• Saturday, December 09, 2023
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Tinubu’s energy sector ministerial appointments inspire little cheer

FG to harness regional potential in addressing crisis in power sector

An accountant will be charged with fixing Nigeria’s creaking power grid. The man who will drive local gas exploitation is best known for sacrificing his senate ambitions for the current Senate president and the minister of state for petroleum resources is an environmental lawyer.

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.

Adebayo Adelabu, appointed to head the ministry of power, is a former deputy governor of operations at the Central Bank of Nigeria (CBN) and was an Oyo state gubernatorial candidate for the All Progressives Congress in 2019.

Adelabu started his career with PwC and managed various audit and consultancy engagements for large banks and non-bank financial institutions within and outside Nigeria. He was on secondment to the CBN for one year in 1999 and left for various roles in different banks, and rose CFO at First Bank.

His expertise in financial management is not in doubt, but the power sector is a different ball game. Industry operators say the sector is facing a liquidity challenge, driven initially by the six underperforming distribution companies, which until the naira devaluation had been unable to meet their market obligations to the tune of about N30 billion per month.

With the devaluation and floating of the naira, industry estimates show that the shortfall may have reached N90 billion per month, easily the highest shortfall in the history of the beleaguered market. This shortfall is mainly driven by the abrupt naira devaluation causing significant hike in the gas pricing and the price of generation contracts (like Azura) that are pegged to the US dollar.

Some key priority initiatives to be undertaken include the unbundling of the Transmission Company of Nigeria (TCN) as provided in the Electricity Act 2023.

“A key policy suggestion is the development of a policy framework for merchant transmission lines constructed and operated under PPP arrangements. The development and concessioning of merchant transmission lines is a more preferred route for the impending privatization of TCN,” said Odion Omonfoman, energy lawyer, in a note.

How he navigates returning liquidity to the electricity market and cutting technical losses through forward-looking policies will test his mettle. This includes developing market competition in the electricity distribution business and driving the new subnational administration of electricity supply in their own states.

Gas sector

Nigeria has declared a ‘Decade of Gas’ but little apart from sloganeering has been done to show serious intent. Gas producers have called for a liberal gas pricing regime and the absence of infrastructure contributes to perennial gas shortages in industrial cities in Lagos.

According to the Manufacturers Association of Nigeria, industries that were operating at 60–70 percent capacity utilisation were operating at an average of 15 percent, and energy is their biggest challenge.

“Gas supply to the commercial sector averages around 400 mmscf/d before the current supply challenges. Now supply is lower than 50 percent of previous capacity,” Ogagbano Adejo-Ogiri, executive secretary of the Association of Local Distributors of Gas Ltd., told BusinessDay in August.

The blueprint to enable Nigeria to benefit from the rising prominence of gas has been drawn up in the Decade of Gas Policy. A new minister could be tempted to start drawing up fresh policies and hiring new personnel, leading to abandoned projects.

But this can happen when the minister has a working knowledge of the sector, this is not the case. In the announcement, there is no minister for gas resources, the first time a ministry devoted solely to gas had been created. This puts an end to plans to merge power and gas ministries to create an Energy Ministry following the scuttling of El-Rufai’s purported appointment.

By not announcing an appointment for Minister of Petroleum Resources, Tinubu could be following his predecessor’s strategy of making himself Petroleum Resources Minister. The junior minister inspires little confidence too. Prior to this new role, Lokpobiri was a minister of state for Agriculture and Rural Development under the Buhari government.

Over eighty percent of respondents to a recent poll conducted by BusinessDay said the President should not appoint himself Minister for Petroleum Resources.

Nigeria’s oil sector faces existential threats at this time, which calls for the undivided attention of a minister. Nigeria’s Decade of Gas programme requires the full attention of a Minister.

Read also: Nigeria lost N16.25trn to oil theft from 2009 to 2020 – NEITI

Crude oil theft must be tamed to hope for improved oil revenues to improve dollar supply and government earnings. The NNPC is embarking upon a transition into a commercial entity with serious guidance in implementing joint venture agreements and meeting its obligations.

“It’s a horrible idea at this time,” says Kelvin Emmanuel, an energy sector analyst and CEO of Dairy Hills Ltd.

Emmanuel said the primary areas of focus for the next petroleum minister were “enormous.” This includes reviewing the Petroleum Industry Act’s provisions to improve gas fiscals, especially in deep offshore fields, preparing the NNPCL for an initial public offering to generate cash to fund oil projects, secure pipelines and implement Nigeria’s shift towards a gas-powered economy.

“These responsibilities are too technical for a sitting President to handle, they need an industry person who is not only technical but also understands the administrative politics of dealing with stakeholders,” said Emmanuel.