The Tasks Before Baru
Ejiofor Alike reports that the sudden disengagement of the Minister of State for Petroleum, Dr. Ibe Kachikwu, as the Group Managing Director of Nigerian National Petroleum Corporation (NNPC) at the most trying moment in Nigeria’s oil and gas industry may
President Muhammadu Buhari recently exercised his executive power to ‘hire and fire’ when he relieved the Minister of State for Petroleum, Dr. Ibe Kachikwu, of his position as the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), exactly 11 months after his appointment. Kachikwu who assumed the NNPC topmost position on August 4, 2015, was later named minister in November 2015, thus assuming dual roles. With his executive and discretionary power to ‘hire and fire,’ the removal of Kachikwu as the GMD and the approval of the composition of the board of the NNPC by President Buhari was expected as it was also in line with Section 1(2) of the Nigerian National Petroleum Corporation Act of 1997, as amended. Also contrary to insinuations in some quarters, Kachikwu’s new role is not a demotion but the correction of an obvious aberration in line with the NNPC Act. However, what was unexpected was the timing of the action – coming at a time when there was a serious crisis of confidence between the federal government and the oil-producing Niger Delta over allocation of resources derived from the region. This crisis had led to renewed militancy in the Niger Delta, which curbed Nigeria’s oil production to a 20-year low. At the peak of the present crisis, Kachikwu had used his dual position to pacify the militants and negotiate a peace deal, which led to partial recovery of oil production. While most of the other stakeholders, including officials of government were beating war drums, the minister used his positions to initiate dialogue, which paid off tremendously. In his bid to pacify the oil-producing region and woo the agitators to embrace dialogue, as well as have confidence in President Buhari’s administration, Kachikwu had, at a recent Townhall Meeting of Ministers and other stakeholders in Uyo, Akwa Ibom State, openly disagreed with the Minister of Transport, Mr. Chibuike Amaechi, on the establishment of a Nigerian Maritime University, proposed for Okerenkoko in Warri South-West Local Government Area in Delta State. The removal of Kachikwu, who is one of ‘their own’ at a very critical time may not only truncate the peace efforts but could also fuel the allegation of marginalisation of the region, which the militants have effectively used to justify their renewed attacks on oil facilities. Also, the lopsided composition of the nine-man board of the NNPC, comprising six members of northern extraction and one person each to represent the South-west, South-east and South-south geopolitical zones did not help government’s case. Northerners dominated the new NNPC board and no preferential treatment was given to the oil-producing region, which is the ‘goose that lays the golden egg’. The new board is composed of the following: Chairman – Kachikwu; Group Managing Director – Dr. Maikanti Kacalla Baru; Permanent Secretary of the Federal Ministry of Finance, Alhaji Mahmoud Isa Dutse; the Chief of Staff to the President, Mallam Abba Kyari; and a former Group Managing Director of NNPC, Dr. Thomas M.A John. Others include; a former Executive Director of Mobil Oil Plc and foremost industrialist and boardroom guru, Dr. Pius O. Akinyelure; a former Chairman/CEO of the NigeriaSao Tome & Principe Joint Development Authority (JDA), Dr. Tajuddeen Umar; Mallam Mohammed Lawal; and Mallam Yusuf Lawal. With the renewed mistrust between the federal government and the Niger Delta region over the new appointments, it is not clear if the militants and other stakeholders from the region would trust Baru, who is not one of their own to lead the negotiations in the peace talks. To rebuild this trust, Baru has enormous tasks ahead to restore the confidence of the agitators and the entire people of the Niger Delta in Buhari’s administration. Apart from hampering the peace deals with the militants, Baru’s appointment also has the potential to affect the ongoing reforms in the NNPC, which was initiated by Kachikwu. With a First Class (Honours) degree and Doctor of Philosophy also in Mechanical Engineering, from the Ahmadu Bello University, Zaria, as well as his decades of wealth of experience in both the upstream and downstream sectors of oil and gas industry, where he had worked, Baru’s competence to head the NNPC is not in doubt. What is in doubt is his ability to continue to implement the raft of measures initiated by Kachikwu to reform the once corruptionridden corporation by enthroning a regime of transparency and accountability. Just last week, it was announced that NNPC finally turned the corner, reporting an operating profit of N273.74 million for the month of May and reversing the losses of N35 billion made over the last 15 years President Buhari had demonstrated his political will to sanitise the corporation and the entire oil and gas industry by appointing Kachikwu, an outsider, as the boss of the corporation. Apart from his undisputed competence to head the NNPC, having worked as the Executive Vice Chairman and General Counsel of ExxonMobil (Africa), the appointment of Kachikwu, an outsider that would not be swayed by internal sentiments in wielding the big stick to clean the rot in the NNPC, was one of President Buhari’s wisest decision. Immediately on assumption of office, Kachikwu had initiated a reform targeted at personnel restructuring to enhance transparency and competitiveness of Nigeria’s operating environment. As a cost-cutting measure, he did also not waste time to commence the restructuring of the corporation in a sweeping move that affected senior executives and Baru’s former colleagues. He also ordered a forensic audit of the NNPC, and pledged to split the Pipelines and Products Marketing Company (PPMC) into three portfolio companies that would manage the refineries, pipelines and supply of petroleum products. In line with the recommendations of President Buhari’s Transition Committee, Kachikwu also cancelled contracts with oil traders and called for fresh tender for oil lifting contracts, saving the NNPC $150 million monthly. Also in an unprecedented move to restore public confidence in the then corruptionridden NNPC, Kachikwu further opened up the books of the state-run oil company to public scrutiny with the publication of the monthly financial and operational report of the corporation, thus enthroning a new regime of transparency. With the strong support of President Buhari, Kachikwu took bold steps, which he would not have taken if he was a staff of the NNPC before his appointment. As an establishment man and a member of NNPC family, Baru will require more than ordinary courage and political will to sustain the reforms initiated by the minister. One of the challenges facing the oil and gas sector, which Baru has to contend with, is the issue of dwindling investment and inadequate funding. Due to the challenges in the operating environment – long contracting cycle and lack of clarity of terms, investors have scaled down their investments in Nigeria’s oil and gas industry in recent years While the international oil companies (IOCs) are looking for opportunities elsewhere, citing the unpredictability of Nigeria’s operating environment as a result of the non-passage of the Petroleum Industry Bill (PIB), the NNPC has been bogged down by lack of funding to meet its cash call obligations in the joint ventures with the IOCs. As the boss of the state-run oil firm, Baru is expected to pursue the various funding options explored by Kachikwu. The pictures of the country’s refining capacity are also very gloomy with the poor state of the refineries. Kachikwu has since initiated measures to make Nigeria a net exporter of petroleum products and Baru should implement these initiatives. Crude oil stealing is also a major challenge in the oil and gas sector and has also impacted negatively government’s revenue due to the huge loss in production. The non-passage of PIB, eight years after it was first submitted to the National Assembly had created uncertainty in Nigeria’s operating environment. Without the clarity of terms, the IOCs said they were unable to invest because the operating environment was unpredictable. Kachikwu had split the PIB into several volumes to ease the passage and Baru should pursue the initiative to a conclusion. Baru should also pursue the issue of reducing the long contracting cycle to ease doing business the sector. As Nigeria is experiencing dwindling fortunes in the export of oil and gas, it is believed that domestic gas holds the key to fuel the country’s growth. With the falling prices of crude oil and gas, coupled with over 70 Liquefied Natural Gas (LNG) projects awaiting Final Investment Decision (FID) globally in 2015, LNG projects to export gas should not be the only option. Despite Nigeria’s abundant gas resources, the absence of sustained investments in the sector in recent years had also affected the federal government’s Gas Master Plan, designed to attract $30 billion investment in the sector. Baru should resurrect the gas master plan to boost investment in the sector. Kachikwu had developed a template to tackle these challenges and it is expected that the new NNPC boss should sustain the tempo of the reforms.