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Stakeholders raise alarm over Nigeria’s fragile energy outlook

By Kingsley Jeremiah, Abuja
18 December 2020   |   4:27 am
Energy experts, yesterday, raised concerns about Nigeria’s energy sector, insisting that the country’s economy faces serious uncertainty going by the poor outlook of the sector.

•Insist electricity tariff increase may cripple power sector
•Ask FG to suspend royalty, tax on gas

Energy experts, yesterday, raised concerns about Nigeria’s energy sector, insisting that the country’s economy faces serious uncertainty going by the poor outlook of the sector.

The experts, drawn from top private and public institutions, including the Nigerian Association for Energy Economists (NAEE), projected a catastrophic scenario if the Federal Government remains adamant on urgently addressing challenges bedevilling the sector.

The experts spoke at an event in Abuja organised by the NAEE on ‘Energy and Petroleum in a Post Covid-19 World’. Even after the pandemic, State Minister of State for Petroleum Resources, Timipre Sylva, who delivered an eight-minute speech at the event said it is unlikely the oil and gas sector would quickly recover. He, however, noted that efforts by the Organisation of the Petroleum Exporting Countries (OPEC) and other allies as well as Covid-19 vaccination were yielding positive results.

He also expected cleaner energy to take major shape, adding that gas resources are being tipped as a game-changing plan for the energy sector in the country.

“We are constructing critical infrastructure to boost industrial activities,” Sylva noted while pointing to the Ajaokuta-Kaduna-Kano pipeline as a key achievement.

Some stakeholders, especially former Chairman of Nigerian Electricity Regulatory Commission (NERC) stressed that the recent increase in electricity tariff may be far from the solution the power sector needed to come out of the woods, noting that the Nigerian electricity supply industry could collapse as the development would not provide the needed fund required to run the sector. 

Although the Federal Government has been looking to boost revenue with different taxes, the experts, particularly former President of the association, Prof. Wunmi Iledare, said tax and other royalty must immediately be removed to open up the sector for massive investment that would unlock the gas potential.
 
The Petroleum Industry Bill, which is expected to provide clarity in the sector has remained a bill for over a decade. Losses to this failure are estimated at $15 billion in revenue yearly. The global push for greener energy coupled with the devastating effects of the COVID-19 pandemic have left the industry in a dilemma.

President of NAEE, Yinka Omorogbe said unnecessary time is being wasted on kick-starting reform in the sectors, especially the oil industry, stressing that signing the PIB into law is only the first step towards needed reform.

The power sector has also been in quandary. Although privatised in 2013 to change the narrative of epileptic power supply, the sector has failed to perform as supply to homes remained at float around 4000 megawatts. 

Sadly, the oil and gas sector provides as much as 90 per cent of foreign exchange earnings and above 60 per cent of revenue while many industries, particularly small scale businesses are folding up as the power sector fails to stimulate the economy.

While the Federal Government had supported an increase in electricity tariff, stating that revenue shortfall crippled its capability to finance the sector, Amadi noted that the industry is heading for a collapse under a defective market structure. 

The increase in tariff over such a situation is abnormal, said Amadi, who added that the development could worsen existing challenges as the objective of ensuring that the sector generates enough revenue remains elusive under the market structure. 
   
Amadi noted that the government needed a key investor in the sector, saying: “Government needs to socialise the risk of transition from scarcity to plenty.”
 
Iledare believes that gas offers some windows in the face of the push away from fossil fuel. That option for him included the suspension of royalty and tax for natural gas.
         
He however noted that the suspension should not mean zero royalty and tax to avoid mistakes that were hard to correct in the deep-water, especially the 1993 Production Sharing Contract.

         
Iledare said: “Nigeria has the time frame to be able to adjust its way of thinking and know that the train is already moving more when it comes to energy transition dynamics. We are fortunate. We have gas, which is the transition fuel.”
         
Omorogbe insisted that the prevailing framework in the nation’s energy sector remained unsustainable, adding that “it cannot get Nigeria to where we want it to be in the petroleum industry as it does not attract any investment.

“Now that Covid-19has come, and has hit the industry to a great extent causing a big decline in energy use so we’re worse off than we were before the pandemic came into play.”

She stated that while the petroleum industry bill was the very first step before the reform, Nigeria has a long way to go as it has not even been able to its first step.

“For once, get your policies right, make sure your laws align with your policies, pass the law. Why must it take several cycles of the National Assembly to pass a simple law? After you’ve passed the law starts to implement. 

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