital to start the business and, by 1997, I hit the road to do the job, and I’ve been on it since then.
Do you feel fulfilled today?
]I feel very fulfilled. Although, as they say, success is a journey; it’s not a destination. So we are still very much on that destination. But so far, I look back and have nothing but to give gratitude to God for how far we’ve come. Rainoil, today, is one of the very leading players in the downstream sector in Nigeria. As an indigenous company, we started from scratch to where we are today.
I never doubted if I would succeed, but, at the same time, I didn’t look too far. I kept it very simple. We were taking it one step at a time. From one petrol station to two to three to four to about 100 that we have today; from one truck to two to three to about 150 trucks that we have today. We built our first depot in Oghara in Delta State in 2011. We commissioned the second storage facility in Calabar in 2015, and we commissioned the third one in Lagos in 2019. Rainoil is the only downstream oil and gas company I know today that owns three petroleum storage facilities in three out of Nigeria’s four key markets. The four key markets for petroleum import into Nigeria is Lagos as a cluster, Oghara, Warri as the second cluster, Port Harcourt as the third cluster, and Calabar as the fourth cluster. We are in Lagos, and we are in Oghara and Calabar. The only place we don’t have a petroleum storage depot in Nigeria is Port Harcourt.
Do you still import petroleum products?
Yes, we bring in a lot of diesel into this country. We bring in a lot of aviation fuels into this country. The only product we don’t import directly as a company is petrol, even though we account for a very significant percentage of petrol sold in this country. As of today, only NNPC is importing petrol into this country because of the price dynamics and the distortions in the system, so NNPC is the one filling that gap for now.
Marketers have called for petrol price to be increased as the oil price traded at $67 per barrel. NNPC hasn’t responded. What do you think?
I think it will be a misnomer to say marketers are clamouring for an increase in petroleum products’ price. Marketers are not clamouring for an increase in the price of petroleum products. The price of petroleum products is driven by government policy. The government came out and said they had deregulated the price of petrol. Before now, the government deregulated the price of diesel and jet fuels, which is why today, nobody has any discussion on how much to sell diesel. Diesel at the depots today sells for about N235 per litre. Diesel at the pump is going for about N250 per litre today. There are no conversations about that. You can go to the petrol station tomorrow, and diesel is selling for N260. Nobody calls a roundtable to discuss the price of diesel. The same is true with the price of jet fuel, which is aviation fuel or kerosene, depending on the way you want to look at it. Those prices are deregulated.
But petrol has always been a regulated product. So the government fixes the price. Now, once you fix a price, it’s like you are drawing a straight line and say, this is the price. Now, the cost of crude, which is the product in which petrol’s price takes its reference, keeps fluctuating daily. Once you draw a straight line and fix the price of petrol, it means that as the price of crude keeps fluctuating, somebody has to bear that difference in cost. Historically, the government has always borne that difference, and that is what we call subsidy or under-recovery, depending on what name you want to call it. The government, historically, has taken that hit. According to a report, Nigeria might have spent about N8 trillion subsidising petrol alone in the last couple of years. The government came out about a year ago and said, we have deregulated. In other words, we have taken a subsidy out of petrol.
At the height of the COVID-19 pandemic, when we saw the price of crude oil fall to as low as $15 a barrel, we got to a point where the same government brought down the price of petrol from N145 to N125 per litre. Because at that point, the import cost of petrol was such that you could sell at N125 and make money and not have to pay the subsidy. But unfortunately, since then, the price of crude started recovering as the world started finding a solution to COVID-19. As crude oil prices started recovering, the cost of bringing in petroleum products, especially petrol, also started inching up. So, from N125, the government moved the price of petrol again to about N142; from there, we got to N162, where it is now. But when it got to N162, the price of crude oil now went further up, such that today, the price of bringing in petrol into the country, depending on the exchange rate you use, went up. The landing cost of petrol into the country today should be about N200 per litre. At the pump, we should see prices of about N220 per
The subsidy has inadvertently crept in. Unfortunately, it has now become a political problem. Marketers don’t have a problem because NNPC imports fuel and distributes it to marketers. But the policy is a government policy. The government has now found itself in a dilemma of whether to keep prices where they are and bear the subsidy’s cost or increase the price, at least, up to import parity, where the consumers pay for the actual cost of importing petrol. The government chose the route of retaining that subsidy. Unfortunately, we have gone back to a subsidy regime, and that subsidy regime is that you can still buy your petrol at anything between N162 to N165. But know that if you buy petrol at N162 or N165 today, the government subsidises it with nothing less than N50 per litre.
Now, to put it in perspective, our daily consumption is about 60 million litres per day. If the government today subsidises it with about N50 per litre, the federal government spends about N3 billion every day to subsidise petrol. It means that today, the government spends N90 billion a month to subsidise petrol. If they continue that at this level, in the next 12 months, we run the risk of spending about N1 trillion on subsidy. Now, that’s going to be a very tough call for the government to make because the last time I checked, the budget on health and transportation is not up to that amount on an annual basis. For marketers, our responsibility is to do business as things are. It is what it is. But if you ask me, I think Nigeria can afford not to incur the cost of subsidy right now.
What should be the right approach to deregulate for the masses, the government, and marketers to benefit?
I believe that the government should deregulate. Deregulation brings efficiency and allows market forces to drive the business. It means the private sector will take complete responsibility for bringing in petroleum products. It will bring enhanced competition. It will bring increased investment in the industry. Look at diesel, for example. Diesel is completely deregulated. When last did you have a scarcity of diesel? If you drive along the road, if you go to four different marketers’ petrol stations, you will likely see four different diesel prices. It’s pure competition. Market forces determine the prices. If you allow the same on petrol, yes, prices may go up initially, but sooner than later, the prices will come down because the competition will drive that price.
But most important, the government is going to save a lot of money. When you look at the system, why should you use N3 billion daily to subsidise one product? Why should you spend N90 billion in a month to subsidise one product? Now, look at N90 billion and imagine the amount of critical infrastructure (roads and railways) you can build if you have N90 billion. When you talk of the masses and when you speak of subsidy, who are you really subsidising? Is it the masses? When I’m going to work and I’m driving, I look at the number of SUVs on the road just going to work in the morning.
The SUVs are gas guzzlers. To fill an SUV tank, some of them take 120 litres to fill it up. Anybody who can drive an SUV doesn’t need your subsidy. He can afford to pay the open market price of petrol. With due respect, the poor people you talk about, how many of them even have cars? How many of them buy petrol? Yes, some of that subsidy impact the people at the lower rung of the social ladder, but the real people who enjoy the low price of petrol are the people who can afford to pay.
The government should remove subsidy and re-channel that fund into putting more money in the poor people’s hands. Use that money to increase the minimum wage, for example. I struggle to understand why people should earn N30,000? You can find ways of spending that money either to do those things I mentioned earlier; mass transit, free education, and social welfare that will impact the poor rather than spend it on petrol, subsidising it, and thinking that you are doing it for the poor. Now, I heard you when you talked of marketers introducing artificial scarcity by asking some to sell today, some to sell tomorrow. Now, those are things that happen in an imperfect market.
When the market is not perfect because the government is subsiding the product, there is a bit of scarcity because there is no proper competition. We are economic beings. Naturally, once any product is scarce, the instinct is to want to take advantage. Whether it’s petrol or any product, whether it’s an air ticket, once there is a bit of scarcity, you begin to have those kinds of human economic behaviour. But if you remove the subsidy to allow a perfect market, that kind of behaviour won’t be seen anymore. I keep giving the example of diesel. When last did you see anything like that happen on diesel or in ATK? But as long as the government keeps trying to determine the price of petrol, we will keep having this kind of hiccups.
How will competition bring down petrol price?
When you talk about price, price is relative. The petrol price will always be benchmarked to the crude cost and always benchmarked to the exchange rate. Two things have happened in the last five years, so to speak, depending on your reference point. We have seen the exchange rate slide from N160 to N190 to N285 to N360 to N410 today, officially or N490 (to the dollar), depending on the exchange rate you use. On the exchange rate alone, the naira has lost maybe, more than 50 percent of its value, which also impacts petrol price.
In terms of crude oil, crude oil is trading for about $65 per barrel today. You are not going to see those low-level prices on a naira-per-litre basis. As long as crude oil (price) keeps going up, as long as the exchange rate keeps sliding, we will see a higher naira-per-litre price of petrol. However, when I talk of competition driving down pricing, I mean, when there is competition amongst marketers, you will have a stable price that does not take advantage of the market because it’s an open market. Every single marketer is bringing in fuel. There is more than enough supply in the market. You are going to have a market-driven price.
How can the government mitigate the initial adverse effect of total deregulation on the masses?
Again, as I said, if the government removes the subsidy, all the government needs to do is to channel those savings into social programmes. There are a lot of things that can be done. People in the lower rung of the social bracket need mass transit. You need to give them mass transit. You need to invest a lot in railways. I look at a city like Lagos, a city of 20 million people. We don’t have what you call mass transit. If I want to go from Lekki to Okomaiko, for example, if trains are running, I should get to Okokomaiko in 45 minutes and be sure I will be there in 45 minutes. You should have a train (system) that can easily carry a thousand people, and those trains are just moving.
These things cost a lot of money, and this is what the masses need. They need to invest a lot in housing and infrastructure; open up the cities. You need money to do all this. We also need to invest in education. I look at education, for example. A lot of us in my generation attended public primary schools. I went to a public primary school. I went to a public secondary school. I went to a public university -the University of Benin. Today, even the people in the lower rung of society all want to send their children to private schools. The public schools have collapsed, and the private schools charge so much money. The government can channel these savings to education, build more public primary schools, build more public secondary schools, and make those schools accessible. Education should be free.
You may spend more money paying for petrol, but you can save that money by ensuring that your child gets free education. It balances out, and everybody is happier for it. There is this book I’m reading now, by Barack Obama. When Obama came in (as US president), the US financial institutions were collapsing, and they needed to rejig their economy. They needed to pump in about $800 billion into the US economy, and they were arguing where to spend the money, and the man said, ‘Let’s spend it on huge infrastructure. That is a faster way of putting money in people’s pockets.’ So, the government should find ways of putting money in people’s pockets to have money to spend, which is why I talk about the minimum wage. You need to find ways of increasing people’s wage. Again, I have found petrol to be a very emotive issue. Once you talk about petrol, everybody gets very emotional about it. Petrol is just one commodity. Why are you spending so much money on one commodity when you can channel that same money into doing so many other things that can impact people for the better?
Does the Petroleum Industry Bill currently at the National Assembly portend anything good for the oil and gas industry?
Yes, we will be very happy if, eventually, this National Assembly passes the petroleum bill. The Petroleum Industry Bill has bogged down in the National Assembly since the Obasanjo administration. It’s been there so long that many of us no longer know which version is in the National Assembly. But I’m happy that this current National Assembly has been able to harmonise it. It got bogged down with politics and self-interest. Many people were benefiting from the industry as it is, especially in the upstream sector. We look forward to this current National Assembly being able to pass the bill. They are going to consolidate DPR with PPPRA. Most of the regulatory agencies will have to come together and work as a single unit. There are many benefits to the PIB, and we are very optimistic that this National Assembly will pass it.
The PIB proposes the establishment of the Midstream Infrastructure Fund. What is it, and how will it be funded?
I think it’s going to be funded by the government and, to some extent, by the marketers. Everybody is going to make some contribution to that fund. A part of DPR will come together with the Petroleum Equalisation Fund and the Petroleum Products Pricing Regulatory Authority to form that Midstream Regulatory Agency to take care of both the downstream and the midstream sector of the oil and gas industry. The funding will come partly from the government. Today, for example, on every litre of petrol that sold, marketers contribute about N7.65 to the Petroleum Equalisation Fund to ensure that the price of petrol is equalised across the country to buy petrol at N162 in Lagos and Abuja and anywhere in the country. The fund ensures the price of petrol is uniform across the country.
Are there any grey areas in the bill that you feel should be addressed before its passage?
You know, what happened was that the original PIB was very diverse. What the government has done this time is like saying, ‘Look, can we take away the contentious areas and then reduce the PIB into the upstream part and then the midstream part? Can we take those two sections, take them to the National Assembly, get it passed and implemented, and then, later, we can come to deal with the others?’ The version before the National Assembly is essentially a reduced and simplified version of the PIB. For now, I don’t see any needlessly contentious part in the current PIB before the National Assembly.
You are from the Niger Delta. Are you comfortable with how NDDC is managed?
I don’t want to isolate NDDC from our national problems. NDDC is Nigeria in microcosm. NDDC is a representative of the malaise we have in the larger nation. Whatever is happening in NDDC is not peculiar to NDDC. But having said that, NDDC, I dare say, haven’t lived up to the expectation, especially when I see the level of abandoned projects; when I see the level of waste that has taken place in NDDC. Much has been given to them. They have also achieved a lot but not commensurate with the amount of resources that they have got. For example, I know that NDDC built the road that passes through my village in Delta State, and we thanked them for it.
They have constructed a lot of roads, a lot of infrastructures. But for the amount of money given to them, they could have done far more than they have actually done. When I read the amount of debt that owed, the number of abandoned projects, the kind of sleaze that we hear coming out of the place, I shudder. I think the place needs to be completely overhauled. NDDC needs to be run as a business. People need to ensure that we get value for money. That’s something I always see missing. If you are going to spend N1 billion, are you getting N1 billion worth of value? It’s not just enough to bandy huge figures around and achieve so little. For example, I look at the East-West Road, which is a major road project that NDDC has been doing for a very long time. Hundreds of billions of naira have gone into that project. Yet, it’s still not completed. That is the main artery through Niger Delta, running from Warri to Port Harcourt. Up till now, we see a work in progress largely. NDDC needs to be completely overhauled, and I will encourage the federal government to take a very active interest in what is happening there
What’s your take on the current rise in the price of LPG?
It’s one of the contradictions we find in the industry; Nigeria is more of a gas-producing nation than an oil-producing nation. We have more gas than crude oil. Seventy percent of the LPG we use in this country is imported, and it’s a contradiction. We have seen the national demand for LPG rise from about 300,000 metric tonnes per annum to a million tonnes per annum in the last five years. We closed the year 2020 with more than a million tonnes per annum in national demand. NLNG exports most of the gas they produce. NLNG’s quota for domestic LPG consumption is 300,000 metric tonnes per annum. Our national demand is a million tonnes. So, we now have to go abroad to import the same LPG to Nigeria.
Meanwhile, we are gas-producing. We (Rainoil) have an 8000 metric tonnes LPG facility in Lagos. One hundred percent of the LPG we have sold in Ijegun in Lagos were imported. Here we are, exporting our LPG and exporting our gas, and we are looking for dollar, the same scarce dollar, to use and import LPG back into the country, to meet our national demand. That is a contradiction that we need to solve. One of the things I have suggested for the policymakers is that first and foremost, they should come up with a policy that ensures that 100 percent of the LPG produced in this country is consumed locally first to meet 100 percent of the local demand. Then, any surplus can be exported. You can’t be exporting LPG and then be re-importing the same LPG using your scarce dollar. It’s a contradiction. I’m not surprised if you tell me that the price of LPG has gone up because, in the last six months, I have seen the price practically double at the depots. If you have to import LPG, the import cost of LPG is tied to crude oil price and the exchange rate. In the last months, we have seen crude oil kind of double. We have seen the exchange rate also slide. So, the price of LPG is impacted, and LPG is used for cooking. So, whether you are rich or poor, everybody is using LPG, and I’m not surprised if people in the lower rung of the social ladder complain about the price of LPG.
Are you keying into the federal government’s alternative energy policy?
Yes, we are keying into that seriously. That is the way to go. As the government keeps getting more pushback on the petrol price, we also see the government increasing investment in autogas, trying to get people to convert, running their vehicles on autogas. Even if people are going to run their vehicle on autogas, you still need to come up with policies that will ensure that the price of gas also remains cheap relatively and remains affordable. The challenge with the autogas is, how many people are ready to make that initial investment? There has to be an initial investment to convert your vehicle from running on petrol to LPG. The next thing people need to grapple with is availability. For example, if I’m going to drive from Lagos to Abuja by road, I know that a full tank in my car will not carry me from here to Abuja, I fill my car in Lagos, but I’m sure that if I get to Ibadan, I can get petrol to buy. I’m sure if I get to Owo, I will see petrol to buy. If I get to Lokoja, I will see petrol to buy. But if my car is running on LPG today and I fill up my tank in Lagos, say, I’m going to Onitsha, what assurance do I have that if I get to Benin, I can easily get a petrol station to fill up my LPG? What assurance do I have that I will get a petrol station to fill up my LPG? A lot of these investments will need to go hand in hand. But it’s the right and proper thing to do. It’s the right direction to go. I also want to see a lot of electric cars come into the country in the near future.
Are you comfortable with Dangote Group’s request that only companies with a refinery licence should import petroleum products when there is a shortage resulting from Turn Around Maintenance?
I don’t think it’s the right and proper thing to do. I’m excited that Dangote is building a refinery. I’m excited that the country is going to gain a lot from the refinery. But business is good when you have a lot of players playing in it. Business is good when you create a level playing field, and business is good when there is competition. Creating a monopoly around petroleum products hands the country over to one person. I don’t think that’s healthy. The refinery is good for the system. If the refinery is up and running, whatever they produce should come into the country. Marketers will be happy to patronise them and be part of the distribution process. If the refinery is down and the country needs to import petrol, everybody should be given a chance to play in that market. Handing over the importation of petroleum products to just one person just because he owns a refinery, which at that point in time the refinery is not working, I think it’s anti-business. It’s unhealthy, and it’s not good for the country.
Tell us about the development projects carried out by Rainoil as part of its corporate social responsibility.
In Rainoil, we take corporate social responsibility seriously. It’s something for which, on an annual basis, we have a healthy budget. We operate in a community called Oghara in Delta. We built and equipped a classroom block for one of the secondary schools in Oghara, called Oreki Grammar School. We built a classroom block, equipped it with desks, blackboards, etc., and handed it over to the community. In Lagos, we support a lot of orphanages on a going basis. We did medical outreaches, including eye tests and donated eyeglasses to people in Oshodi. We did the same thing in Kaduna. We support many schools with what we call the Back-to-School programmes, where we give out a lot of school bags and books. In Oghara, when we did that programme, we gave out about 6,000 school bags and more than 10,000 notebooks to primary school pupils. Now, coming closer home, in my community, I know that a couple of years ago, we built two kilometre-road with four kilometres of drains and handed them to the community. We had built a town hall for the community. We take corporate social responsibility seriously. At a personal level, I run a foundation where we give scholarships annually. We have many people on the scholarship.
What’s the long-term vision of Rainoil?
The long-term vision of Rainoil is to be the dominant downstream oil and gas company in Nigeria; to be a dominant energy provider in the country. Today, I think we are easily (in) the top three downstream oil and gas companies in the country. But our vision is to be the very dominant player, and we are very much on track to achieve that.