Cutting operations cost: Oil marketers say FG should lead by example

The Nigerian government has been calling on oil and gas industry operators to reduce their cost of operations to achieve the $10 a barrel production cost target. Now some of the oil workers say the government should lead by example.

This counsel rings true considering that Nigeria’s recurrent expenditure overshadows capital expenditure needed to stimulate investments at every budget circle.

“A visible and measured reduction in the cost of governance throughout the polity would bring about savings which can be directed toward improving the livelihood of the average Nigerian,” said Adetunji Oyebanji, chairman of Major Marketers Association of Nigeria (MOMAN) in a press conference held virtually on Thursday.

On Wednesday, Timipre Sylva, minister of state for Petroleum Resources launched the Nigerian Upstream Cost Optimization Program (NUCOP), designed to cut upstream production costs.

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Nigeria is one of the world’s highest-cost producers with some fields reporting $22 on joint venture operating expenditure and $12 for capital expenditure at an oil price of $50 per barrel. Logistics and handling costs are also higher in Nigeria. This leaves little for taxation benefit to Nigerians.

Through NUCOP, the government aims to reduce costs of production, administration, and governance throughout the petroleum value chain in the Nigerian petroleum sector, to promote efficiency and competitiveness within the industry and ensure value creation for all consumers.

“However, beyond this initiative being limited to the petroleum industry, we believe it is a notion that should be applied to the Nigerian landscape, particularly in the area of governance,” the oil marketers said.

They said this cost optimization initiative would demonstrate to Nigerians the good faith of the decision-makers in both the public and private sectors.

Nigeria’s rising governance cost has become even worrisome to officials. Femi Gbajabiamila, Speaker of the House Assembly said it had become increasingly difficult with each appropriation cycle for the government to meet its obligations, echoing the IMF warning to Nigeria.

“At a time of reduced revenue, with pre-existing and worsening infrastructure deficits requiring significant investments, we cannot afford to keep establishing more institutions that impose a permanent liability on government income,” the speaker told the lawmakers.

At its January Monetary Policy Committee meeting, members expressed concern over the rising public debt stock, the recurrent expenditure that remains relatively high, as against planned capital spending. This, they said, signals future debt servicing challenges.

Yet the government has not summoned the political will to reduce its costs. It has failed to implement the report of the Presidential Committee on Restructuring and Rationalisation of Federal Government Parastatals, Commission, and Agencies led by Stephen Orosanye, which called for the scrapping of 102 of the statutory agencies in the country.
Even lawmakers are wont to sponsor Establishment Bills seeking to set up new institutions.
The oil marketers also called for reviewing fuel importation. “We need to collectively, and as a nation, track the progress of work at all the new refineries under construction across the country to ensure they are delivered timely, efficiently, and sustainably.