Still in the Pipeline – Reforming Nigeria’s Oil Sector

Nigeria’s oil sector is plagued by waste and corruption. Despite being Africa’s main petrostate, the country’s actual production of oil barrels is a meagre reflection of its potential. Refineries in the Niger Delta managed by the state-owned Nigerian National Petroleum Corporation (NNPC) squeezed out a modest 11% of their total capacity last year [1]. Of what is produced, a significant part is diverted or stolen every day and according to some estimates around $400 billion in revenues have been lost since 1960 [2]. The implications of such waste should be considered in light of Nigeria’s reliance on its oil sector, which accounts for two-thirds of government revenue and 95% of export revenue [3].

It was therefore only natural that reform of the oil sector should play a key role in deciding the outcome of Nigeria’s presidential election last month. The contest pitted two candidates, the incumbent Mr. Muhammadu Buhari and his challenger Mr. Atiku Abubakar, with starkly different plans to revamp the industry. The fault line between them lay in the Petroleum Industry Governance Bill (PIGB), a controversial piece of proposed legislation that has been in the works for nearly two decades and that aims at reducing corruption in Nigeria’s oil sector. Firstly, it would create the Nigerian Petroleum Regulatory Commission (NPRC), a new body independent of the oil ministry that would strip the latter’s power to supervise the country’s oil sector and to award or revoke licenses [4]. The NPRC would also retain 10% of revenue from oil production that would be dedicated to developing the Niger Delta, a region fraught with energy terrorism borne out of economic deprivation [5]. Moreover, the legislation would fragment the NNPC into small and separate entities and transfer the Corporation’s joint venture assets and its control of national refineries to a new National Petroleum Company (NPC).

The chasm between Mr. Buhari’s and Mr. Abubakar’s stances on the PIGB mirrors the picture of a country wrought by internal divisions and differing concerns. On one hand, Mr. Abubakar, a self-styled pro-business candidate, expressed his support for the legislation and a desire to overhaul the opaque NNPC. Although defeated, he won commanding electoral majorities in Nigeria’s southern provinces, which account for the lion’s share of the country’s oil production and employment in the sector. On the other hand, Mr. Buhari re-affirmed his disapproval of the PIGB, to which he had already refused presidential assent in August 2018 after it passed through both chambers of the National Assembly. He substantiated his view by claiming that the reform would unduly divert funds from the Federal Government to the new regulatory commission and thus deprive the state of resources to combat Boko Haram and foster economic development in the North. Accordingly, the incumbent retained his office thanks to the endorsement of Nigeria’s northern provinces. His opposition to the PIGB could also be explained by the legislation’s provision to strip much of the functions of the oil minister, a position that Mr. Buhari claimed for himself in addition to the role of President in his previous term, which he plans to do again. As the PIGB’s prospects look stalled, Nigeria’s energy demand will continue to grow from demographic and economic pressures. However, significant reform to the country’s oil sector seems contingent on the ability of southern oil-producing provinces to exert a decisive influence on national leaders.

Martin Quick

[1] https://www.ft.com/content/1e9e9d52-2e0d-11e9-ba00-0251022932c8

[2] “The Political Ecology of Oil and Gas in West Africa’s Gulf of Guinea: State, Petroleum and Conflict in Nigeria”, The Palgrave Handbook of the International Political Economy of Energy, pages 559-584, Michael Watts

[3] “The Big Squeeze: Nigeria on the Brink”, The New Politics of Strategic Resources: Energy and Food Security Challenges in the 21st Century”, Mark Weston

[4] https://www.ft.com/content/3d785448-c71f-11e8-86e6-19f5b7134d1c

[5] http://www.eiu.com/industry/article/216384405/petroleum-reform-remains-slow-moving/2018-02-05

 

Photo by Ayotunde Oguntoyinbo on Unsplash

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