Business & Economy
What Nigeria’s next president should do to the Oil and Gas Sector
The 2023 general elections are in top gear as political parties have concluded their respective primaries and selected their flag bearers. The flag bearers of these parties have wasted no time in unveiling their plans and most importantly, the economic agenda for the country. It’s important to state that the Oil and Gas sector is Nigeria’s most profitable sector.
Over the years, the sector has been Nigeria’s live wire in terms of exports and the major source of revenue. According to the National Bureau of Statistics (NBS), Nigeria exported goods worth N7.1 trillion in Q1 of 2022, crude oil export was at N5.62 trillion representing 79.16% of total export. The oil and gas sector is crucial for the success of Nigeria’s next president and this article seeks to explore what the next president must do to ensure the sustainability and efficiency of the sector.
NNPC
The Nigeria National Petroleum Corporation (NNPC) was founded in 1977 and it is a state-owned corporation owned by the Federal Government of Nigeria, it is the corporation through which the government control and partakes in oil activities such as exploration, production, refining, amongst others in the country. It is a member of the Organization of Petroleum Exporting Countries (OPEC). Over the years, the corporation has been enmeshed in a series of crises and issues.
The ‘shady’ nature of the corporation has raised eyebrows over the years. In 2020, the NNPC published its first audited financial records, which was the first in 43 years. Also, according to reports, 107 million barrels that were lifted for domestic consumption in 2019 could not be accounted for, and petrol valued at $16.8m which were pumped to depots at Ibadan and Aba in 2019, was never received by the depot.
A detailed and ‘easy to read’ financial audit record should be published by the NNPC every year. The NNPC started this in 2020, this should however be a constant thing by the NNPC and should be available on its websites and other platforms for easy access.
The next president should make it mandatory for the NNPC through its General Manager to give an account of all NNPC depots and every litre that is sent to each depot. This will ensure accurate figures from the end of NNPC and the depot to avoid discrepancies.
A probe of the corporation’s books in the last decade. The NNPC has been criticized as being a haven of corruption. All corrupt officials should be made to make the wrath of the law.
PIA Implementation
The Petroleum Industry Act (PIA) provides a legal, governance, regulatory and fiscal framework for the Nigerian petroleum industry, the development of host communities, and related matters. The first executive bill of the PIA was in 2008, and this was under the 6th Assembly, under the government of late Musa Umaru Yar’adua. Over the years, successive governments and national assemblies have ignored the passage of the bill. On August 16, 2021, President Buhari assented to the bill which was passed 48 days earlier by the national assembly. The passage of the bill was lauded by experts and Nigerians.
The passage of the bill is only the first step, the next president should ensure that it doesn’t get nested in the rivers of forgotten waters. The implementation should be done to ensure every aspect of the bill is not left out.
A periodic review or assessment of the implementation should be made, to ensure further problems do not arise. The 3% to host communities and 30% profit for Frontline Basin Development should be reviewed to ensure it doesn’t degenerate into more problems.
Oil Theft
Oil theft in Nigeria has continued to grow in leaps and bounds. Nigeria loses about 200,000 barrels of oil every day. With a production of 1.02mbpd which is short of OPEC’s quota, oil theft has generated more problems. Nairametrics earlier reported that the Managing Director of Chevron Nigeria/Mid Africa Business Unit, Richard Kennedy revealed that, Oil theft in Nigeria is an organized crime. According to reports, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has revealed that $1 billion was lost to oil theft in Q1 of 2022. Also, Shell Petroleum, which has already shut two of its pipelines has disclosed that continuous oil theft may force them out of the country.
Social amenities should be made for host communities. Issues such as degradation and oil spillage should be addressed, this will help in improving security.
Pipeline security should be made paramount. Investment should be made in terms of and also equipment to help safeguard pipelines.
Investment should be made in technology such as trackers on oil wells, and pipelines at strategic places, to monitor the flow of oil.
Subsidies
Fuel subsidies over the years have proven to be inimical to the growth of the Nigerian economy. Nairametrics earlier reported that the revised 2022 budget saw an upward in fuel subsidy from N3.557 trillion to N4 trillion. However, the International Monetary Fund (IMF) has warned that the country could see subsidies rise to N6 trillion, which will pose a greater risk to the Nigerian economy.
The next president must remove fuel subsidies totally, and ensure judicious use of funds.
Moribund refineries should be working and plans should be made to increase and build new ones. This will help to cushion the effect of fuel subsidy removal and also end the importation of Petrol.
Investment in pipeline
Plans are already in place to kickstart Nigeria sending natural gas to Europe through Algeria and Morocco. The project could see Nigeria send up to 30 billion cubic meters of gas per year to Europe.
The next president should make the project come to fruition as early as possible and seek profitable partnerships with European investors.
Also, it’s important to avoid a parasitic relationship like crude oil. Crude Oil is Nigeria’s biggest export, in a contrasting line, petroleum is Nigeria’s biggest import.
The oil and gas sector should be the most important sector for Nigeria’s next president, stabilizing the sector will help the country boost the economy, and foreign reserves, among others.
