Petroleum Ministry’s Silver Bullets for Oil Sector Reforms

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the Nigerian petroleum industry, over the years, has been described as a cesspool of corruption but the current administration, worried about the tag, has begun a number of initiatives to reform the industry.

Specifically, the petroleum industry had acquired a notorious reputation for sleaze, sharp practices, opacity, and under-hand dealings among many other negatives. These had deprived the country of the huge benefits accruable from the petroleum industry.

The industry, despite its immense potentials and earnings over the last 50 years, had made only an insignificant contribution to the growth of the Nigerian economy and had in most cases been described as the major reasons for Nigeria’s under-development; a reflection of the resource-curse syndrome.

Particularly, between 1999 and 2017, Nigeria recorded huge earnings from the petroleum industry, but had been unable to utilize the funds to improve the lives of its citizens, neither has it used it to develop the economy in a significantly sustainable manner.

Poverty amidst huge oil earnings


Data compiled from the Central Bank of Nigeria, CBN, showed that Nigeria earned a gross income of N77.348 trillion from the oil and gas industry from 1999 to 2016, and after various deductions, net oil revenue over the same period stood at N41.038 trillion.

Nigeria’s gross oil earnings translates to an average annual earning of N4.55 trillion, while the net oil revenue translates to average annual earning of N2.414 trillion.

Ironically, despite the earnings from the industry, the country has nothing concrete to show, as it is still besieged with inadequate industrial and social infrastructure, epileptic power supply, low foreign exchange reserves, low savings and an abysmally low standard of living. The country’s currency is currently exchanged at about N360 to a US dollar.

Nigerian Natural Resource Charter, NNRC, in collaboration with an international governance watchdog, Natural Resource Governance Institute, NRGI, had also disclosed that about N7.1 trillion is currently trapped among individuals and operators in Nigeria’s petroleum industry.

It stated that the sum comprises misappropriated and unremitted funds withheld by the respective parties, which should have been paid into government coffers.

A new set of reforms
Perhaps heeding the demand for more transparency in the management of the industry, the Ministry of Petroleum resources, led by the Minister of State for Petroleum Resources Dr. Ibe Kachikwu, an experienced private sector oil industry executive, had introduced far-reaching reforms to bring about a transformation in the industry, and these have started to yield positive fruits.

The petroleum ministry identified key challenges in the industry to include ineffective regulation, concentration and control of petroleum resources within limited set of license holders, Joint Venture funding issues, high operating costs, unsustainable importation of petroleum products, limited refining capacity, insecurity in the Niger Delta and dilapidated midstream oil network as a result of systemic inefficiencies and vandalism.

Other challenges the industry was facing included an unstructured and unprofitable NNPC that was in dire need of understanding of its purpose; huge subsidy and foreign exchange distortions arising from the cut in oil production and reduction in crude oil prices as well as shrinking national oil reserves.

The Petroleum Ministry transformation programme was predicated on the need to attend to the numerous challenges bedeviling the industry.

A key initiative the ministry is using to drive the transformation of the oil and gas industry is the Seven Big Wins.

Its reforms initiatives were based on the fact that the role of government in the oil and gas sectors needs to be better clarified whilst the policy, regulatory and commercial institution need be given a refocused mandate to ensure better sector governance, transparency of regulations and operations, accountability of the institutions and removal of opacity around the industry.

Some of the initiatives include the signing of a novel agreement on a new sustainable funding framework for joint venture cash call operation, which it said would not only sustain JV operations but would also be a key enabler for incremental production from the JV operations.It is also focusing on growing Nigeria’s gas reserves through active explorationand this can be seen in the directive of the Nigerian National Petroleum Corporation, NNPC, to expedite exploratory activities in frontier basins across the country. The Ministry had also introduced a fiscal reform policy targeted at tackling Nigeria’s energy dilemma of addressing energy availability, enhancing energy accessibility and promoting energy availability.

The Ministry said it would enhance fiscal neutrality, create a fiscal basis that would encourage investments and market developments, while emplacing competitiveness and cost efficiency for the benefit of both government and the industry operators.

The Ministry had also proposed that, henceforth, most oil and gas infrastructure development projects would be financed and managed through private sector participation, due to the competing demands for government resources from other public sectors such as education, health and transportation infrastructure, among others.

The Ministry had also shown its determination towards addressing the Niger Delta issues and building a peaceful and prosperous Niger Delta, with emphasis on job creation for our teaming unemployed youths, investment in infrastructure, energy and promotion of sustainable livelihood.

So far, Vice President Yemi Osinbajo and the Minister of State for Petroleum Resources, Dr. IbeKachikwu, had gone round the oil producing states and have been working very closely with all relevant stakeholders such as communities, state governors, government agencies, oil and gas companies to deploy a pertinent developmental framework that will ensure lasting peace and sustained development in the region.

Also, the Ministry, in line with its National Content and indigenization drive, is aggressively working on using the country’s vast oil resources as a catalyst for the provision of employment opportunities for Nigerians.It had shown its commitment to ensuring a distinct preference for Nigerian goods and services through creating incentives for domestication of capital spending.To this end, in addition to the Gas Industrial Park in Delta State, the Ministry of Petroleum is working on creating clusters of industrial parks across the Niger Delta states through the Nigerian Content Development Management Board.

The ministry is also pushing for the speedy passage of the petroleum industry bill, which it argued, is expected to establish and clarify the rules, procedures and institutions that would entrench good governance, accountability and transparency in the oil and gas sector.The Bill, it also stated, aims to introduce new operational and fiscal terms for revenue management to enable the government retain a higher proportion of the revenue derived from operations in the petroleum industry than previously obtained.

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