Harvard Alumni: Like Telecom, Nigeria Must Create Stable Market for Oil, Gas Sector to Unlock Its Potential

•Tasks FG on urgent policy actions to extract full values in Dangote Refinery, attract investments in upstream sector

Peter Uzoho

As Nigeria’s oil and gas industry continues underperforming in terms of investment inflows, Gross Domestic Product (GDP) and even revenue generation despite its huge potential, the Harvard Business School Association of Nigeria (HBSAN) has stressed the need for the federal government to create a robust and stable market for the sector to make it competitive and flourishing like the telecom sector of the economy.

President of HBSAN and Chairman of Signal Alliance Holdings, Mr. Collins Onuegbu, made the call yesterday during an exclusive chat with THISDAY, on the sidelines of the association’s Golf session in Lagos.

Onuegbu also urged the government to take some urgent policy actions targeted at extracting the full values in the 650,000 barrels per day Dangote Refinery as well as attracting more investments into the nation’s upstream oil and gas sector.

He hinted that the association was also planning to convene a dialogue aimed at spotlighting and proffering solutions to the challenges emanating from the ongoing banking industry’s fundraising and restructuring process.

In addition, the HBSAN boss revealed that the body would also be signing an agreement with the Enterprise Development Centre (EDC) to enable its members to begin to offer mentorship to young businesses in Nigeria to help catalyse their growth.

Specifically for the oil and gas sector, which he viewed as crucial to the Nigerian economy, Onuegbu said the government must create a robust and stable market for the sector to make it competitive and flourishing like the telecom sector.

He said the telecom sector has become more competitive and performing well because of the market that was created around it, which enabled it to drive the banking, fintech, insurance and pension sectors, saying similar markets should be created for the oil and gas industry.

“I think that one of the things that we need to do is to build markets. When we reformed the telecom industry, we built a huge market. The telecom market has driven fintech, banking, commerce, social commerce, so many sectors today, just by that reform. We built a market around health insurance. We built a market around pension. Those are all markets that were built, they were not there.

“I think one of the things government needs to do is to build a very competitive market for oil and gas industry. I think that the market that has existed in the downstream oil and gas sector has been import and distribution. Meanwhile, where are the raw materials?” Onuegbu stated.

But now, he said Dangote has changed the equation in a way, recalling that Nigeria had started trying to change the import dependence position by building its own refineries but that mismanagement jeopardised that effort.

He said what Dangote has done now was very strategic as the building of the $20 billion refinery has rescued Nigeria.

Arguing that NITEL died when the nation’s telecom sector was reformed, the HBSAN president noted that it was also possible that some refineries will die when other players enter the market.

He rebuffed the complaints in some quarters about Dangote having a monopoly, saying Africa’s richest man “didn’t say I should have a monopoly.”

He explained, “There’s opportunity for any other person who wants to come in, but it requires a lot of investment. Because if you invest that kind of money, it changes the dynamics of the entire business.”

“And hopefully, to create a market that will allow us to ensure the efficiency in that market, and now create the energy security you are talking about. We cannot have security based on refineries abroad. I don’t think that would happen.

“We are a country that produces enough oil. Our security is that we have to keep producing more oil to fund the refinery, to provide feedstock for the refineries. On the basis of that, no one scratches to get fuel. If you want fuel, you get it. If you need aviation fuel, you get it. If you need diesel, you get it.

“Not that every time we have to wait for our products to be brought to the shores of Nigeria.”

He said Dangote had made a lot of sacrifice by building the massive refinery in the country instead of taking that huge investment abroad.

He admitted that there were still teething problems especially around pricing issues in the downstream oil and gas sector but that they would be sorted out with time as it was done with the issue of tariff in the telecom sector when it was initially reformed.

He pointed out that the passage of the Petroleum Industry Act (PIA) came rather too late but that it was essential to the running of the sector.

Reiterating the strategic importance of the Dangote Refinery to Nigeria’s economy, Onuegbu advised the Bola Tinubu administration to assist the company to flourish and deliver its full value to the country.

“So, if I were this present government, I would get Dangote off the block, settle it down, so that you can settle the downstream sector down, stabilise it a bit to the point where it is no longer about fuel price, is Dangote producing? Is Dangote not producing? I think it will settle down at that point. But, that’s for the downstream sector. There’s also the midstream and the upstream sectors,” he stated.

Furthermore, he said the entire oil and gas market needs to be reformed and consolidated and that sub-markets needed to be created for the onshore and the deep offshore spaces, especially now that the industry is witnessing divestment from the onshore by the international oil companies (IOCs).

Onuegbu explained, “Now, we are seeing divestment happening in some areas in the upstream sector, at least on the onshore assets. But the deep offshore assets, Nigeria has to get some investment into that area. Again, if you create a market, a sub-market in that space, you see the local players playing in certain areas; and then international players playing more in the deepwater and offshore spaces, or through joint ventures, the local players join with international players to play in the offshore space, and then they create their market.

“And then, assume that Dangote is a mid-market, that’s manufacturing, and then people are distributing. So, once you create these markets and they get more competitive, new players will come in because you have assured the market that when you produce, there’s a market for it, and definitely, there’s always a market for it.

“But in that market, what we did was just import, because it was a simple thing to import. But now Dangote has changed that dynamics. So, I’m not worried about what is going to happen.

“As these players are playing, PIA will help regulate the market, or keep people honest as possible. So, that PIA will take years to get to the point where even the industrial operators understand it properly. But I believe that some people are taking advantage of it as it is today because it allows ad you can see that even when Dangote was being pushed to the corner. He says PIA protects me, and he showed where it protects him.

“So, the law is there. If you’re a player in that space, you can understand the law. And then, if you need to take somebody to court, take the person to court, and say, the law is there.I think that’s the advantage it gives you at the end of the day.”

Meanwhile, the HBSAN president hinted that the association was planning to convene a dialogue next year, aimed at spotlighting and proffering solutions to the challenges emanating from the ongoing banking industry’s fundraising and restructuring process.

In addition, he revealed that the body would also be signing an agreement with the Enterprise Development Centre (EDC) to enable its members to offer mentorship to young businesses in Nigeria to help catalyse their growth.