The urgent need for reforms in the Nigerian oil and gas industry was the subject of discussion by stakeholders, experts and members of the media at a conference on April 29 in Lagos. Jointly organised by the Nigeria Natural Resources Charter (NNRC), and Order Paper Advocacy Initiative, the event hosted key players in Nigeria’s petroleum sector to promote reforms that will secure benefits for the country. The conference was part of the Development Dialogue Series (DDS) of Order Paper Advocacy, focused on policy and legislative engagements that seek to promote good governance and instituting democratic practices in Nigeria. The event focused on the implications of not embracing reforms in the petroleum sector.
In her presentation, Ms. Tengi George-Ikoli, program coordinator, NNRC, emphasised the importance of the petroleum sector to the economy of the nation. She said that the country’s inability to finance its budget and service its debt which depends on proceeds from oil is due to the inability of government to reform the sector for the general benefit of the masses.
To her, repositioning the Nigerian economy for recovery, without depending on oil and gas sector remains the key transformative tool for diversification and growth. “Concerns have continued to mount over prevailing uncertainty around the stalemated reforms in oil and gas industry, which many believe, has a negative impact on the economy with increasing investor flight and a continually dwindling resource base for Nigeria,” she said.
Oke Epia, executive director, OrderPaper Said: “It is against the backdrop of the ding-dong affair between the National Assembly and President Muhammadu Buhari on the Petroleum Industry and Governance Bill, PIGB, which was recently passed again by the former after an initial rejection by the latter. It will determine ways to engage with the federal government on alternative reforms for the sector.”
Wumi Iledare, a professor, and vice president, training, research and development at the International Institute for Petroleum, Energy Law, and Policy, IIPELP, at the University of Port Harcourt, and a keynote speaker for the event, said that the country has been at lost of its revenue that should have accrued for oil and gas due to its obsolete laws guiding the operation of the industry. To him, the call for petroleum sector reforms is to block wastage and leakages of revenues and resources.
In its 2017 Benchmarking Exercise Report, BER, NNRC stated that the combined effect of low transparency and accountability, ineffective corporate governance, and commercial ineffectiveness among others may explain the inability of the Nigeria National Petroleum Corporation, NNPC, to attract sufficient funds and have a workable funding mechanism for its operation over the years.
To NNRC, a successful financial drive for NNPC strongly hinges on restructuring and strategic positioning that imbibes unalloyed transparency and accountability on one hand, and commercial effectiveness on the other. Open and transparent operationalization in NNPC would foster investors’ confidence in the oil and gas sector. This in addition to business drive that is market-oriented as well as sound financial accountability would attract substantial resources into the corporation – the consequence of which would facilitate expansion and global competitiveness of the nation’s oil firm.
Furthermore, some of the key findings in the 2017 BER that indicated marginal improvements in the NNPC have since changed. Particularly, the PIGB passed by the National Assembly failed to receive presidential assent and the perceived removal of fuel subsidy remains in question with the NNPC continuing to fund subsidies in what the corporation terms ‘under-recovery’. Consequently, it is recommended that the government/NNPC: Allocate resources more efficiently.
Specifically, NNPC should invest resources in income generating activities -such as the rehabilitation and effective management of existing refineries, and should be encouraged by the government to do so, rather than financing the government’s mandate on subsidies. For proper checks and balances, if fuel subsidy is perceived as a national priority by Nigerians, it should be reflected in the national budgets to allow for proper oversight by the legislature. Commence oil sector reform by signing the PIGB into law, thus allowing new national oil companies to become more commercially oriented. Specifically, a change in the business model and ownership structure will improve efficiency in value addition and corporate governance.
As recommended in the NRC, a good corporate governance system will promote sound business judgment, reduce the influence of narrow political interests and allow for predictable planning. Make NNPC more commercially viable to reduce losses and unlock investments to cover financing shortfalls, by adopting an effective corporate governance system that reduces political interferences, prioritizes commercial objectives of the corporation, and enhances financial and operational efficiency. The reform in ownership structure proposed in the PIGB is a step towards achieving this by phasing in private participation.
Speakers at the event include Dr. Adeoye Adefulu, partner/head, Odujinrin Adefulu’s Energy Practice , Henry Adigun of the Facility for Oil Sector Transformation (FOSTER), Israel Aye, founding and managing partner of Primera Africa Legal, Olufemi Dawole of Depots and Petroleum Products Marketers Association of Nigeria, DAPPMAN, and Joseph Nwaukwe, a renowned expert in the oil and gas sector.