Oil sector prospects optimistic after Tinubu’s 100 days

The removal of petrol subsidies, a modest rise in crude oil output, increased efforts to curb oil theft, the appointment of ministers and a new divestment deal have raised hopes that the oil sector’s fortunes could improve after Tinubu’s 100 days in office.

Following his inauguration, the president took the bold step of ending petrol subsidies, which his predecessor indicated would end in June but did not provide any money for. However, the plan was criticised because social programmes that could cushion the impact on the vulnerable were not immediately announced.

Petrol subsidy removal has triggered widespread disaffection within the economy, prompting labour unions to declare strike action but the government has held firm, offering to provide palliatives including cash transfers, grain supply and a gas vehicle programme.

“The removal of fuel subsidy is a masterstroke. We hope that ongoing efforts to repair the refineries, fix the challenge of oil theft and put the industry back on the path of sustainable growth will be sustained,” said Adewale-Smart Oyerinde, Director General of the Nigeria Employers’ Consultative Association.

The Federal Government recently approved N5 billion for each state and the Federal Capital Territory (FCT) to enable them to procure food items for distribution to the needy in their respective states. The programme itself has come under criticism because it seems impractical and inadequate as entire communities have to work out how to share a bag of rice.

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The president sent in a list of ministers right before the deadline was up, but those assigned to the energy sector revealed why a blind screening by the National Assembly was a great disservice to the country.

“The time it took to appoint Ministers for the sector has actually reduced the performance in my opinion as ministers are still trying to get a grasp of the issues,” said Jide Pratt, Country Manager of Trade Grid.

Pratt said that while Tinubu’s initial policy document was good, the implementation was spotty.

President Bola Tinubu’s picks for the critical energy sector do not inspire much confidence from industry experts who believe that this appointment does not reflect the urgency of tackling the challenges confronting the sector.

He did not appoint a substantive minister for Petroleum Resources and appointed politicians to as junior ministers in Gas and Petroleum Resources.

By not announcing an appointment for Minister of Petroleum Resources, Tinubu could be following his predecessor’s strategy of making himself Petroleum Resources Minister. Over eighty percent of respondents to a recent poll conducted by BusinessDay said the President should not appoint himself Minister for Petroleum Resources.

However, the oil sector faces existential threats from oil theft to insecurity and divestments by oil majors.

Read also: NNPCL: Oil production surges to 1.6mbpd, petrol consumption slows 30%

Fallen oil production in April, May, and June eroded the gains recorded in the first quarter of the year as the sector GDP dropped by 9.22 percent over the previous quarter’s result, according to the latest data from the National Bureau of Statistics (NBS) has shown.

On a year-on-year basis, the report showed a decrease of 1.66 percent from -11.77 percent in the corresponding quarter of 2022. Also, the real growth of the oil sector still wobbles in the negative region.

“The real growth of the oil sector was –13.43 percent (year-on-year) in Q2 2023, indicating a decrease of 1.66 percent points relative to the rate recorded in the corresponding quarter of 2022 (-11.77 percent).

“Growth also decreased by 9.22 points when compared to Q1 2023 which was –4.21 percent. On a quarter-on-quarter basis, the oil sector recorded a growth rate of -14.12 percent in Q2 2023,” the report showed.

Last week the NNPC said production had risen to 1.6m bpd raising hopes that the sector’s fortunes will improve.