PIA and Nigeria’s post-oil future

The signing of the Petroleum Industry Bill into law by President Muhammadu Buhari last Monday set in motion a misguided outrage in some quarters over the status of the Nigerian National Petroleum Corporation, which, they claimed, had been “sold” in the new Act. This subject trended ahead of the 2019 general elections because of Atiku […]

The signing of the Petroleum Industry Bill into law by President Muhammadu Buhari last Monday set in motion a misguided outrage in some quarters over the status of the Nigerian National Petroleum Corporation, which, they claimed, had been “sold” in the new Act.

This subject trended ahead of the 2019 general elections because of Atiku Abubakar’s declaration during a town-hall meeting of his intention to sell the NNPC if elected.

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He was maligned by the pro-Buhari crowd who had shared that such promised privatization was a ploy to hand the national asset to his friends.

While the recent outrage is based on a misreading of clauses in the Petroleum Industry Act passed across social media by persons with a bare understanding of the Act, so many scams have passed as privatization schemes in Nigeria and so such vigilance isn’t misplaced. Since the indigenization programmes of the 1970s, when public and foreign-owned enterprises were sold to local businessmen, mostly cronies of the powers that were, such policy has been understood as a conduit for the political class to enrich themselves. Only that the NNPC story isn’t the same.

NNPC isn’t exactly privatized in the Petroleum Industry Act. It’s only restructured to function as a limited liability company but entirely owned by the government. The shares are to be held by the ministries of Finance and Petroleum on behalf of the federal government. The difference between the proposed NNPC and the current is, the new version is going to be run as a profit-maximizing enterprise that pays dividends to the shareholders—the government. The sustainability of this, in a country where NNPC has been a monthly cash cow of the federal government, is the grand experiment we must wait to test.

Perhaps the least discussed outcome of the PIA is Nigeria’s seeming indifference to the world’s to rush relegate the essence of fossil oil. Nigeria isn’t only reconstructing the agencies to supervise the oil and gas business, it’s investing in exploring more hydrocarbons. It’s setting aside 30 percent of the profits of NNPC limited to oil prospecting in frontier basins, comprising the Anambra basin, the lower, middle, and upper Benue trough, the Sokoto basin, the Chad basin and the Bida basin.

Despite the promise of operating a slim bureaucracy to manage the oil and gas sector, the PIA proposes two regulatory agencies to replace the current single regulator. The wisdom of this may be better understood in the coming months or years, but our policymakers must pay mind to the administrative costs of the two-regulator model and ensure that the proceeds of our oil exports are heavily redirected to the technologies of the future, and for building a diversified economy.

The implosion of the oil and gas industry may still be about two decades away, as predicted in a 2020 report of the International Monetary Fund, but the language being spoken from Washington to Beijing is one in which “fossil oil” is gradually disappearing in the vocabulary of policymakers of the world’s leading economies. Their Nigerian counterparts can’t afford to stay away from the race to the post-2040 world, which must begin by imagining a future characterized by dwindled demand for oil.

Fossil oil is flowing to its end, even if there are still billions of barrels to sell. On its website, the Imperial College London, one of the world’s most prestigious universities and hubs of science and technology, announced its decision to suspend master’s degree programmes in petroleum courses at the end of the 2020 – 2021 academic year to “reassess the skillset needed in today’s broader geo-energy industry, and to be able to come up with a new, fit-for-purpose MSc course offering for 2022 and beyond.”

The West’s quests to remain at the forefront of the race away from over-dependence on oil has been propelled by the hugely effective carbon tax and climate change campaigners. Strangely, the writing on the wall doesn’t seem legible for oil-producing countries with economies sustained by rents from the very places preparing to abandon this commodity. If the global instability of oil prices isn’t enough warning shot for countries yet to acknowledge this language of western oil importers, then they must lag in the fast-changing fourth industrial revolution.

Nigeria has enjoyed a few periods of the oil boom, and yet with more episodes of regrets than progress to show for them. Having been held to ransom by successive casts of rent-seeking elites who were more interested in the revenues coming from foreign countries, the NNPC simply functioned as headquarters of political corruption. This lack of transparency was why Nigerians rushed to believe Sanusi Lamido Sanusi who, as Governor of the Central Bank of Nigeria, alleged that a sum of $20 billion had gone missing at the NNPC.

Even though the government challenged his claims then and sacked him, Sanusi’s whistleblowing was inspired by the opaque operations of the NNPC. Until the current GMD of the corporation, Mele Kyari, took charge and made public the first audited financial statements of the NNPC in its 43 years of operation, Nigerians had no idea of the corporation’s revenue profile, even though it kept announcing persistent losses. Perhaps the politicians don’t know this yet, but PIA is the last lap of Nigeria’s opportunity to invest its diminishing petrodollars in a future dominated by electric cars and emission-free technologies.