Stakeholders pick holes in Nigeria’s push for hydrocarbon maximisation
•Insist frontier exploration investment may backfire
Stakeholders at the Natural Resource Governance Institute (NRGI) are worried over Nigeria’s dependence on the oil and gas sector, warning that current efforts by the federation to keep exploring oil and gas resources against move from fossil fuels remain with flaws.
NRGI in a new report titled ‘Ending Nigeria’s Oil Dependency: Not If, But When…and How’ made available to The Guardian, insisted that the Federal Government’s short-term plans to maximize oil and gas endowments have obvious challenges.
NRGI also said the rehabilitation of refineries, investments in Dangote refinery, frontier exploration and payment of fuel subsidies may put Nigeria’s future at risk if the alternative costs are not appropriately assessed.
West Africa (Anglophone) regional manager of NRGI, Nafi Chinery and senior governance officer with NRGI’s Nigeria programme, Tengi George Ikoli in the report, said investments in frontier explorations as provided for in the Petroleum Industry Act (PIA) may pose some risks in locking in revenue that may not yield the desired returns.
Despite being a leading oil and gas producing country, Nigeria’s revenue from the sector has yielded little improvement in infrastructure development and standard of living of the citizens. Instead of improving, states and federal government are reportedly close to bankruptcy as borrowing already hovered around N50 trillion and the country remained one of the countries with the highest figure of poor people.
While the rest of the world is transitioning from fossil fuels, Nigeria, like other African leaders, has insisted on continuous exploration of hydrocarbon resources, stating that attention would be shifted to gas resources.
NGRI, while noting that gas as a ‘transition fuel’ requires significant capital investments and needs more time to bring profits, said Nigeria needs a clear plan and pathway for how it intends to transition to other energy options with trackable milestones.
“In addition, if natural gas exports are expected to supplement foreign exchange earnings from oil in the short-term, lower longer-term investments may mean that those gains won’t last.
“Buffers need to be put in place to account for that or the growing investments made in cleaner fuels may put natural gas projects at risk of becoming “stranded assets”—with revenues sunk before realizing any value. It is critical that the Federal Government makes strategic spending decisions as oil’s role in meeting global energy demands continually declines over time,” the stakeholders said.
Calling for urgent action to diversify from oil and gas, NGRI noted the struggle Nigeria is facing in meeting production targets, divestment by international oil companies as importers of Nigeria’s petroleum products are also seeking greener options.
According to the report, the Federal Government should accelerate revenue diversification through trade and domestic production, leveraging other sources of foreign exchange.
It said attracting foreign exchange earnings could be done by backing enablers that add greater value to local products, offering greater support to the manufacturing sector, developing Nigeria’s critical minerals in the mining sector to leverage the green economy, boosting regional trade through the African Continental Free Trade Agreement (AfCFTA) 2020.
The report also called on the Federal Ministry of Finance, Budget and National Planning to devise a comprehensive and inclusive plan with concrete and measurable milestones in collaboration with relevant Ministries, Departments and Agencies that speaks to Nigeria’s context, and accounts for both risks and opportunities to reduce oil dependence. That plan must then be implemented collaboratively.
“Nigerians’ opinions must be sought on the best approach to wean the country off its dependency on oil. They must agree on a timeline and pace for reform, and identify priority areas of focus.
“During the upcoming 2023 electoral campaigns, presidential and gubernatorial candidates; especially oil producing states, must be required by citizens to outline plans to build fiscal resilience away from oil dependence. Civil society, accountability actors and the public must sustain dialogue and make economic diversification a major theme in the 2023 elections—on the campaign trail, in candidate commitments and party platforms,” the report noted.