What is Nigeria’s energy policy?

The frequent brouhaha overpricing of petroleum products together with the undefined issue of subsidy shows that there is no policy that guides the operation of the petroleum industry in Nigeria. Anything goes seems to be the in-thing. Every administration tinkers with petroleum the way it pleases as Nigerians are treated with impunity on the issue of pricing. The pump price of petrol, a basic necessity in a country that lacks power supply, is hiked every now and then with resultant labour unrest.

Just last week, the pump price of petrol, overnight, jumped to N212 from N165 per litre, days after the Nigeria National Petroleum Corporation (NNPC) denied the price hike. In a matter of hours, petroleum marketers adjusted their prices and made a huge profit before the Petroleum Pricing Regulatory Agency (PPPRA) recanted on the price that had appeared on its website. Even at that, the matter remains unsettled; some filling stations in parts of the country are still selling at the new unapproved price while the black market price is as high as N300 per litre.

The coalition of labour unions and civil society organisations were warming up for a nationwide industrial showdown, the fear of which may have forced the government to recant on the price. But the price has continued to spiral in the black market.

One of the terms of the agreement between the labour unions and government in previous industrial action was a moratorium on the fuel price increase for one year. That was under the Obasanjo administration. What that meant was that at the end of the period, there would be more price increases. It, therefore, follows that any time from June 2008 when the moratorium expired, price hikes continued. And so it is ever since. That has re-enacted the vicious cycle of price increases and strikes.

The question is how long would the country continue in this merry-go-round? What is Nigeria’s energy policy? Wh
y is fuel price increase a regular feature almost on yearly basis? The Obasanjo administration increased the price of fuel six times in eight years. The present Buhari administration has increased petrol price two times plus in five years. Why can’t there be stability in the oil industry?

There is an unending energy crisis because the country has no energy policy. By energy policy is meant a framework by which issues of energy production, distribution, and consumption are managed. The features of an energy policy may include legislation, international treaties, incentives to investment, and guidelines for energy conservation, taxation and other public policy issues. A national energy policy comprises a set of measures involving the country’s laws, treaties and agency directives.

The energy policy of Nigeria may include one or more of the following measures: (a) Statement of national policy regarding energy planning, energy generation, transmission, and usage. (b) Legislation on commercial energy activities—trading, transport, storage, etc. (c) Legislation concerning energy use, such as efficiency standards, emission standards. (d) Instructions for state-owned energy sector assets and organisations. (e) Active participation in the co-ordination of and incentives for mineral fuels exploration and other energy-related research and development. (f) Energy security and international policy measures. (g) Current energy policies also address environmental issues. These are the standards used around the world.

Quite often, the risk of supply and demand mismatch dominates the issue of energy policy. In the context of Nigeria, this concern arises because the government has partial control of the one and only main source of national revenue—crude oil. The entire energy need of the country is dependent on oil. This explains why the other available sources of energy in the country are neglected. With the exception of hydropower development, other sources of energy such as coal, solar, and wind are virtually ignored. There are a number of elements that are naturally contained in a national energy policy, regardless of which of the above measures was used to arrive at the resultant policy.

The principal elements are posed in terms of the following questions: What is the extent of energy sufficiency for the country? Where would the future energy sources derive? How would future energy be consumed among the various sectors? What fraction of the population will be acceptable to endure energy poverty? What are the goals of future energy intensity, the ratio of energy consumed to GDP? What is the reliability standard for distribution? How will energy-efficient hardware, e.g. household appliances, hybrid cars be encouraged? How can the national policy drive state and functions? What specific mechanisms, e.g. taxes, incentives, and manufacturing standards are in place to implement the total policy?

Looking at the foregoing, it is obvious that these issues related to a well-articulated energy policy are lacking in Nigeria’s energy sector. There is hardly any country that does not practice some type of energy policy. But while some countries operate based on explicitly declared policy, others don’t. Nigeria belongs to the latter. It is obvious that though, Nigeria exploits and sells her oil resources based on a certain framework with her joint partners, that arrangement cannot be regarded as policy. Over the years, Nigeria had embarked on the development of some of its hydropower resources. That again is not a policy. The resort to the building of independent power plants that rely on gas in different parts of the country again does not constitute an energy policy. An energy policy must be holistic, subsisting, taking into account the quantum of energy sources available to the country, with targets set on production, distribution, and utilisation. Some examples from other countries will illustrate this point.

In India, the energy policy is characterised by tradeoffs between four major drivers including 1) A rapidly growing economy, with the need for a dependable and reliable supply of electricity, gas, and petroleum products. 2) Increasing household incomes, with a need for an affordable and adequate supply of electricity and clean cooking fuels. 3) Limited reserves of fossil fuels and the need to import a vast fraction of the gas, crude oil, and petroleum product requirements as well as coal. 4) Indoor, urban and regional environmental impacts, necessitating the need for the adoption of cleaner fuels and cleaner technologies. In recent years, these challenges have led to a major set of continuing reforms, restructuring, and a focus on energy conservation.

The energy policy of Thailand is characterized by 1) Increasing energy consumption efficiency. 2) Increasing domestic energy production. 3) Increasing the private sector’s role in the energy sector. 4) Increasing the role of market mechanisms in setting energy prices. These policies have been consistent since the 1990s, despite various changes in government.

In Australia, the energy policy features a heavy reliance on fossil fuel power stations, especially, coal for electricity and oil transport. With the exception of nuclear power, Australia’s policy is very similar to that of the United States. Both countries have remained isolated on the issue of climate change because they have not ratified the Kyoto Protocol or been successful in encouraging major renewable energy development.

Russia, one of the world’s energy superpowers, is rich in natural energy resources, the world’s leading net energy exporter, and a major supplier to the European Union. The main document defining the energy policy of Russia is the Energy Strategy, which sets out the policy for the period up to 2020. Russia has also signed the Kyoto Protocol.

Where does Nigeria stand in all this? The country is rich in natural sources of energy. But there is no consistent policy that directs energy production and utilisation.

The crude oil revenue is dependent on the vagaries of the international price fluctuation. There is no policy that stipulates how to cushion or regulate domestic demand and supply of petroleum products. There is no policy that sets a minimum target for the refineries. There is no policy on the use of alternative and cleaner sources of energy. There is no policy on minimum environmental quality standards including pollution control.

An energy policy would stabilize the local energy market? How could a major oil producer as Nigeria not have a benchmark policy on energy? There would be no end to fuel price instability and its attendant strikes except there is a policy on energy. The policy would identify the sources of energy in the country and stipulate the manner of their utilisation. Unless this is done, each new administration will come up with its own ad-hoc measures and Nigerians will continue to be at the receiving end.