Leading economic and energy policy experts have called for the need to deepen private sector participation as a means of addressing some of the challenges bedevilling the Nigerian oil and gas sector.
The experts spoke at a webinar put together to address new governance models in the downstream sector of Nigeria’s oil and gas industry.
The programme, sponsored by the Premium Times Centre for Investigative Journalism, held on Wednesday.
In his submission at the webinar, Doyin Salami, Chairman of Nigeria’s Economic Advisory Council and former member of the Central Bank of Nigeria’s Monetary Policy Committee, called for a conscious effort to develop private sector participation across the value chain.
Mr Salami, a professor, noted that Nigeria operates an economy that is defined by public ownership and operation of key infrastructure.
“We have spent too much time being dependent on the government,” Mr Salami said, adding that “Nigeria must improve on the role of the private sector across the entire value chain.”
Speaking on fundamental issues necessary to drive reforms within the sector, Mr Salami said there must be focus on efficient access to and use of resources.
“On that particular issue, the role of private capital is very important,” he explained.
The economist provided historical insights into the dynamics around private sector and government ownership and operation of key infrastructure in the country, noting that early enough, as far back as the 1970s, the government had money generated through oil revenues, which placed it in charge of the provision of key infrastructure.
When the private sector came of age, he explained, the government had no such financial wherewithal yet there were reservations around pricing, monopoly and other key issues associated with private sector participation.
He added, however, that fundamentals like technology, models and other key determining factors have changed, which incentivize the private sector.
Markets do fail, he said, but when markets fail or can be seen on the way to failure, then the government is expected to come in. He also debunked a number of myths surrounding private sector participation in key economic activities.
“Today, we now see major road networks across the globe being built by the private sector,” he said. “There must be a philosophical framework about what the role of government should be. This should be about whether government or the private sector is well placed to do it.”
He explained further that the role of government is about providing a level playing field in terms of regulation.
On concerns raised about pricing in an industry driven by deep private sector participation, Mr Salami said Nigeria needs data to ascertain and address the possible concerns.
“Fuel comes at a cost, which may be higher or lower,” he said. “We need data that is cost reflective of Nigeria’s reality.”
He added, however, that the numbers in which the industry presently operates on are not numbers that would make the private sector thrive. He noted that there could be regulatory mechanisms put in place to check price issues, adding that what is fundamental is that it must be run as a business.
“It (the industry) should run as a business, which is what makes it sustainable,” he said.
The webinar also presented an occasion to deliberate on a proposed document about the downstream sector of the oil and gas industry, being put together by the PTCIJ.
Toyin Aina, Group Head, Energy and International Oil Trading at First Bank of Nigeria Limited noted that the new research report is still in draft form.
In her review of the 42-page report, Ms Aina revealed that the publication covers governance and transparency in the oil sector.
According to her, the first part looked at the governance of the Nigerian oil and gas sector, with a focus on the vulnerability of the Nigerian economy, Nigeria’s place within the OPEC cartel, the Dutch disease, the monetization of Nigeria’s crude oil, and what goes into the nation’s foreign reserves and sovereign wealth funds.
She noted that Nigerian production cost is considered quite higher, compared to other oil producers, adding that the report shows how Nigeria’s choices make the nation vulnerable.
Ms Aina said it looked into what she called Nigeria’s “dysfunctional” downstream sector, which starts from the point of refining until it gets to the end user via the filling station.
About 90 per cent of the oil consumed is imported while only 10 per cent can be handled by the nation’s refineries, she noted, adding that the report also looked into the attempts to refurbish the refineries.
The report also looked into the overlapping roles of the various agencies in the value chain, as well as those of the security agencies. There was also focus on the subsidy regime during the Goodluck Jonathan administration, the civil unrest, the subsidy probe and the subsequent revelations.
Ms Aina noted that the NNPC needs to be more decentralized so it can pay more of oversight roles in the ecosystem.
Earlier in his opening remarks, Dapo Olorunyomi, the Publisher of PREMIUM TIMES and Executive Director at PTCIJ, noted that the organisation chose to look into technical areas of the economy like the oil and gas sector in order to deepen the conversation and elevate discourses on transparency and regulatory issues.
He said there are significant challenges in the oil sector, like the subsidy scheme, which the PTCIJ seeks to look into and proffer solutions to with its research report.
In his goodwill message, Kole Shettima of the MacArthur Foundation, which provides support to PTCIJ and others, said the organisation has come a long way since it opened its office in 1994. He explained that MacArthur Foundation considered the issue of accountability and anti-corruption key to national development and it has continued to support initiatives in that area.
“All the work that we are doing, the bottom line is to improve the quality of lives of the people,” he said. “That is what is really driving us in the works we do around investigative journalism.”
Speaking on the focus of the webinar, he noted that the governance of the oil sector is very important because that is where Nigeria generates revenue. This is key to ensuring that ordinary Nigerians enjoy the benefits of the resources the nation is endowed with, he added. For those working in the area of accountability and open governance, Mr Shettima advised that consistency is key to getting the desired result.
“We should always remember that some of the things that may have consequences may not happen today, but may happen tomorrow,” he said.
He added that there is need to pay attention to sustainability in media operations, adding that stakeholders in the private sector should be carried along to support the media.
In his submission, an official of the NNPC, Inuwa Waya, lamented incidents of pipeline sabotage across the country.
He said: “There is a lot of sabotage along the line. Today, it has become expensive for the NNPC and the entire country to maintain the pipeline along the line.
“Who will come and invest in the pipeline system?” he said, adding that investors only invest where they can recoup their investment.
The society has a greater role to play in the ecosystem, he explained.
Wilson Opuwei, chief executive of Dateline Energy Services Limited, a member of the Association of International Petroleum Negotiators (AIPN) and the Association of Private Refinery Owners of Nigeria (APRON), decried what he called the “politicization” of the sector.
“The earlier we are able to play less politics… it will help us move forward,” he noted. Mr Opuwei also called for more private-sector participation in the oil industry value chain, adding that there are series of legislative frameworks put in place to address issues in the sector.
“First, we need to have the conversation to see the sector as a business,” he said, noting that private sector participants should not be distant to the regulator while policies should not be too stringent for the players.
When issues were thrown up for discussion, Ms Aina called for full deregulation of the sector. On his part, Mr Opuwei said the industry should be made easy for private sectors to operate, adding that Nigeria needs to deepen commercialization of the oil and gas sector.
In her closing remarks, Tosin Alagbe, Programme Director at PTCIJ, said the new report will look into the concerns raised by stakeholders during the webinar. She added that it will also harmonize the recommendations and reviews thrown up to drive reform in the downstream oil sector.