Lagos — All strategies must be sustainable, if Nigeria is to minimise the effects of the inevitable recession due to the falling oil prices, depreciating revenues, rising debt ratio and diminishing reserves, the Nigeria Natural Resource Charter, NNRC has said in a new report.
According to the report, the recent OPEC+ production cuts may be too little too late and so Nigeria must look internally for solutions and adopt interventions that take a longer term view.
Speaking on this development, the Program Coordinator of NNRC, Ms. Tengi George-Ikoli notes that the group arrived at this position based on the gaps identified in its recently published Benchmarking Exercise Report, BER 2019 which x-rayed the state of the Nigerian petroleum sector, highlighting policy options to support the Nigerian government’s efforts to stimulate 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, she pointed that Nigeria must consider the following policy options to stabilize the sector, maintain revenue flows, attract investment and drive growth:
- Maintain peace and stability in the Niger Delta to sustain revenue flows from oil production. Sustaining beneficiation schemes by NDDC, MNDA and other interventions will support the governments stabilization efforts;
- Improve coordination between federal and Niger Delta state governments on the response to the Covid-19 pandemic including the design and implementation of stimulus plans;
- Liberalise the downstream sector to allow market forces determine pump prices for petroleum and other products. This will ensure the availability of revenues necessary for more critical areas of the economy;
- Improve the efficiency of the downstream oil sector by reviewing its policies, regulations and operational guidelines to ensure profitability, improved private sector participation and improved employment;
- Adopt and constitutionalise a savings mechanism with clear and transparent operational rules. This could be by retaining the more effective sovereign wealth fund (SWF) in the NSIA and transferring funds from the Excess Crude Account, the stabilization fund and other similar funds to the SWF. This will help fortify the Nigerian economy from oil price volatilities and other economic shocks. Ramping and prioritizing domestic gas-based industrialization projects, to diversify Nigeria’s energy supply, increase local employment and reduce domestic demand and Nigeria’s reliance on oil;
- Support a major and urgent shift to gas in terms of investment focus. Gas supply to domestic market for power, industrial & manufacturing feedstock and enabler to economic development. Emphatic shift to the gas value chain offers Nigeria the leverage for socio-economic development in the medium to long term;
- Fast-track the passage of the petroleum industry bill to bring about the fiscal, governance and regulatory clarity required to monetize Nigeria’s 200+ tcf of gas reserves. Speedy passage of the Petroleum Industry Bill will provide a clearer strategic direction to the entire industry, re-engender trust, thereby increasing investments which will in turn increase national revenues required for development;
- Review 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;
- Institutionalize 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;
- Immediately privatize refineries as stated by NNPC to improve Nigeria’s access to finished products in country, reducing potential for over reliance on external support for products, to preserve Nigeria’s sovereignty; and
- Sell off unviable government owned oil assets to raise revenue and boost efficiency in the short to medium term.
The NNRC said it strongly believes that adopting these reforms will improve Nigeria’s competitiveness, revenue inflows and improve her ability to survive and subsequently recover from the effects of covid-19 on the global economy. The government, the NNRC warns, must adopt a wholly consultative approach in its reforms, transparency and inclusivity to increase likelihood of acceptance and implementation. Prioritizing these reforms is necessary while Nigeria considers other medium to long term reform plans simultaneously.
The NNRC’s 2019 Benchmarking Exercise Report, BER outlines other sector gaps to be focused on in the medium to long term to improve Nigeria’s oil sector performance.