Nigeria risks declining earnings from crude oil
…as PIB overlooks renewable energy
The Petroleum Industry Bill (PIB) has continued to receive knocks from industry operators who see it as a document that contains poor strategies that may not take Nigeria’s oil and gas industry to the next level of development.
For instance, the document fails to address renewable energy at a time when the world is moving in that direction.
Some of the industry operators argue that in the next few years, the PIB document will become moribund when the growing global interest in hydrogen strategies, electric cars, and other technologies may have reduced the usage of fossil fuels.
Reliance on fossil fuel means that Nigeria would not get big markets for its crude oil in the international market. This is bound to negatively affect the country’s foreign exchange earnings, a development that would put pressure on financing the economy.
Despite the plunge in crude oil prices and oil production cuts, Nigeria’s oil revenue in the first half of 2020 increased by 57.6 percent over its budget benchmark to N2.7 trillion which was largely driven by increases in petroleum profits tax and royalties, according to the Central Bank of Nigeria (CBN).
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This was, however, attributed to the lag effects of the Nigeria National Petroleum Corporation’s (NNPC) accrual accounting method, where oil transaction contracts materialise within 90 days from the date of initiation, after which the proceeds are deposited in the Federation Account.
Experts believe that as the world continues to rely more on renewable energy, the demand for fossil fuel will drop.
“If the world continues to look at renewable energy which is gaining ground already and Nigeria is still struggling with the PIB document that has refused to take a holistic look at the country’s energy development, the chances are that its hydrocarbon reserve may become wasted assets”, said Najim Animashaun – Partner, Gulf of Guinea Consulting
Animashaun noted that the PIB does attempt to comprehensively address the issue of gas constraints and flaring. Nevertheless, it ultimately fails to account for climate change, acknowledge the Paris Agreement, and address the need for diversification to adequately prepare Nigeria for the energy transition that is already underway.
The Columbia Centre for Sustainable Investment noted also that “rather than locking more capital into projects and infrastructure that will soon be obsolete, Nigeria should be promoting the stewardship of assets that propel the energy transition forward, not those that will be left behind.”