Bola Tinubu, presidential candidate of the All Progressives Congress, wants to raise Nigeria’s oil output to 4 million barrels per day as investors flee the Niger Delta; Labour Party’s Peter Obi seeks to legalise artisanal refiners but they steal the crude they refine; and Peoples Democratic Party’s Atiku Abubakar has ambitions to privatise the Nigerian National Petroleum Company despite glaring hurdles.
As elegant as these plans sound, they are unmoored from reality.
BusinessDay’s analysis of the energy plans of the presidential candidates of the major political parties reveals that in the main, they could end up as pipe dream unless they are tweaked to accommodate current realities and backed by enough political will to push through badly needed reforms against the current of corruption and entrenched interests.
Of all the top presidential contenders, TInubu has released the most comprehensive plan, an 84-page document that captures his party’s priorities. Much of the insight from other presidential candidates was gleaned from interviews with the media and recorded speeches detailing their plans.
Nigeria’s oil sector is declining with the exit of International Oil Companies (IOCs) who are prioritising investment in other countries. Million-dollar projects including the 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko deepwater project; and 1billion barrel Owowo field development await final investment decisions.
Fiscal and regulatory terms for the oil and gas sector do not encourage investments. The country has passed the Petroleum Industry Act but the government has dragged the implementation of the law. Regardless of local capacity, an output cap by the Organization of Petroleum Exporting Countries places limits on ambition.
The situation is compounded by rampant crude theft, even in the midst of several military units devoted to curbing it and the deployment of technological tools by oil companies to check vandals.
Tinubu’s plan is to deploy technology to track oil and gas assets and create a special task force to curb crude theft. He also plans to track vessels coming into Nigerian waters to lift crude.
In a July interview on Arise TV, Atiku said: “This is a task where you must bring in all the security agencies, army, naval forces, because now everyone is left to do whatever they like without coordination, without supervision, without leadership.”
Obi has fingered external parties including government agencies to be involved and promised to send security forces after the thieves.
The reality though is that all these actions are already in place. Several armed forces have been sent after the thieves but the practice continues because the soldiers provide cover for the crooks. This is why analysts surveyed by BusinessDay feel the plans are enough.
“I haven’t seen any concrete plans to change the status of the energy sector from any of the candidates,” said Chinwendu Enechi, an energy analyst and partner at Andersen in Nigeria.
“Any government coming in needs to deal with the issue of crude theft because that affects production and will stifle any potential investment from anyone,” Enechi said.
Analysts say this will involve removing the reasons why security operatives collude with criminals. It would involve streamlining the regulatory process for vessels getting into Nigerian waters and removing the multiplicity of regulatory agencies that fosters chaos in the sector. It would also demand a determination to prosecute the oil thieves and their sponsors.
Nigeria is on course to spend about N6 trillion by next year on petrol subsidies, and all the top presidential candidates claim they are for removal of petrol subsidy.
Seven years ago, President Muhammadu Buhari claimed it was a fraudulent exercise and would not enable it. So far, he has spent over N7 trillion on fuel subsidies.
Analysts say the best gauge of a presidential hopeful’s sincerity is how he plans to remove subsidies and where the saved funds would be channelled.
“We shall phase out the fuel subsidy yet maintain the underlying social contract between government and the
people” said the APC campaign document.
Obi, in an interview a few days ago, said: “There is no way we consume about 66 million litres of fuel daily when Pakistan is consuming about 22 million litres of fuel daily, and we are the same population.”
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According to Obi, Pakistan has more roads and a similar number of vehicles, based on his studies. “So if they are doing 22 million, how can we be doing 66 million?” he queried. “By the time you remove fuel subsidy, you find out that the quantity you’re dealing with is less.”
All the presidential candidates say social projects including public transportation must accompany subsidy removal.
However, they are yet to speak about the critical engagement with labour required to push this through or how they would build goodwill from Nigerians to stomach the reality of a litre of petrol selling at N450 at the petrol station or concrete plans to boost local refining.
“I agree that subsidy must be removed but done fairly and for there to be fairness, the following must be present- nearly constant electric power; there must be alternatives to road transport, which uses PMS and diesel and our refineries must work and we then refine locally,” said Ayodele Oni, energy lawyer and partner at Bloomfield Law Practice.
The NNPC is punching way below its weight and as currently constituted drags down the economy analysts say. A sustainable reform of the sector will transform the NNPC into a functional state oil firm in the form of Saudi Aramco and Statoil, analysts say.
To fix the power sector, Atiku, in an interview with Arise TV, said power should be generated from sources closest to areas of comparative advantage.
In July, Obi travelled to Egypt to understudy how the country implemented its electricity reforms and replicate it back home. “Egypt moved their power generation, transmission and distribution from about 20,000 to over 55,000 (megawatt of electricity) today within five years. I go to where people have done the right thing to learn,” he said.
“We will introduce a Nigeria First policy by which gas resources shall be directed, as a #1 priority to Nigerian power generation,” says Tinubu’s campaign plan. The APC campaign says it will ensure power generated is moved to homes, ramp up off-grid power, eliminate estimated billing and consolidate Buhari’s current power plan.
While there is something redeeming about these plans, the key challenge in Nigeria’s power sector is a dysfunctional electricity market. The inability to recoup investments into the power sector is a critical issue requiring attention.
Operators say one way to achieve this is a tariff that generates commercial returns. A liberalised power market that will buy gas used to generate power at market rate, removing subsidies and the power sector to a fully functional market governed by contracts.
While the presidential aspirants may not have everything figured out, the rigour they bring to understanding the challenges, their track record of earlier performance, their willingness to swim against the tide of parochial interests and their determination to stick to painful reforms will be crucial in lifting the sector from the current doldrums.
