Unresolved Issues in Energy Sector

As chroniclers of events that shaped the tenure of the outgoing administration of President Muhammadu Buhari round up their jobs ahead of the May 29 handover to the next administration, the list of issues that will continue to cast shadows on the report includes the monumental waste of approximately N8trillion on the corruptridden fuel subsidy programme in the space of eight years, corruption in the oil sector, untamed oil theft and the attendant threat to the nation’s revenue.

For a regime that rode on the back of the SURPLVH WR ÀJKW FRUUXSWLRQ HLJKW \HDUV DJR analysts said it is rather unfortunate that rather than subdue the cankerworm of corruption, the outgoing administration has watched KHOSOHVVO\ DV IXHO VXEVLG\ FDUWHO ÁHHFHV WKH nation through the controversial fuel subsidy policy.

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Analysts said the administration’s record of GHÀFLWVSHQGLQJRI1 WULOOLRQLQLWVHLJKW year rule will continue to taint its record, especially since it was the controversial oil subsidy policy that gulped a substantial amount of the money between 2015 and 2022.

Data from the Central Bank of Nigeria (CBN) RQ )HGHUDO *RYHUQPHQW ÀQDQFHV IURP to 2022 revealed that total revenue for the HLJKW \HDUV VWRRG DW 1 WULOOLRQ ZKLOH total expenditure during the period stood DW1 WULOOLRQ LQGLFDWLQJGHÀFLWVSHQGLQJ RI 1 WULOOLRQ

$ PDMRU IDFWRU EHKLQG WKH VSLNH LQ GHÀFLW spending is the steady and sharp increase in IXHO VXEVLG\ VSHQGLQJ ZKLFK VWRRG DW 1 trillion in the eight years from 2015 to 2022. Reports indicated that annual fuel subsidy VSHQGLQJ VKRW XS E\ SHU FHQW WR 1 WULOOLRQ LQ IURP 1 ELOOLRQ LQ

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Before his election in 2015, President Buhari’s argument then was that there was no subsidy on petrol and that the former administration of President Goodluck Jonathan was corrupt and was looking for ways to fraudulently enrich themselves at the expense of the Nigerian masses.

The campaign to de-market the Jonathan DGPLQLVWUDWLRQ ZDV ÀHUFH DQG FRQVLVWHQW ,W was a campaign that falsely raised the hope of many Nigerians, especially those making the case for the cancellation of the subsidy regime.

To add salt to the injury, the reality is President Buhari, who had described the oil subsidy policy as a scam eight years ago LV OHDYLQJ WKH R΀FH DV D 3UHVLGHQW ZLWK WKH highest amount spent on subsidising petrol in Nigeria’s history, apart from his failure to ZDNH WKH QDWLRQ·V IRXU UHÀQHULHV IURP FROODSVH

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Relying on oil and gas industry reports FRQGXFWHG E\ WKH 1LJHULD ([WUDFWLYH ,Q - GXVWULHV 7UDQVSDUHQF\ ,QLWLDWLYH 1(,7, analysts pointed out that subsidy payment between 2015 and 2020 was N1.99 trillion. However, another report by the Nigerian National Petroleum Corporation (NNPC) to the Federation Accounts Allocation Committee (FAAC), showed that petrol subsidy cost N1.57 trillion in 2021 alone and another N1.27 trillion from January to May 2022. The JRYHUQPHQW KDV D EXGJHW RI 1 WULOOLRQ WR cover petrol subsidy costs from June 2022 WR -XQH

An aggregation of the entire costs showed that under President Buhari the government

ZRXOG KDYH VSHQW 1 WULOOLRQ RQ SHWURO subsidies.

$ EUHDNGRZQ RI WKH 1(,7,·V UHSRUW VKRZV that the subsidy payments in 2005 stood at 1 ELOOLRQ ELOOLRQ 1 ELOOLRQ

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The report also showed that subsidy payPHQWV IRU VWRRG DW 1 WULOOLRQ ELOOLRQ 1 ELOOLRQ ELOOLRQ LQ 1 ELOOLRQ ELOOLRQ LQ 1 ELOOLRQ

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+RZHYHU LQ DQRWKHU EUHDWKH 1(,7, KDV GLVFORVHG WKDW 1LJHULD ORVW PLOOLRQ EDUUHOV RI FUXGH RLO YDOXHG DW 1 WULOOLRQ billion) to crude oil theft between 2009 and 2020.

7KH ([HFXWLYH 6HFUHWDU\ RI 1(,7, 2JERQQD\D 2UML VDLG WKLV GXULQJ D UHFHQW SROLF\ GLDORJXH RQ WKH XWLOLVDWLRQ RI EHQHÀFLDO RZQHUVKLS GDWD LQ WKH ÀJKW DJDLQVW FRUUXSWLRQ LQ Nigeria’s crude swap deals, held in Abuja.

He said the volume of crude oil stolen rep

UHVHQWHG D ORVV RI RYHU EDUUHOV per day, adding that between 2009 and

WKH FRXQWU\ ORVW ELOOLRQ OLWUHV RI SHWUROHXP SURGXFWV IURP UHÀQHULHV YDOXHGDW ELOOLRQ $QDO\VWVZRQdered why the Buhari administration FRXOG QRW PDNH D GLͿHUHQFH E\ KDOWLQJ this ugly trend in its eight years of being in the saddle.

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Many observers said Nigeria has not been able to realise its revenue potential from the oil industry because the authorities have not really been looking at the issue of corruption in the oil sector. And in what looks like D FRQÀUPDWLRQ RI WKLV REVHUYDWLRQ D UHSRUW RI WKH 6SHFLDO ,QYHVWLJDWLYH 3DQHO RQ 2LO 7KHIW /RVVHV LQ 1LJHULD recently submitted to the National Security Adviser (NSA), Maj-Gen. Babagana Monguno (rtd), attributed the cause of crude oil racketeering to a lack of proper reporting of crude RLO SURGXFWLRQ LOOHJDO UHÀQLQJ WKHIW from wellheads, and diversion from sophisticated pipelines network.

The panel attributed losses to the absence of a robust industry-wide metering system and an unworkable security arrangement.

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The orgy of theft continued to wreak havoc on Nigeria’s revenue base as Nigeria’s crude RLO RXWSXW IHOO WR PLOOLRQ EDUUHOV SHU GD\ ESG LQ 0DUFK WKLV \HDU WKH ÀUVW GHFOLQH LQ seven months, according to the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) latest oil production status report.

Data from the upstream regulatory body shows that the country’s oil production GHFUHDVHG E\ SHU FHQW IURP PLOOLRQ ESG LQ )HEUXDU\ 2Q D \HDU RQ \HDU EDVLV LW LQFUHDVHGE\ SHUFHQWIURP PLOOLRQESG

The oil report shows that production fell last in August 2022 from 1.08 million bpd in -XO\ WR ESG ZKHQ WKH FRXQWU\ ZDV battling oil thieves.

2LO DQG JDV DQDO\VWV KDYH DWWULEXWHG WKH latest decline to a major oil pipeline exploVLRQ GXULQJ WKH ÀUVW ZHHN RI 0DUFK SLSHOLQH vandalism, maintenance, and shutdowns.

5HFRUGV VKRZHG WKDW 1LJHULD GULOOHG million less barrels of oil in January and February compared to the quota allocated to the FRXQWU\ E\ WKH 2UJDQLVDWLRQ RI 3HWUROHXP ([SRUWLQJ &RXQWULHV 23(& GXULQJ WKH period.

A review of data from the NUPRC for the two months showed that while in January, 1LJHULD GULOOHG PLOOLRQ RI WKH PLOOLRQ barrels allocated to it, in February this year, it RQO\ PDQDJHG WR SURGXFH PLOOLRQ RI WKH WRWDO SURMHFWHG RXWSXW RI PLOOLRQ EDUUHOV

According to the analysis, in total, Nigeria was expected by the international oil producHUV· JURXS WR SURGXFH PLOOLRQ EDUUHOV RI oil in January and February, but could only drill 75.5 million barrels during the period under consideration.

7KH PHPEHU23(&JURXSGLVWULEXWHVRLO production quotas to its members based on market conditions to ensure price and supply stability in the global oil market. Nigeria’s share of that quota was 1.8 million barrels per day for both months under review.

For over two years, Nigeria has been unDEOH WR PHHW LWV 23(& SURGXFWLRQ TXRWD for what it blames on oil theft and pipeline vandalism in the Niger Delta.

But in the second half of last year, just before production fell to a historic 900,000 bpd, the government in collaboration with local security groups took steps to curb the menace.

For a regime that rode on the back of the promise to fight corruption eight years ago, analysts said it is rather unfortunate that rather than subdue the cankerworm of corruption, the outgoing administration has watched helplessly as fuel subsidy cartel fleeces the nation through the controversial fuel subsidy policy

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Another issue of concern was the award RI D 1 ELOOLRQ D \HDU FRQWUDFW WR SURWHFW pipelines bearing petroleum products to 7DQWLWD 6HFXULW\ 6HUYLFHV 1LJHULD /LPLWHG a company that belongs to a former Niger Delta militant, Government Ekpemupolo (a.k.a. Tompolo).

Government’s critics said the contract adds no value to the esteem of an administration that had promised not to reward criminals with medals, arguing that the pipeline protection contract award to Tompolo raises deep concern about the capacity of the state to secure lives and property.

“What the Muhammadu Buhari governPHQW KDV GRQH LQ HͿHFW LV WR DEGLFDWH WKH government’s constitutional responsibility to mercenaries, even against its avowed policy QRW WR HQJDJH PHUFHQDULHV LQ ÀJKWLQJ WHUURULVP

´(ͿHFWLYHO\ WKH JRYHUQPHQW KDV WXUQHG around to award pipeline surveillance contracts to ‘ex-militants’ under the guise of seeking peace,” a newspaper’s editorial had said.

As Buhari bid farewell to the seat of power next week, one hopes his successor will not regale Nigerians with excuses when the time comes to give an account of his stewardship too.