With the coronavirus pandemic still biting hard on the global economy, Nigeria must adopt policies in the short to medium term to sustain its revenue, while exploring long-term options to reduce over-dependence on oil post-COVID-19 crisis, the Nigeria Natural Resource Charter (NNRC) said on Thursday.
The NNRC is a not-for-profit policy institute committed to supporting Nigeria’s effective management of her natural resources for the public good.
In a statement on Thursday by its programmes coordinator, Tengi George-Ikoli, the institute said since the breakout of the COVID-19 health crisis, attempts have been made to halt its spread to avoid it significantly affecting global revenues and resources.
Ms George-Ikoli said although the universal measures of social distancing, movement restrictions and lockdowns adopted to stem the spread of the disease were necessary, its impact so far has contributed to slowing down the global economy.
She said the call for sustainable revenue flows for the economy was important, as low crude oil prices and price volatility at the international oil market is expected to continue impacting negatively on the Nigerian economy.
The effects of the pandemic on the oil sector, the coordinator said, underlined the imperative to revisit the much-advertised policy of economic diversification by the government.
Sustaining growth through reforms
Regardless, she commended the Nigerian government on the steps taken so far to sustain the Nigerian economy through oil sector reforms.
Some of the reform initiatives include the deregulation of the downstream sector of the petroleum industry; the planned re-opening of the bid rounds of marginal oil fields; the cut in the estimates in the approved 2020 Federal budget, and the contemplated privatisation of the country’s four refineries.
Going forward, the NNRC said all strategies must be sustainable if Nigeria is to minimise the effects of the inevitable recession due to the falling oil prices, declining revenues, rising debts and depleting reserves.
The recent production cuts deal by the Organisation of Petroleum Exporting Countries (OPEC) and its allies, she said, may prove too little too late, adding that Nigeria must look internally for solutions and adopt interventions that would take a longer-term view.
The recommendations were part of the outcome of the Institute’s recent Benchmarking Exercise Report (BER 2019) which x-rayed the state of the Nigerian petroleum sector and highlighted policy options to support the Nigerian government’s efforts to stimulate the growth of the economy and its post-COVID-19 recovery.
To optimise the opportunities from oil and gas exploitation to withstand the prevailing COVID-19 shocks and its after-effects, the NNRC further identified policy options Nigeria must consider stabilising the sector, maintain revenue flows, attract investment and drive growth.
They included the maintenance of peace and stability in the Niger Delta to sustain revenue flows from oil production; sustaining beneficiation schemes by the Niger Delta Development Commission (NDDC), Ministry of Niger Delta Affairs and other interventions to support the government’s stabilisation efforts.
Stimulus plans for growth
Others include improved coordination between federal and Niger Delta state governments on the response to the COVID-19 pandemic, including the design and implementation of stimulus plans; liberalisation of the downstream petroleum sector to allow market forces to determine pump prices for petroleum and other products.
Also included were improved efficiency of the downstream oil sector of the petroleum industry by reviewing its policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment.
The NNRC called for the adoption of savings mechanism with clear and transparent operational rules for Sovereign Wealth Fund (SWF) in the Nigeria Sovereign Investment Authority (NSIA) and transferring of funds from the Excess Crude Account, the stabilisation fund and other such funds to the SWF.
Adopting such policies, the Charter said, would help fortify the Nigerian economy from oil price volatilities and other economic shocks as well as help ramp up domestic gas-based industrialisation projects, to diversify Nigeria’s energy supply, increase local employment and reduce domestic demand and Nigeria’s reliance on oil.
Besides, it said gas supply to domestic market for power, industrial and manufacturing feedstock are enablers to economic development, while shift of emphasis to the gas value chain would help Nigeria to leverage for socio-economic development in the medium to long term.
“Fast-tracking the passage of the Petroleum Industry Bill will bring the fiscal, governance and regulatory clarity required to monetise Nigeria’s 200+ trillion cubic feet of gas reserves; provide a clearer strategic direction to the entire industry, re-engender trust, thereby increasing investments and increase national revenues required for the development.
“Reviewing the existing fiscal framework to ensure competitiveness and support Nigeria’s ability to attract investments into the upstream sector, effectively shoring up Nigeria’s diminished reserves.
“Institutionalise cost management strategies within the sector with the overall objective of reducing the high unit production cost of crude thereby improving governments revenue from the sector,” the NNRC said.