Tag: Nigeria

Ifeanyi Onuba

Since the commencement of the Petroleum Industry Act in 2021, the Nigerian oil and gas industry has undergone significant transformation. The PIA passed by the National Assembly was signed into law by former President Muhammadu Buhari. It is one of the most audacious attempts to overhaul the petroleum sector in Nigeria.

The Act provides a legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry. Despite being a major source of revenue, the oil sector before the passage of the law had lagged behind other sectors in terms of Gross Domestic Product contribution. It is on this basis that the PIA was formulated to help facilitate Nigeria’s economic development by attracting and creating investment opportunities for local and international investors.

The PIA also created specific institutions to drive the operations of Nigeria’s petroleum sector. One of the regulatory institutions created by the PIA is the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Since the commencement of the Act, the NUPRC under the leadership of the Chief Executive, Engr Gbenga Komolafe, has taken up the statutory responsibility of ensuring compliance with petroleum laws, regulations and guidelines in the upstream oil and gas sector. The discharge of these responsibilities involves monitoring operations at drilling sites, producing wells, production platforms and flow stations, crude oil export terminals, and all pipelines carrying crude oil, and natural gas, among others.

The new dynamics in the global energy arena necessitated that Nigeria, a country that has long depended on the exploitation of oil and gas as the mainstay of its economy, re-examine its strategy to secure a blossoming energy future while meeting the global climate goals.

This is why the legal, governance, fiscal and regulatory frameworks provided in the Petroleum Industry Act, 2021 (PIA), amongst several objectives, are aimed at promoting transparency, efficiency, and innovation for the sustainable development of Nigeria’s hydrocarbon resources as well as meet the global environmental sustainability goals.

As a country, Nigeria boasts 36.966 billion barrels of oil which ranks her second in Africa, 8th in OPEC and 11th in the World. Nigeria is also richly endowed with 208.83 trillion cubic feet of natural gas reserves with an upside potential estimated at 600 TCF. Aside from the hydrocarbon potentials, Nigeria is blessed with potentials for green and blue hydrogen, solar, wind, biomass and other sources of renewable energy to leverage for the right energy mix in the energy transition regime, as well as critical minerals such as lithium, manganese, copper, graphite and nickel for development of clean energy technologies.

Indeed, Nigeria’s potentials are derived from its human, natural and material resources which must be mobilized to propel her on a path of economic growth and development and for her sustainable energy future. Unfortunately, in the years preceding the enactment of the PIA (2021), investments in the Nigerian oil and gas industry declined mostly due to regulatory uncertainty, de-funding of fossil fuel development occasioned by energy transition and the global call for decarbonization.

However, the Commission under the leadership of Komolafe is charting a new course in the upstream petroleum sector through its 10-year Strategic Plan (2023-2033) unveiled in May 2023. This is being implemented through the forward-thinking technically and commercially viable priority regulations developed so far to support energy security and drive emissions reductions pursuant to the PIA.

As the government navigates through the complexities of the global energy transition, the future that the NUPRC foresees for the Nigerian petroleum industry is one that should promote the utilization of the country’s hydrocarbon resources for shared prosperity, energy accessibility, affordability, sustainability, security as well as energy independence and energy sovereignty.

These are the underlying goals upon which the federal government declared natural gas its immediate transition fuel and designed the ‘Decade of Gas’ programme. At the heart of this programme is the vision to ensure that gas plays a role in lifting Nigeria from the challenges that confront the country to drive sustainable development.

A recent study has revealed that growth in gas demand outstrips supply. Between 2020 and 2030, demand is expected to grow exponentially at a compound annual growth rate of 16.6 per cent per annum. This is why the NUPRC is proactively pivoting the industry to close the supply gap as natural gas production is projected to increase from 8 billion cubic feet per day in 2020 to 12.2 bcfd in 2030 driven by major projects such as NLNG Train 7 & Train 8, Nigeria/Morocco pipeline, Ajaokuta-Kaduna-Kano (AKK) Natural Gas Pipeline Project, and so many other gas projects.

The import of this is to showcase the huge opportunities in the gas business for both the existing investors and new entrants in the Nigerian upstream gas sector. Further investment opportunities have been created through the intensified efforts of the NUPRC towards eliminating flared gas, methane abatement and reduction of fugitive gas emissions.

As part of the efforts to deepen our gas market and ensure decarbonization of upstream operations, the Commission recently awarded 49 flare sites to successful bidders for flare gas commercialization through the Nigerian Gas Flare Commercialization Program (NGFCP).

Through this initiative, more gas is being made available for domestic utilization as Liquefied Petroleum Gas (LPG), feedstock for power generation plants, fertilizer plants, petrochemicals and export.

Further investment opportunities are also available in the licencing rounds by the NUPRC, which would be conducted more frequently in line with the provisions of the PIA and the relevant Regulations.

In addition, there are also huge opportunities in Seismic acquisition on a multiclient basis, and development of deeper hydrocarbon opportunities as there are also business prospects in the carbon-pricing system currently being stewarded by the Commission. Each of these areas provides a unique entry point for willing investors.

In the area of the implementation of the Host Communities Development Trust (HCDT) which is a provision of the PIA, the NUPRC, under the leadership of Komolafe, has restored confidence and created social inclusion for the host communities by the operators.

It is in this regard, that the Commission, in carrying out its oversight roles, has registered a total of 103 HCDTs, and has deployed an intelligent digital, platform for reporting, monitoring and ensuring transparent administration of the HCDTs for sustainable operations in the Nigerian communities.

Also, the Commission has worked assiduously to reposition the upstream oil and gas industry in Nigeria through a Strategic Plan that aligns with the mandate of the PIA. The NUPRC is also not resting on its oars as it had, in furtherance of the strategic plan, undertaken regulatory activities, and implemented strategic initiatives articulated in the NUPRC Regulatory Action Plan (RAP) for 2024 and the Near Term. The RAP is centred around ensuring regulatory certainty and predictability, vacating entry barriers, promoting global competitiveness, deepening transparency and accountability, value creation and monitoring, hosting community and environmental sustainability, and accelerating field developments.

The commission is also fostering a resilient and sustainable upstream oil and gas industry in Nigeria through effective collaborations with industry stakeholders while focusing on 24 cardinal areas of the RAP benchmarked against international best practices.

Despite the challenges posed by the climate calls, the NUPRC has been leveraging sustainability mandates in the Petroleum Industry Act (2021) as well as its generous fiscal incentives which include: zero hydrocarbon tax for deep water developments, reduced royalty rates based on production and terrains, and tax consolidation provisions amongst others.

With the global momentum toward renewable energy sources and the call for the phase-out of fossil fuel gaining traction, the NUPRC has been deploying best practices and technology to ensure strategic and responsible utilization of the vast natural resources for the benefit of all Nigerians and the global community.

Onuba, a Chartered Accountant wrote in from Abuja

NUPRC: Fostering A Resilient, Sustainable Upstream Oil & Gas Industry Through Sound Regulation is first published on The Whistler Newspaper

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Nigerian corporate influence and that of the West continue to collide. The rationale is straightforward: whereas corporate activity in Europe and America is part of their larger local and foreign policy engagement, privately owned enterprises in Nigeria or commercial interests are not part of Nigeria’s foreign policy ecosystem, neither is there a strong culture of government support for privately owned enterprises’ expansion locally and internationally.

Nigerian firms’ competitiveness on a global scale can only be enhanced by the support of the Nigerian government.  It is evident that relationship between Nigerian businesses  and foreign policy is important to the national interest. When backing domestic Nigerian companies to compete on a worldwide scale, the government should see it as a lever to drive foreign policy, national strategic interest, promote trade, enhance national security considerations, minimize distortion in the domestic market as the foreign airlines were doing, boost GDP, create employment opportunities, and optimize corporate returns for the firms.

For example, the South Korean mega conglomerates within the chaebols corporate structure, such as Samsung, Daewoo, SK Group, LG, and others, have become globally recognizable brands thanks to the backing of the South Korean government. For Chaebol to succeed, strong collaboration with the government has been essential. Also, in telecommunications, Huawei would only be such a well-known brand worldwide with the backing of the Chinese government. The opposite is the case with Nigeria.

Admitted nations do not always interfere directly in their companies’ business and commercial dealings, and there are always exceptions. I can cite two areas of exception: military sales by companies because of their strategic implications and are, therefore, part of foreign and diplomatic policy and processes. The second is where the products or routes of a company have implications for foreign policy. Air Peace falls into the second category in the Lagos – London route.

Two events demonstrate an emerging trend that, if not checked, will disincentivize Nigerian firms from competing in the global marketplace. There are other notable examples, but I am using these two examples because they are very recent and ongoing, and they are typological representations of the need for Nigerian government backing and support for local companies that are playing  in a very competitive international  market dominated by big foreign companies whose governments are using all forms of foreign policies and diplomacy to support and sustain.

The first is Airpeace. It is the only Nigerian-owned aviation company playing globally and checkmating the dominance of foreign airlines. The most recent advance is the commencement of flights on the Lagos – London route. In Nigeria, foreign airlines are well-established and accustomed to a lack of rivalry, yet a free-market economy depends on the existence of competition. Nigeria has significantly larger airline profits per passenger than other comparable African nations.

Insufficient competition has resulted in high ticket costs and poor service quality. It is precisely this jinx that Airpeace is attempting to break. On March 30, 2024, Air Peace reciprocated the lopsided Bilateral Air Service Agreement (BASA) between Nigeria and the United Kingdom when the local airline began direct flight operations from Lagos to Gatwick Airport in London. This elicited several reactions from foreign airlines backed by their various sovereigns because of their strategic interest.

A critical response is the commencement of a price war. Before the Airpeace entry, the price of international flight tickets on the Lagos-London route had soared to as much as N3.5 million for the  economy ticket. However, after Airpeace introduced a return economy class ticket priced at N1.2 million, foreign carriers like British Airways, Virgin Atlantic, and Qatar Airways reduced their fares significantly to remain competitive.

In a price war, there is little the government can do. In an open-market competitive situation such as this, our government must not act in a manner that suggests it is antagonistic to foreign players and competitors. There must be an appearance of a level playing field. However, the government owes Airpeace protection against foreign competitors backed by their home governments.

This is in the overall interest of the Nigerian consumer of goods and services. Competition history in the airspace works where the Consumer Protection Authority in the host country is active. This is almost absent in Nigeria and it is a reason why foreign airlines have been arbitrary in pricing their tickets. Nigerian consumers are often at the mercy of these foreign firms who lack any vista of patriotism and are more inclined to protect the national interest of their governments and countries.

It would not be too much to expect Nigerian companies playing globally to benefit from the protection of the Nigerian government to limit influence peddling by foreign-owned companies. The success of Airpeace should enable a more competitive and sustainable market, allowing domestic players to grow their network and propel Nigeria to the forefront of international aviation.

The second is Proforce, a Nigerian-owned military hardware manufacturing firm active in Rwanda, Chad, Mali, Ghana, Niger, Burkina Faso, and South Sudan. Despite the growing capacity of Proforce in military hardware manufacturing, Nigeria entered two lopsided arrangements with two UAE firms to supply military equipment worth billions of dollars , respectively. Both deals are backed by the UAE government but executed by UAE firms. These deals on a more extensive web are not unconnected with UAE’s national strategic interest. In pursuit of its strategic national interest, India is pushing Indian firms to supply military equipment to Nigeria.

The Nigerian defence equipment market has seen weaker indigenous competitors driven out due to the combination of local manufacturers’ lack of competitive capacity and government patronage of Asian, European, and US firms in the defence equipment manufacturing sector. This is a misnomer and needs to be corrected. Not only should our government be the primary customer of this firm if its products meet international standards, but it should also support and protect it from the harsh competitive realities of a challenging but strategic market directly linked to our national military procurement ecosystem.

The ability to produce military hardware locally is significant to our defence strategy. This firm and similar companies playing in this strategic defence area must be considered strategic and have a considerable place in Nigeria’s foreign policy calculations. Protecting Nigeria’s interests is the primary reason for our engagement in global diplomacy. The government must deliberately balance national interest with capacity and competence in military hardware purchases. It will not be too much to ask these foreign firms to partner with local companies so we can embed the technology transfer advantages.

Increasingly, other companies, especially in the banking and fintech sectors, are making giant strides in global competitiveness. Our government must create an environment that enables our local companies to compete globally and ply their trades in various countries. It should be part of the government’s overall economic, strategic growth agenda to identify areas or sectors in which Nigerian companies have a competitive advantage, especially in the sub-region and across Africa and support the companies in these sectors to advance and grow to dominate in  the African region with a view to competing globally. Government support in the form of incentives such as competitive grants ,tax credit for consumers ,low-interest capital, patronage, G2G business, operational support, and diplomatic lobbying, amongst others, will alter the competitive landscape. Governments  and key government agencies in the west retain the services of lobbying firms in pursuit of its strategic interest. 

Nigerian firms’ competitiveness on a global scale can only be enhanced by the support of the Nigerian government. Foreign policy interests should be a key driver of Nigerian trade agreements. How does the Nigerian government support private companies to grow and compete globally? Is it intentionally mapping out growth areas and creating opportunities for Nigerian firms to maximize their potential? Is the government at the domestic level removing bottlenecks and impediments to private company growth, allowing a level playing field for these companies to compete with international companies?

Why is the government patronising foreign firms against local firms if their products are of similar value? What was the rationale for flight tickets from Lagos to London costing N3.5M for the economy class just a few weeks ago only to come down to N1.3M with the entrance of Airpeace to the market? Why are Nigerian consumers left to the hands of international  companies in some sectors without the government actively supporting the growth of local firms to compete in those sectors? These questions merit honest answers. Nigerian national interest must be the driving factor for our foreign policies, which must cover the private sector, just as is the case with most developed countries. The new global capitalism is not a product of accident or chance; the government has choreographed and shaped it by using foreign policies to support and protect local firms competing globally. Nigeria must learn to do the same to build a strong economy with more jobs.

Disclaimer: This article is entirely the opinion of the writer and does not represent the views of The Whistler.

Air Peace, Capitalism, And National Interest is first published on The Whistler Newspaper

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