Given that the architects of the PIA still maintain authority, it is a tool wielded by the masterminds to maintain their stranglehold on the nation’s resources, resembling a situation where ‘the fox guards the hen house.’ While the complicity of those involved in this charade is reprehensible, it behoves on Nigerians to rise against this tyranny of deception and to dismantle this facade of deceit.
In the corridors of power, the Petroleum Industry Act (PIA) was hailed as the panacea to Nigeria’s oil sector woes – a landmark legislation promising transparency, accountability, and fair distribution of the nation’s oil wealth. Yet, as the dust settles, it reveals a disconcerting reality of promises not meant to be fulfilled.
Running the NNPC Ltd Like a Fiefdom
Let’s do a quick refresher, according to the latest data from both the US Energy Information Administration. Nigeria is ranked eleventh in the world and fourth in Africa in crude oil production as at September 2023, with an average of 1.14 million barrels per day. While its crude oil production quota approved by Organisation of Petroleum Exporting Countries (OPEC) for December 2023 was 1.72 million barrels/day. No figures could be traced or anchored to the NNPC Limited within the same period.
The four government-owned refineries in Nigeria, built between 1965 and 1989, have all been shut down for several years due to, chief amongst them, structural neglect. Their total refining capacity is 445,000 barrels/day. Data provided by KNOEMA, a global data platform, shows the daily consumption of 520,000 barrels/day in December 2023.
Data available as at 2019 shows that about 43 licences were granted for large and modular refineries, out of which only about four modular refineries may be operational, with a total capacity of 34,000 barrels/day to grow to 135,000 barrels/day.
The Dangote Refinery costs $19 billion and was commissioned in 2023, but it is yet to start full operations and has a production capacity for 650,000 barrels/day. Through ‘Project Bison’, the NNPC, and not through the Sovereign Wealth Fund (SWF), has audaciously gone ahead to acquire a 20 per cent stake in the refinery for $2.76 billion, and to rub salt on the injury, will also deliver 300,000 barrels/day of crude to Dangote at a discount and would forfeit 100 per cent of the dividend that will be declared within the repayment period.
In addition, ‘Project Gazelle’, a loan of $3.2 billion, was collected from AFREXIM bank to fund the Federal Government’s dollar liquidity crisis, while its repayment will be from crude oil.
Despite owning about 130,000 barrels/day of oil from Dangote, NNPC chose to squander $1.5 billion in 2021 on renovating the antiquated Port Harcourt refinery, which lacks readily available spare parts. The renovation project is expected to take 44 months (until July 2024) and the first phase of the progress is unknown. The conditions of the other three refineries are also unclear.
Who Owns the Oil?
Nigeria is supposed to use its God-given oil revenue for various purposes, including funding the federal, state and local government budgets; investing in infrastructure, education, health, agriculture; and saving for future generations. However, the management of oil revenue in Nigeria has been plagued and besieged by fiscal indiscipline, corruption, misallocation, and inefficiency, resulting in poor development outcomes and welfare.
According to Wikipedia, Nigeria’s Sovereign Wealth Fund (SWF) that is meant to save and invest some of the oil revenue for future generations, as well as to stabilise the economy during oil price shocks, was established in 2011 with an initial capital of $1 billion, and had $2.3 billion in it as at June 2023, which is a paltry $1.3 billion increment after 12 years. It will be interesting to know how much was squandered on salaries and perks of office within those 12 years.
What is disconcerting is that NNPC Ltd remitted $2.7 billion to its CBN accounts from January to June 2022, with $645 million from NLNG dividends and $1.786 billion from operational activities, predating the PIB’s enactment. Post-PIB, the remittance details have been elusive. Remember, the PIB purportedly seeks to overhaul the oil sector, establish new regulations, and transform NNPC into a transparent limited liability company for improved efficiency. Yet, transparency regarding post-PIB remittances remains uncertain.
A Scam on Nigerians
Nigerians were presented with an albeit flimsy rationale for restructuring the NNPC, citing:
Reliance on government funding, making it less competitive for global investors.
Political influence causing bureaucratic delays, thereby unsettling International Oil Companies.
The NNPC had a workforce employed for political reasons, hindering its success as a commercial entity. Meanwhile the four refineries are non-operational and their large numbers of staff members are still paid all entitlements without producing a single drop of oil.
High credit sales and indebtedness hindering operations, but we should remember that they borrowed $3.2 billion from AFREXIM bank, to be paid with crude oil.
Low revenues and gross profits impeding success. The question remains: How much has the NNPC remitted to the CBN to date?
Here Enters the PIA
The 2021 Petroleum Industry Act, identified as Gazette No.142, comprises five chapters, 319 sections, and eight schedules. It addresses very distressing, disconcerting, frightening and upsetting issues that will impact over 200 million Nigerians, including the Domestic Base Price and Pricing Framework, Gas Price Formula for Gas-Based Industries, Capital and Production Allowances, Petroleum Fees, Rents, Royalty, and allocations to Host Communities and Frontier Basins. Due to space constraints, a detailed analysis of these provisions is not feasible here, but their implications are significant and wide-reaching for the populace.
Challenges inherent therein:
The PIA provides for the establishment of new entities, such as the NNPC Ltd, the Ministry of Petroleum Incorporated, two regulators, the host communities trust fund, and the dissolution or transfer of existing entities, such as the NNPC, the Department of Petroleum Resources, and the Petroleum Equalisation Fund.
It also provides for the transition of the existing petroleum licenses and leases, contracts and agreements, assets and liabilities, and staff and personnel, to the new entities or arrangements, within specified periods and conditions. However, implementation will face challenges such as legal disputes, political interference, bureaucratic delays, resistance, etc.
The PIA mandates the improvement of operational and technical capacities, as well as funding sources, for both new and existing entities in the industry. It emphasises the need for alignment and coordination of activities and funding mechanisms to foster synergy and harmony. However, addressing these challenges will be daunting, given existing skills shortages, technology gaps, and infrastructure limitations.
The PIA necessitates the creation and execution of monitoring, evaluation, and feedback mechanisms to uphold compliance, accountability, transparency, and performance. It underscores the importance of collecting, analysing, reporting, and disseminating data and information from these mechanisms to inform decision-making and policy formulation. However, such endeavours will face challenges in terms of data quality, availability, accessibility, and security, given the intricacies and crafty nature of those involved in the drafting and sign-off processes.
The Undertaker
Given that the architects of the PIA still maintain authority, it is a tool wielded by the masterminds to maintain their stranglehold on the nation’s resources, resembling a situation where ‘the fox guards the hen house.’ While the complicity of those involved in this charade is reprehensible, it behoves on Nigerians to rise against this tyranny of deception and to dismantle this facade of deceit.
Considering these circumstances, wouldn’t it be prudent to suspend or abandon the PIA and revert to the status quo ante before it becomes a QUICK SAND?
Adamu Rabiu Writes from Kaduna.
