Full or partial privatisation of the state-owned oil company Nigerian National Petroleum Corporation (NNPC), removal of subsidy on petroleum products, and provision of stable power are among issues topping the agenda of candidates in the presidential election this month.
Nigerians will on February 16 vote a president for the next four years, in an election that experts project will shape the future of the oil and gas industry, not only because Nigeria is Africa’s biggest oil and gas producer, but because what happens in the country impacts the rest of the subcontinent one way or the other.
While Kingsley Moghalu, presidential candidate of Young Progressives Party (YPP), believes partially privatising the NNPC will make it a more profitable organisation, Atiku Abubakar of the main opposition People’s Democratic Party (PDP) pledges to fully privatise NNPC.
Muhammadu Buhari of the All Progressives Congress (NNPC) has not said much about his plans for the state-owned oil company, while Fela Durotoye, presidential candidate of the Alliance for New Nigerian (ANN), and Omoyele Sowore, candidate of the African Action Congress (AAC), are looking to provide stable electricity power in Africa’s largest economy.
Atiku, a former vice president, has vowed to break up the NNPC, which he called a “mafia organisation”. According to excerpts from Atiku’s policy documents ‘Let’s Get Nigeria Working Again’ and ‘Atiku’s Plan’, the PDP candidate plans to increase the contribution of the downstream sector to GDP from 0.5 percent to at least 2 percent by 2025 by increasing the quantity of petroleum being refined, consumed and exported.
Atiku further plans to expand domestic gas production to meet power generation and manufacturing demand, as well as more efficient management of revenue flows from the oil and gas sector by ensuring transparency and accountability in the operation of all private and public institutions operating in the sector.
Atiku also plans to strengthen the regulatory framework to create a functional, fair and transparent upstream and downstream oil and gas market and stir competition that will eventually improve efficiency and breed higher quality of service. The framework, according to the policy documents, will be such as to ensure confidence in the system and will include implementing the Petroleum Industry Bill (PIB), the National Oil Policy, National Gas Policy and Downstream Gas Act, which will enable the commercial regulation of the sector as well as improve transparent licensing and non-discriminate access to pipelines.
If elected president on February 16, Atiku plans to create policies and a transparent incentive regime that will allow for purposeful growth of the national reserve base for both oil and gas.
To boost ‘producibility’ and increase reserves, Atiku says his government will reconsider the introduction of the marginal fields bid round and also reconsider the blocks bid round to encourage more exploration.
In order to improve domestic supply of refined petroleum products, the former president says his government will incentivise investors willing to site modular refineries in Nigeria’s northern region to source crude from neighbouring Niger and Chad via pipeline to be constructed under Public Private Partnership (PPP).
Luqman Agboola, head of research at Sofidam Capital, said it’s impossible, uneconomical and not feasible to privatise NNPC 100 percent within four years, adding that doing so would entail losing money.
Agboola explained that it would be difficult to privatise some agencies under NNPC, like National Petroleum Investment Management Services (NAPIMS) which is in charge of JV and PSC with over 100 assets that cannot be fully evaluated within two or three years.
“What we can do is partial or gradual privatisation because what we have seen is not all privatisation is successful, like we have seen with the power sector, although there are a couple we can do away with very quickly in the downstream sector, like NNPC retail,” Agboola said.
Muhammadu Buhari, incumbent president and candidate of the All Progressives Congress (APC), while declaring open the first-ever Nigeria International Petroleum Summit (NIPS) in Abuja in February, said Nigeria was ready to provide leadership for Africa in oil and gas.
The country, he said, was open to private investment in the downstream sector and was vigorously pursuing “a programme for the rehabilitation of existing refineries so as to enhance capacity to supply locally-refined petroleum products in Nigeria and West Africa”.
He said this was a key component of the National Petroleum Industry Roadmap and the 2017-2020 Economic Recovery and Growth Plan (ERGP) of his administration.
“This summit will afford Nigeria a unique opportunity to showcase to the international community policy direction and efforts of government in the petroleum sector. This is especially in the new oil and gas exploration and markets, new measures to sanitise the sector, the expansion of investment opportunities to boost investors’ confidence, technological advancement and Nigeria’s content development,” he said.
“Our effort in stakeholder engagement and stabilising the Niger Delta will continue to receive due attention to ensure sustainable level of production,” Buhari said.
In December, at the 40th anniversary of the National Union of Petroleum and Natural Gas Workers (NUPENG) in Abuja, Buhari said to demonstrate his commitment to Nigeria’s reforms, he would give assent to the Petroleum Industry Governance Bill (PIGB) as soon as the National Assembly presents it to him.
Buhari had last year declined assent to the PIGB, saying the provision of the Bill permitting the Petroleum Regulatory Commission to retain as much as 10 percent of the revenue generated unduly increases the funds accruing to the commission to the detriment of the revenue available to the federal, states, Federal Capital Territory, and local governments in the country.
He also cited some legislative drafting concerns which would create ambiguity and conflict in interpretation if the Bill was assented to in the form it was presented.
Last week, Buhari directed NNPC to extend its exploration to six basins in the country.
“Exploration in our frontier basins is imperative to the economy of the country. I, therefore, have directed NNPC to intensify its campaign in the Chad Basin, to discover new hydrogen to extend the economy of the people within the region and the nation at large,” he said.
“Our next level is to ensure that exploration is extended to Chad Basin, Gongola Basin, Anambra Basin, Sokoto Basin, Dahomey Basin, Bida Basin and Benue Trough, for more prosperous Nigeria. Gas and oil remain critical to the present economic development of our country and the future,” he said.
While Buhari has not said much on his plans for NNPC, Femi Adesina, presidential spokesperson, on July 25, 2015, barely two months after Buhari was sworn in as Nigeria’s president, said the president would split the NNPC into two entities.
“Mr President will soon split the NNPC into two entities. One will be an independent regulator and the other one an investor vehicle,” Adesina said.
Nearly four years on, that promise is yet to come to fruition.
Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria (CBN) and presidential candidate of Young Progressives Party (YPP), believes partially privatising the NNPC will make it a more profitable organisation.
The political economist wonders why a presidential candidate will propose 90 percent sale of the NNPC and adds that public organisations should not be a tool for political agenda.
“The NNPC needs to be partially privatised 41 percent or 51 percent to either private sector or government. This will turn the NNPC into a much more transparent organisation that is run consistently profitably,” Moghalu told Channels TV in a recent live interview.
Moghalu also believes petrol subsidy is one of the biggest scams in Nigeria.
“At some point in the future – I am not saying that is the first thing I will do as president – we are going to take a look at the economy, and if, as I believe it is necessary that subsidy will eventually have to end, we will prepare for how to end it so that Nigerians won‘t suffer unnecessarily,” Moghalu says.
“The NNPC has long been a prime example of how the absence of corporate governance leads to institutional decay and ineffectiveness. This is why the NNPC must be partially privatised (with well-thought provisions to protect the interests of host communities in the oil-producing states of its operations) if it is ever to run as an efficient corporation,” he says in his book ‘Build, Innovate and Grow: My Vision for Nigeria’.
Wummi Iledare, professor of Petroleum Economics and director of energy at the Centre for Energy Studies, University of Ibadan, agrees with Moghalu, saying all the promises the politicians are making concerning the oil and gas sector are achievable except 100 percent privatisation of NNPC.
“The privatisation of NNPC 100 percent is just politics because we have understood that NNPC exists based on an Act of the Congress called NNPC Act of 1977,” Iledare told BusinessDay.
He explained that the only problem with NNPC was political interference, adding that the government-owned oil company was very viable and profitable with working refineries prior to 1995.
Fela Durotoye, presidential candidate of the Alliance for New Nigerian (ANN), in his 10-point plan promises to deliver a minimum of 12,000MW of electricity to Nigeria within four years, from the current 4,000-5,000MW.
If elected president next year, the management consultant promises to ensure a multidimensional regional approach to power generation across the federation; prioritise the use of renewable energies for power generation; partner with the private sector in the area of increased funding for power projects across for federation, and fully deregulate the end-to-end electricity chain.
Durotoye also plans to make the power sector attractive for investors and allow cost-reflective prices; implement a National Energy Rebate Scheme that allows for proper pricing to attract investors within and outside Nigeria to be able to make power sector work, and find ways to cushion the effects on the vulnerable parts of the population by giving them rebate tickets that can be used to claim back monies spent on power.
Omoyele Sowore, presidential candidate of the African Action Congress (AAC), says if elected president, he will solve the country’s electricity problems in less than a year.
According Sowore’s manifesto titled ‘Moving Nigeria Forward: A manifesto for growth and prosperity’, the power sector will be driven by key principles that include setting targets for power capacity that reflect the country’s desire to leverage energy for generating rapid and sustainable growth; diversifying energy mix to enhance sustainability; decentralising new power asset generation to bring development quicker to communities and breaking projects into smaller bits that can be funded rapidly through private-public partnerships.
The other principles enumerated in Sowore’s manifesto include driving the enactment of policies that will attract and retain private investment in the electric power sector; mitigating the exposure of Nigeria’s electric power sector to pipeline vandalism by building a strategic virtual pipeline comprising trailers and rail cars that will transport LNG via truck or rail to power generation facilities across the country.
“We intend to decentralise a significant part of new power infrastructure so that many smaller facilities dedicated to servicing local communities and dedicated industrial zones and parks can be established across the country,” Sowore says in his manifesto.
DIPO OLADEHINDE
