It is clear that Nigeria's Petroleum Minister, Dr Emmanuel Ibe Kachikwu is a man undeterred by adversity. But what sets him apart is that, in spite of his bold ambitions for the oil sector, he is under no illusions about the scale of the challenge.
That challenge is being explored in detail this week, where the Nigeria Oil and Gas Forum (NOG) is meeting for the first time in nearly two years. We have heard encouraging contributions by participants in both the business and regulatory spheres, but today all eyes were on Dr Kachikwu as he delivered his keynote address to the largest gathering of oil and gas exhibitors in Africa.
Speaking to a capacity crowd in Abuja, Dr Kachikwu laid out his much-anticipated vision for the sector. Moving fluidly across subjects specific and general, the Petroleum Minister covered immediate needs, like a fiscal regime that promotes investment, competitiveness and cost efficiency, alongside broader reforms like the fast-tracking of private-sector led downstream infrastructure development and full deregulation of that market competition for greater competition and efficiency.
Looking back over the progress the Buhari government has made in the sector, Dr Kachikwu rightly celebrated successful efforts to counter militant vandalism, which in 2016 brought Nigeria's oil output to a debilitating 1.3 million barrels per day, a fraction off the lowest level ever witnessed. I have experienced first-hand the militant violence that wreaks havoc in the communities in which our businesses operate and I know from personal experience its particularly disruptive effect on production that threatens to bring Nigeria to its knees. Yet government action has brought real progress, tempered with the knowledge that there is still more to do to encourage peace and economic prosperity in the Niger Delta.
Of greatest note, however, this keynote speech bore all the hallmarks of a shift in approach to governance in the oil sector: moving away from oil as a source of income to oil as a fuel for economic growth. This is not just a welcome change for the oil sector, it is a breath of fresh air that could spell liberation for the entire country. New legislation for the petroleum industry must see oil companies not just as a vital source of government revenue, but as a means to grow the economy. But what does this look like in practice? Legislation must be seen to focus on competition, and the creation of a stable business environment for each stage of the supply chain, including downstream infrastructure. Nigeria also needs an up-to-date, fair and transparent regulatory regime – including the bidding process for licences and leases – and clarity over taxation rules in the upstream sector, so that businesses can make investment decisions with confidence.
If good management of the oil sector becomes a reality, as all watching this week's conference will surely hope, it will be to the benefit of the circular economy of Nigeria as a whole; not just those with a stake in the energy sector. In particular, we hope to see job creation at all stages of the production supply chain, creating a new generation of home-grown executives who can lead the sector in decades to come. Energy sustainability must start with the development of expertise and experience to carry the mantle. Growth of this sort will create a ripple effect in a great many other sectors in need of rejuvenation: telecommunications, transport, infrastructure, finance and professional services, to name just a few.
Taking a step back from the welcome ambitions expressed by Dr Kachikwu for a moment, we should not lose sight of the fact that the recovery of our prized oil sector requires a holistic approach; seeing the sector's place in the national economy as a whole. And it is here where the most immediate stumbling block lies: Nigeria's foreign exchange rate challenges. It is an issue that my colleague Dr. Ransome Owan, Group Managing Director of Aiteo, addressed in his own speech to Conference, summarising the FX situation perfectly: “The issues of forex should be addressed so that those bringing their foreign exchange into the country can access the forex when they decide to move to other countries for investment.”
Investors need to know that when they put their money into Nigeria, they are not locking it up and throwing away the key. Enabling access to other currency, through a foreign exchange market in which supply freely responds to demand, is crucial to Nigeria's recovery. As well as an encouraging signal to investors abroad, it grants permission to domestic companies to grow enterprises in Nigeria and truly build a platform from which they may explore Pan-African opportunities for expansion.
Contrary to some international reports of opacity and stagnation, seeing these views put forward and debated in an open forum is a sign of the maturity of the oil sector in Nigeria. Politicians and businesspeople both know that progress is something to be earned, not bought, and part of this is an admission of the challenges.
But the test of any such discussion is the outcome and the change it affects. To this end, we await to see the recommendations emerging from NOG 2017 – ambitious in scope, no doubt, but laying out our challenges for all to see, as a sign of our determination to overcome them. The world watches at this pivotal time for the oil market globally and for Nigeria, as it reasserts its grip on its own place in the international sector and attempts to fend off recession at home.
The 16th Nigeria Oil and Gas (NOG) Conference and Exhibition and Nigeria Power Forum takes place between February 27 – March 2 at the International Conference Centre (ICC), Abuja.
Benedict Peters the CEO and Vice President of Aiteo Group, an integrated energy group involved in exploration, production, refining and supply.
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