Reposition Oil, Gas Industry to Attract More FDIs, Improve Revenue, Analysts Tell Tinubu

As Nigeria’s president-elect, Senator Bola Tinubu, readies to be inaugurated today as the country’s 16th president, some economic policy analysts and oil and gas operators have charged him to take priority steps to reposition the nation’s oil and gas industry in order to attract more Foreign Direct Investments (FDIs) and increase earnings from the sector.

They also urged Tinubu to move swiftly upon assumption of office to tackle the perennial oil theft, raise the nation’s oil production from the current low position and end the controversial petrol subsidy.

The speakers equally called on Tinubu to appoint knowledgeable and competent industry professionals to superintendent the petroleum and power ministries as well as heads of agencies and parastatals under the ministries.

The Partner/Head, Energy and Natural Resources, KPMG Professional Services, Mr. Ayo Salami and the immediate-past Chairman of the Major Oil Marketers Association of Nigeria (MOMAN), Mr. Adetunji Oyebanji made the advocacies in separate chats with THISDAY.

During the 2023 electioneering campaigns, Tinubu, who won the election on the platform of the ruling All Progressives Congress (APC) had vowed to ramp up Nigeria’s oil production from the low of 1.5 million barrels per day (mbpd) in March 2023 to 2.6mbpd by 2027.

He had also promised to strike early deals with oil companies to reverse the gale of divestments by international oil companies (IOCs) and agree on improved fiscal regimes in a bid to boost oil and gas production and stimulate Africa’s biggest economy.

Tinubu also promised to abolish the perennial controversial petrol subsidy that has only contributed to worsening the bleeding of Nigeria’s economy.

However, sharing his views and expectations from the president-elect, Salami in an email response to THISDAY’s questions, said he expects Tinubu to hit the ground running, stressing that the country was running out of time.

He said he was sincerely hoping that the incoming president had used the interregnum between when he was announced as the winner of the election and his inauguration today to assemble a team of professionals and technocrats who will support him to deliver the country from the doldrums.

According to him, “there is really no time. He would have to act fast.”

Commenting specifically on the petroleum sector, Salami said Tinubu must reposition the sector and must run it, “in a world class manner, akin to what we have in Saudi Arabia or in North America and Europe. The provisions of the Petroleum Industry Act (PIA) must be implemented to the letter.

“The president-elect should break the tradition of doubling as the Minister of Petroleum Resources (MPR). In essence, we must have a substantive MPR to superintend this extremely important sector. Such a person should exercise the executive powers given to him under the PIA.”

The KPMG analyst said Nigeria must leverage technology to track and identify oil theft and infractions on the nation’s oil infrastructure and punish offenders and culprits.

Salami said government must be seen to respect the rule of law and agreements with third parties, adding that he also expects Tinubu to give impetus to one of the constitutional amendment bills recently passed into law by the incumbent, to ensure that states across the country are be able to licence, generate, transmit and distribute electricity.

This, he explained, would assist to stimulate competition, reduce production cost and make Nigerian businesses more competitive, particularly, in view of the large market offered on the back of the African Continental Free Trade Agreement (AfCFTA).

He said the incoming president must prioritise certain issues as contained in his campaign manifesto, which were clear and unambiguous.

Salami maintained, “And I am glad that his party’s manifesto speaks to some of them. For example, he has promised, as articulated in the manifesto, to ramp up oil production from the lows of about 1.5mbpd in March 2023 to 2.6mbpd by 2027, the end of his term in office (of which over 1mbpd must be from indigenous producers).

“This production level is projected to peak at 4mbpd by 2030. I would like to see real action towards achieving this goal (e.g., curbing oil theft). He must articulate clear policies beyond the PIA to attract significant foreign investment, which has eluded us in the last couple of years, into the sector.

 “His promise to grow our gas production by 20 per cent and complete critical gas infrastructure by 2027 is commendable. However, he must walk the talk! I would expect him to challenge his MPR to achieve these lofty goals without excuses, as they align with our ESG strategy of using gas as a transition fuel towards achieving net zero carbon emission by 2060.

“I also expect him to deregulate the downstream petroleum sector completely (that is remove the subsidy). He made this promise during his response to questions at the Nigeria Economic Summit Group (NESG’s) town hall engagement early 2023.

“There is no gain saying that the subsidy regime, apart from being a significant drain on the country’s hard-earned FX resources, stifles the competitive spirit of Nigerian entrepreneurs in that sector, which indirectly stagnates its growth.”

On the power sector, the KPMG Partner, who commended Tinubu’s party’s manifesto around how to begin the transformation, stated that he expects the new government to at least fix the transmission and distribution challenges faced by the subsector.

He said resolving the challenges would enable Nigeria to at least transmit and distribute the 12,000MW installed generating capacity that the country currently has, which would be a prelude to more significant investment in the off-grid and renewable energy solutions.

Salami also called for the appointment of more technocrats and professionals, and fewer politicians to superintendent the petroleum and power ministries.

According to him, “That is the only way to salvage both the petroleum and power sectors and put them on the path of sustained growth into the future. Again, there must be a substantive MPR -Minister of Petroleum Resources.”

The analyst also called on the Tinubu government to remove fuel subsidy upon assumption of office, saying abolishing subsidy in June was feasible.

Salami added, “Also I think that the removal of the oil subsidy in June is feasible. However, we will need to resolve a few matters to facilitate the policy.

“First, we need to fix the exchange rate problem and the under-performing refineries. There is also a dearth of information and knowledge about how the subsidy regime works.

“I think that the ordinary Nigerians don’t know the devastating impact it is having on government revenues. We need to cure this ignorance completely. Thus, there is a need for sustained public enlightenment. Otherwise, the policy may be met with resistance from Nigerians, particularly, the organised labor.

“In a nutshell, the solution is deregulation of the sector, but with the government providing some social safety net for the vulnerable people. The merit is that it encourages private investors to invest in new refineries and perhaps, import white products (if we are unable to meet local demand from domestic production).

“When that happens, producers will sell at competitive prices. The product may be expensive in the very short run, but ultimately, in the long run, equilibrium will be reached, and consumers will be the better for it.”

However, in a separate telephone chat with THISDAY, Oyebanji, who is also the Managing Director of 11Plc, harped on the need for the Tinubu administration to herald a positive change in the oil and gas industry and the economy in general.

Oyebanji advised the incoming administration to endeavour to put competent technocrats and industry professionals in charge of the petroleum ministry and its agencies and parastatals.

He pointed out that the mistake of appointing square pegs in round holes because of political considerations had been the bane of the nation’s key economic sectors and growth.

Oyebanji said, “Anytime there is a change, there is opportunity for improvement, opportunity for growth. So, we are hopeful that his government heralds positive changes for the industry. He knows that we are coming from a situation where things have been very tough, but we cannot but look forward to the future with hope and expectations that things would be better.

“We would like to advise that they should try and put square pegs in square holes and round pegs in round holes, by putting people who know what they are doing into positions, people who understand the industry and how it works.

“This has always been the bane of our situation in Nigeria because we always put politics ahead of everything and this always brings confusion in terms of policies because the person in charge most times has no clue of what happens in the sector under him.”

Peter Uzoho

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