Two important victories for Nigeria’s oil sector

Recently, the Presidential Transition Committee, led by Ahmed Joda, recommended the Buhari administration carry out a comprehensive audit of all Offshore Processing Agreements (OPA) and Crude Oil Swap deals put forth by the Nigerian National Petroleum Corporation (NNPC).

President Buhari has granted licenses to 65 Nigerian companies to construct modular refineries. The companies selected, who were subjected to screening applications, are expected to set up mini-refineries with capacities ranging from 1,000 to 10,000 barrels per day, which can be assembled and separated easily for enhanced performance and efficiency. The licenses in question consist of the License to Establish (LTE), Approval to Construct (ATC) and the License to Operate (LTO).

Since President Buhari took office, the NNPC has continuously implemented policies that reflect a change in the status quo. Most recent, is the reduction in the number of crude oil lifters in the country from 43 to 16. NNPC cited transparency and probity as reasons for the new policy. The corporation has received an endorsement from the United States of America for recent reforms.

Buhari, who marked 100 days in office as President yesterday, has also approved the cancellation of oil swap deals that were initiated by the Goodluck Jonathan administration. The deals were designed to supply petroleum products for crude oil refining to cushion the negative impact of continued reliance on imports domestic consumption. The reason behind the cancellation however, is to objectively review and re-evaluate the contracts in a way that would help restructure the terms to be more favorable to the average Nigerian citizen.

NNPC under the Jonathan administration

Earlier this year, the Emir of Kano and former governor of Nigeria’s Central Bank, Sanusi Lamido Sanusi, mentioned ongoing corruption in the oil sector during his interview with CNN’s Christine Amanpour. The scandal surrounding a missing $20 billion from NNPC accounts was a major controversy that rocked the administration. Questions were asked and accusations were made. In response, Jonathan’s administration, requested a forensic audit, which was carried out by Price Waterhouse Coopers (PwC) but the report came out inconclusive.

“President Buhari’s policy in the oil sector so far has concentrated on reforming the sector and plugging holes to minimize leakages. The oil sector has not only performed poorly in the last three decades due to mismanagement, but has been a drain on Nigeria’s development”, said Mr. Ifediora Amobi, a policy analyst of the African Heritage Institution, in a chat with Ventures.

“The new policies are meant to reform the sector to make it profitable for the common man. The reduction of oil marketers will also ensure better management of Nigeria’s oil contracts for maximum effectiveness. He further stated. Even while the policies are put in place, we must explore other channels for Nigeria’s crude, due to the oil price fall. Buhari and the NNPC GMD, Dr. Ibe Kachikwu have both displayed a high level of zeal in recent times, this may yield positive outcomes in the sector”, he concluded.

However, the NNPC must take note

The obvious changes that are ongoing in the corporation could all be a step in the right direction, but all the parties involved need to employ the use of observation techniques for the crude market. The existing oil marketers and the industry operators to be selected in the future, need to stand out. Implementing good policies are not the only way to ensure transparency, the need of the NNPC to be involved in all activities of the industry players are also essential.

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