Unresolved Issues in Energy Sector

Festus Akanbi

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 corrupt-ridden 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 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.

Deficit Spending

Analysts said the administration’s record of deficit spending of N36.8 trillion in its eight-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) on Federal Government finances from 2015 to 2022 revealed that total revenue for the eight years stood at N32.05 trillion, while total expenditure during the period stood at N68.8 trillion, indicating deficit spending of N36.8 trillion.

A major factor behind the spike in deficit spending is the steady and sharp increase in fuel subsidy spending which stood at N9.34 trillion in the eight years from 2015 to 2022. Reports indicated that annual fuel subsidy spending shot up by 571 per cent to N4.39 trillion in 2022 from N654 billion in 2015. 

The Denial

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 administration was fierce and consistent. It 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 is leaving the office as a President with the highest amount spent on subsidising petrol in Nigeria’s history, apart from his failure to wake the nation’s four refineries from collapse.

Subsidy Payments

Relying on oil and gas industry reports conducted by the Nigeria Extractive Industries Transparency Initiative (NEITI), 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 government has a budget of N3 trillion to cover petrol subsidy costs from June 2022 to June 2023.

An aggregation of the entire costs showed that under President Buhari the government would have spent N7.83 trillion on petrol subsidies.

A breakdown of the NEITI’s report shows that the subsidy payments in 2005 stood at N351 billion ($2.66 billion), N219.72 billion ($1.70 billion) in 2006, N236.64 billion (1.89 billion) in 2007, N360.18 billion (3.03 billion) in 2008, N198.11 billion ($1.60 billion) in 2009 and N416.45 billion ($2.76 billion) in 2010.

The report also showed that subsidy payments for 2011 stood at N1.9 trillion ($12.18 billion), N690 billion ($4.34 billion) in 2012, N495 billion ($3.11 billion) in 2013, N482 billion ($2.92 billion) in 2014, N316.70 billion ($1.62 billion) in 2015, N99 billion ($0.39 billion) in 2016, N141.63 billion ($0.44 million) in 2017, N722.30 billion ($2.36 billion) in 2018, N578.07 billion ($1.88 billion) in 2019 and 134 billion ($0.37 billion) in 2020, respectively.

Oil Theft

However, in another breathe, NEITI has disclosed that Nigeria lost 619.7 million barrels of crude oil valued at N16.25 trillion ($46.16 billion) to crude oil theft between 2009 and 2020.

The Executive Secretary of NEITI, Ogbonnaya Orji, said this during a recent policy dialogue on the utilisation of beneficial ownership data in the fight against corruption in Nigeria’s crude swap deals, held in Abuja.

He said the volume of crude oil stolen represented a loss of over 140,000 barrels per day, adding that between 2009 and 2018, the country lost 4.2 billion litres of petroleum products from refineries valued at $1.84 billion. Analysts wondered why the Buhari administration could not make a difference by halting this ugly trend in its eight years of being in the saddle.

Corruption

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 a confirmation of this observation, a report of the Special Investigative Panel on Oil Theft/Losses in Nigeria, 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 oil production, illegal refining, theft 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.

Fall in Crude Oil Output

The orgy of theft continued to wreak havoc on Nigeria’s revenue base as Nigeria’s crude oil output fell to 1.26 million barrels per day (bpd) in March this year, the first decline in 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 decreased by 2.9 per cent from 1.3 million bpd in February. On a year-on-year basis, it increased by 2.5 per cent from 1.23 million bpd.

The oil report shows that production fell last in August 2022 from 1.08 million bpd in July to 972,394 bpd, when the country was battling oil thieves.

Oil and gas analysts have attributed the latest decline to a major oil pipeline explosion during the first week of March, pipeline vandalism, maintenance, and shutdowns.

Records showed that Nigeria drilled 30.6 million less barrels of oil in January and February compared to the quota allocated to the country by the Organisation of Petroleum Exporting Countries (OPEC) during the period.

A review of data from the NUPRC for the two months showed that while in January, Nigeria drilled 39 million of the 55 million barrels allocated to it, in February this year, it only managed to produce 36.5 million of the total projected output of 50.4 million barrels.

According to the analysis, in total, Nigeria was expected by the international oil producers’ group to produce 106.2 million barrels of oil in January and February, but could only drill 75.5 million barrels during the period under consideration.

The 13-member OPEC group distributes oil 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 unable to meet its OPEC production quota 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.

Pipeline Monitoring Contract

Another issue of concern was the award of a N48 billion-a-year contract to protect pipelines bearing petroleum products to Tantita Security Services Nigeria Limited, 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 government has done in effect is to abdicate the government’s constitutional responsibility to mercenaries, even against its avowed policy not to engage mercenaries in fighting terrorism.

“Effectively, the government has turned 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.