Bola Tinubu steps into office at a time when the economy is in tatters. Over N70 trillion worth of debt hangs over the nation, oil output is at half of 1970s capacity, trillions of cubic feet of gas molecules lie fallow dangerously close to their sell-by date, and investors are scrambling out of the Niger Delta as a fraudulent fuel subsidy programme and crude theft plunge the country into ruin.
The job of Nigerian president would test the political will of the most popular candidate and the sanity of the healthiest of men. President Tinubu is none of those things.
In his inaugural speech, President Bola Tinubu said the subsidy is gone.
“We commend the decision of the outgoing administration in phasing out the petrol subsidy regime, which has increasingly favoured the rich more than the poor.
Subsidies can no longer justify their ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investments in public infrastructure, education, health care, and jobs that will materially improve the lives of millions,” Tinubu said.
There’s a reason his supporters on Twitter have been amplifying that aspect of his speech across social media platforms. In Nigeria, things that are often blindingly obvious are often easily, deliberately obscured. Then again, it’s often difficult to wake someone who isn’t asleep in the first place.
The next showdown is between the government, labour unions, and civil society groups, with the government fighting to convince the people that they will mobilise, not to start protesting against their own interests.
Tinubu’s lack of popular mandate would be an albatross, something his predecessor had in abundance but squandered in a way that ought to be a crime.
Between mid-2014 and early 2016, the global economy faced one of the largest oil price declines in modern history. A 70 percent price drop due to a supply glut was one of the three biggest declines since World War II and the longest lasting since the supply-driven collapse of 1986. Oil prices were literally on the floor, but Nigeria failed to remove petrol subsidies, grant new oil leases, or reform oil regulations.
Analysts of all stripes counseled the Buhari government, barely a year into office, to remove subsidies on imported petrol. Even his minister of state for petroleum, Ibe Kachikwu, struggled to explain away the illogicality of keeping subsidies at a time when Nigeria’s production had fallen to 20-year lows on account of the militant activities.
Four years later, the Organisation of Petroleum Exporting Countries (OPEC) and non-OPEC members, including Russia, failed to agree on export curbs to shore up prices and began pushing so much volume into the market, they set off a price war that eventually upended oil markets.
By March, Saudi Arabia was doing ‘give-aways,” slashing prices to $4 per barrel in the Asian market. Russia, in response, began pumping like oil was going to replace water. Negotiations between Saudi Arabia and Russia broke down. High cost shale producers who profited from a boom in prices were in tears. Brent prices, which started at $45 a barrel in March, had crashed below $10 by April. Some shale producers were paying people to take the oil by the end of April.
Again, many analysts called on the federal government to seize the opportunity to remove subsidies, reform the sector, and pass the Petroleum Industry Act. The president, a former military general with a tenuous grasp of economics and geopolitics,refused the counsel until it was too late to implement any serious reforms. Subsidies become an albatross.
In the 2023 general elections, all the presidential candidates have pledged to remove subsidies, but as Buhari was quick to find out in 2015, articulating policy is easier when you’re doing it on a campaign podium. The man who lampooned petrol subsidies ended up burning over N11 trillion on them.
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This is why Tinubu needs balls of steel, an iron-clad will, and a laser focus on delivering much needed reforms.
“The government must bite the bullet rather than the several postponements seen by the outgoing government for obvious political reasons,” Joshua Olorunmaiye, team lead/executive associate, energy and natural resources at Bloomfield LP, told BusinessDay.
Nigeria has declared a ‘Decade of Gas’ but little apart from sloganeering has been done to show serious intent. Gas producers have called for a liberal gas pricing regime.
Last August, according to the Manufacturers Association of Nigeria (MAN), industries that were operating at 60–70 percent capacity utilisation were operating at an average of 15 percent and energy is their biggest challenge.
“Gas supply to the commercial sector averages around 400 mmscf/d before the current supply challenges. Now supply is lower than 50 percent of previous capacity,” Ogagbano Adejo-Ogiri, executive secretary of the Association of Local Distributors of Gas Ltd. (ALDG) told BusinessDay in August.
The blueprint to enable Nigeria to benefit from the rising prominence of gas has been drawn up in the Decade of Gas Policy. Giving in to the temptation to start afresh, draw up fresh policies, and hire new personnel is how abandoned projects became the Nigerian reality.
Power supply still hovers around 4GW daily despite reportedly improving DisCo revenue. Legacy gas plants are still billions of naira in debt and the Federal Government is contemplating reneging on the terms with Azura power, a development capable of shredding whatever remains of Nigeria’s credit ratings.
Metering reforms and service-based tariff plans have improved DisCos revenue and the test for Tinubu’s government would be how it sustains these reforms. The urge to cancel and start afresh has the same addictive effect as opium fresh from Afghanistan, this should be resisted.
Many provisions of the new Petroleum Industry Act implementation were suspended by Buhari because he lacked the gumption and mental bandwidth to understand required reforms.
Analysts say, the priority of the Tinubu government must be to implement the law including the new fiscal and regulatory terms.
Buhari’s tenure as oil minister has seen the worst flight of investment capitals, declining production and crude theft. As petrol minister and head of PTDF, Buhari exaggerated his capacity to run an evolving oil sector when his best ideas about the sector became antiquated in the last century. Under him approvals were slow, investments dipped and the oil sector crumbled. It appears the skill to run one of the most vibrant sectors in the world is a tad different from those required to herd cows.
Analysts say, Tinubu should focus on ‘being president’ while professionals run the sector. Oil leases remain unused because cronies rather than investors win bids, this cannot continue if the country yearns for recovery.
Tinubu comes to power with the baggage of a history of rent seeking, opacity in his life and finances, and crony capitalism that he virtually developed into the template for running Lagos.
Things are a tad different at the center. The sun has to be let into Abuja’s finances, and they should never be indistinguishable from his. Nigeria can no longer sustain the kind of heists politicians and their cronies inflict on her. Under Buhari, Nigeria was looted to its core, right down to the bones!
At the passage of the Petroleum Industry Act, in August 2021, it was advertised as the elixir for new investments in the sector, but investors are fleeing Nigeria due to industrial-scale crude theft, uncertainty, and the government’s inability to fully implement the act, according to operators.
A recent report on investments into oil and gas exploration in Africa between 2020 and 2022, by the International Renewable Energy Agency (IRENA found that Nigeria’s investment into exploration was $1.33 billion, while Algeria’s was $3.256 billion, Egypt’s was $1.744 billion, Namibia’s was $1.124 billion, and Angola’s share was $977 million.
Shell, ExxonMobil, Sunlink and TotalEnergies spent about $100 million, respectively, on exploration activities in Nigeria.
Osagie Okunbor, Managing Director of The Shell Petroleum Development Company of Nigeria Ltd. (SPDC) and Country Chair, Shell Companies in Nigeria, said at a recent conference in Abuja that a lack of stability in fiscals, issues with the sanctity of contracts, the security of investments, and the sheer impact of crude theft continue to scare away investors.
According to Ayodele Oni, Partner, Energy Practice Group, Bloomfield LP, the efforts at reducing oil theft along the pipeline routes to the export terminals have been critical to increased production.
“The government needs to ensure that this trajectory is sustained,” he said. “The high oil prices have also been some form of encouragement to produce more.”
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) revealed in its monthly oil production status report that Nigeria’s oil production rose by 34 percent from August 2022 to 1.26 million bpd in January 2023, the highest in 12 months, and Tinubu’s top job is to ensure it does not go any further down.
