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Buhari/Kachikwu’s 4-year struggle to fulfil oil sector promises

While campaigning for the 2015 general elections on the “Change” mantra, President Muhammadu Buhari and the APC promised far-reaching reforms; specifically in the oil and…

While campaigning for the 2015 general elections on the “Change” mantra, President Muhammadu Buhari and the APC promised far-reaching reforms; specifically in the oil and gas sector, which accounts for more than 70 per cent of Nigeria’s exports and Foreign Exchange (FOREX) earnings, according data from the National Bureau of Statistics (NBS).

At the inception of the administration in May, 2015, the oil and gas industry was beset with a myriad of challenges ranging from huge backlog of subsidy payments and cash call arrears, joint venture funding issues, infrastructure deficit, and insecurity in the Niger Delta, limited refining capacity to sharp fall in global oil prices.

In order to vigorously pursue the oil sector reform agenda clearly set out prior to the election, President Buhari kept to himself the petroleum minister portfolio and appointed Dr. Ibe Kachikwu as Minister of State.

Addressing the challenges formed the bedrock of a roadmap for the industry called the “7 Big Wins” which was launched by Buhari in October, 2016.

As the first of the two terms of the Buhari presidency comes to an end, Daily Trust evaluates some of the president’s oil and gas sector promises, including those contained in APC’s policy document/manifesto, the 7 Big Wins, his speeches at campaign rallies and town hall meetings prior to the 2015 election and eventually after the election.

The following promises were identified and compared against how far they have been fulfilled.

Promise to end fuel importation, subsidy fails

The abysmal state of the country’s refineries was a major concern for President Buhari when he took office.

The consequence of the refineries’ poor performance meant that the country continued to import most of its refined petroleum products with the attendant effect on prices at the pumps and the huge under-recovery or subsidy recorded by the NNPC on petrol.

The Buhari government, therefore, promised that apart from fixing and getting the refineries to work up to 90 per cent of their installed capacity, Nigeria would lower and eventually exit fuel importation by 2019, and by extension, quit the costly subsidy regime.

“We have been able to do a pie chart that shows that by 2019 we should be able to deliver (get the refineries working). Even if in 2019, I don’t achieve the target I still would have been able to reduce importation substantially,” Kachikwu said in an interview in Houston, May, 2017, when asked how realistic the government’s promise to exit importation by 2019 was.

Despite several interventions to revamp the existing plants and incentivise modular and Greenfield (brand new) refineries, the three refineries in Port Harcourt, Warri and Kaduna are still not in the shapes as promised.

In fact, the volume of fuel importation under the current administration has taken an alarming dimension. The amount spent by the Federal Government on the importation of petrol soared by nearly 50 per cent to N2.95tn, NBS data show.

The country spent N1.97tn on PMS imports in 2017, N1.63tn in 2016 and N1.14tn in 2015. Petrol imports accounted for 22.4 per cent of the nation’s total imports in 2018, up from 20.6 per cent in 2017, 18.4 per cent in 2016 and 17 per cent in 2015.

According to the NNPC, Nigeria is the only member country of OPEC that imports petrol and is currently the largest importer of PMS in the world.

Under the current government, subsidy on petrol still persists and has taken a different facade called under-recovery.

Promise to speedily pass much-delayed PIB in the balance

According to the petroleum ministry, the objective of the “Big Win 1” was to provide an enabling environment for sustainable investment and operations in the Nigerian oil and gas industry through policies, legal and regulatory framework to address the shortcomings in existing ones or tackle new challenges.

Three policies which were expected to provide clarity to both investors and government on the position of the Federal Government in the oil sector were considered. The National Petroleum Policy and the National Gas Policy were, therefore, approved by the Federal Executive Council (FEC) and gazetted.

During their electioneering campaign, the APC and its flag bearer, Buhari, promised to speedily pass the much-delayed Petroleum Industry Bill (PIB) and ensure that local content issues were fully addressed.

However, the PIB which is supposed to address legislative limitations of petroleum sector laws, after being split into four, is yet to see the light of day. Although, one part of the PIB, the PIGB, went very close to being signed into law after it was passed in 2018. The fate of the bill is still hanging.

Oil bid round fails to hold

Countries normally issue oil licenses to grant companies rights to search for oil deposits in what is typically called a licensing round. Awarding oil licenses is necessary for the government to raise revenue, meet production targets and increase oil reserves.

Part of the promises contained in the Big Win was a target to attract investment.

According to the document, schedule for conduct of oil blocks and marginal bid rounds and allocations have been drafted and are awaiting presidential directives.

In 2017, the Federal Government, through the Department of Petroleum Resources (DPR), set guidelines for the marginal oil field bid round which was scheduled to take place later that year or early 2018.

“My understanding is that by the end of May (2017) we should have all the data that we need. We have identified about 40 to 45 marginal fields, we will go forward to a bidding process,” Kachikwu said when asked when bids for the marginal bids would be done.

But hopes that Nigeria would hold any licensing round for oil blocks have since dimmed.

The minister recently explained that the government was yet to conduct the bid rounds because it was still awaiting approval of President Buhari.

Promise to end oil sector corruption largely kept

Allegations of missing oil revenue and opaqueness around the oil sector and particularly the NNPC were the major issues that confronted the administration. For instance, PricewaterhouseCoopers (PwC) auditors, in 2015, reviewed NNPC’s oil sales system and concluded that, “NNPC has a ‘blank’ cheque to spend money without limit or control. This is untenable and unsustainable and must be addressed immediately.”

President Buhari’s promise to reform and modernise the “corrupt-ridden” NNPC was clear. He set the tone by firing the NNPC board and then appointed an outsider, Kachikwu, and later Maikanti K. Baru to head the national oil firm. Baru undertook major restructuring exercises that have led to the reduction in the corporation’s monthly losses.

Experts say Buhari deserves kudos for his determination to tackle graft in the sector, adding that some positive changes had been made in how NNPC manages the nation’s oil wealth.

“It is clear that there is an ongoing reform in NNPC and the oil sector in general,” NEITI once wrote.

Since May, 2015, the NNPC has taken a number of initiatives to ensure transparency. The corporation now publishes monthly financial data and its leadership says it is seeking fixes for some of the corporation’s costliest problems.

Other NNPC reforms by the Buhari government have led to a cut in the number of passive, well connected middlemen that pocketed billions of Nigeria’s oil revenue, including the cancellation of the costly and unbalanced crude oil swap contracts for a more efficient one.

Needing President Buhari’s attention was the fraud in petrol subsidy scheme, oil swap scams and widespread corruption in the award of oil block licences. Until Buhari stopped subsidy payments in 2016, Nigeria lost trillions of naira to importers who exploited the scheme to get paid for fuel they never imported.

Promise on security in Niger Delta delivered

The lingering unrest and development issues in the Niger Delta were major problems that confronted the Buhari-led administration at its inception in 2015.

As at that time, there were persistent militant attacks that led to significant reduction in oil production and subsequent crippling of the oil industry which compounded the country’s recession woes.

The Federal Government immediately unveiled a clearly defined roadmap that saw to the checking of militancy in the Niger Delta.

The government took three fundamental actions to arrest the situation; beginning with sustained stakeholders and community engagement, environment and tackling security issues in the region.


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