Tracking Government Reforms On Oil And Gas —Ifeanyi Nwabugu



If there is any issue that has occupied the front burner in our national life and attracted critical commentaries among Nigerians since the 70s, it is the petroleum industry and it has to be so because succeeding Nigerian leaders have used it as benchmark for our national development and as a means of primitive accumulation of wealth. The petroleum industry in Nigeria is the largest industry and main source of GDP in the West African nation which is also the continent’s most populous and richly endowed yet the country still relies on massive oil importation for about 80%of its petrol product needs. Fuel importation as a means of meeting internal supply has led to round tripping and massive fraud which has ranked the country as a leading most corrupt nation on earth. Given the number of years that the oil sector began its operation in Nigeria coupled with the corresponding financial resources accruing to the government and its impact on economic growth in the country, one can conclude that the sector has not been sufficiently active especially when juxtaposed with the enormous resources available it. This is due to numbers of reasons which includes high cost of maintenance of equipment and refineries, gross misappropriation of funds, over reliance on the sector as source of revenue and the control of the operation of the sector by incompetent hands.

It was to address these problems that the present administration embarked on generation of more values for the nation’s petroleum resources. The rationale for restructuring the oil and gas sector in a petroleum dependent economy like Nigeria is designed to enhance sustainability of petroleum wealth and its impact on all stakeholders. Government thinking is that the diversification of the economy will reduce the scramble for oil money, cut the rate of official corruption and reduce internal conflict among the communities laying claim to resource deposit. Carrying out such reforms presupposes that the current state of the industry is inefficient in service delivery and ineffective in promoting societal welfare objective. The target of the reforms is not only focused on enhancing industry effectiveness and efficiency but also to ensure equity with respect to wealth distribution among all stakeholders which include government, communities and operators. There is no doubt that restructuring the NNPC is the focal point of the ongoing oil and gas reforms in Nigeria. The general observation by many Nigerians is that NNPC has failed in its mandate, therefore the new goal is to reposition the new NNPC and benchmark it with the international best practices such as Malaysia NOC (Petronas), Venezuela NOC (Pdvsa), Norway Statoil, Algeria NOC (Sonatraco), Mexico NOC (Pemex), Brazilian NOC and Saudi Aramco . The desire is to get the new corporation to a level in which the degree of operation and strategic autonomy from the government is similar to Norway Statoil. There is no doubt that the separation of business and commercial operation from the regulatory and policy making function in the oil and gas sector in Nigeria will make the NNPC more focused on its mandate. Recall that recently the federal government inaugurated two task forces to fast track its transformation agenda in the sector, the aim being to drive an increase in investment in the downstream processing which, apart from reviving the four ailing refineries, will accentuate the additional refineries investment slated for Lagos, Lokoja and Bayelsa and build more petrochemical plants, fertilizer plants and a liquefied natural gas (LNG) distribution plant in the country. The present federal government’s drive on its gas policy is to ensure adequate gas supply to power plants in the country so as to guarantee steady electric power supply across the country.

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The electric power industry is also undergoing reforms as it migrates from state monopoly to commercial liberalization and the new operational model being introduced in the system is alien to the domestic environment. And just as the petroleum sector, the electric power sector is also trying to weather the supply crisis as generating plants and transmission infrastructure operated by the unbundled PHCN remains fragile and incapable of meeting demands. The present administration in its effort to sanitise the oil sector by 31 December of this year constituted governance and control tax force to design a new code for NNPC and other parastatals as well as eliminate rent seeking opportunists and arbitrage while implementing robust performance management systems and indicators. Earlier this year government announced a partial withdrawal of subsidy from oil. This, government argues, has become necessary since it poses unsustainable financial burden on government, create inefficiency in usage for consumers,inappropriately benefit the rich and divert critical resources from much needed investment in infrastructure. This government in its wisdom created Subsidy Reinvestment and Empowerment Programme, SURE, with a mandate to plough back proceeds from the subsidy into critical infrastructure development, stimulate the economy and create employment for Nigerian youths.

• Ifeanyi wrote from Lagos.