- Nigeria’s oil crisis has steadily grown over the past few months. Today, Nigeria’s crude oil sector has become more of a liability.
- Traffickers have worked with corrupt officials have established an illegal oil pipeline running through the Niger River Deltar.
- President Tinubu plans to remove all policy or procedural bottlenecks that aid corruption and theft in the oil sector.
Nigeria has one of the fastest-growing industries compared to most of its peers in West Africa. Its diverse economy and adaptive governments have led to numerous markets. As a result, this West African country houses five out of eleven unicorn startups registered in Africa.
Despite its advancements within the Fourth Industrial Revolution, Nigeria has forsaken several core economic activities that have driven its progress for years. For instance, Nigeria’s petroleum industry, a primary economic activity within the region, has recently faced numerous hurdles. Nigeria’s oil crisis has steadily grown over the past few months. Today, Nigeria’s crude oil sector has become more of a liability if this trend continues.
Nigeria’s petroleum industry woes
Nigeria’s Petroleum industry has recently faced significant hurdles, despite the efforts of its government to revive it. 2023 was a vital year for the West African country due to its elections and the release of a newly designed currency. Amid this crisis, Nigeria’s oil crisis became the icing on this disastrous cake. Nigeria once held the crown as Africa’s largest oil producer but it is now stuck with imports.
Unfortunately, given the nation’s current state, its petroleum industry cannot meet its domestic needs. Initially, this served to ensure that other sectors of the country were unaffected. However, this later resulted in a debt of $3 billion with creditors, according to the African Institute for Economic Development and Planning. The lack of proper refining infrastructure has limited the capacity of Nigeria’s Petroleum industry, forcing low production of diesel, gasoline and other oil derivatives.
To further Nigeria’s oil industry, the region has struggled with oil theft in the Niger Delta Warriors. The low domestic production rate has driven the military group, Creek Reform Warriors, to vandalize, steal and confiscate crucial crude infrastructure. According to reports, Nigeria’s Petroleum industry’s revenue has declined by 66% to 11 billion. This represents an astronomic decline since by the end of 2022, Nigeria’s Oil revenue was at $34 billion.
Alas, this unpunished theft of thousands of barrels per day has lasted for nearly ten years. Traffickers have worked with corrupt officials to establish an illegal oil pipeline running through the Niger River Deltar. The pipe was more than 4 kilometres and drove gallons of oil to tankers docked on the coast of the Atlantic Ocean.
Among its agendas is to sanction six-month contracts without labour rights, which currently subcontracts the employees in Nigeria’s Petroleum Industry. Despite their efforts, the socioeconomic and political damage is significant. The illusion that Nigeria still benefits from being Africa’s largest oil producer has shattered.
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Hope for Nigeria’s Petroleum Industry
Despite its current tragedy, the Nigerian government has fought tooth and nail to ensure its oil crisis is averted. Back in 2021, former President Muhammadu Buhari enacted the Petroleum Industry Act. The PIA was a Bill offering a new framework for the industry.
It would address the employee’s and organizations’ partnerships associated with Nigeria’s Petroleum Industry. Unfortunately, in two years, the effects of the PIA are either in progress or forsaken. The numerous thefts, corruption and illegalities surrounding the industry made it impossible to implement the PIA.
Fortunately, newly elected Bola Ahmed Tinubu has expressed a different opinion. In July 2023, President Tinubu received the Shell Petroleum Development Company in Abuja and assured the nation that the vision of the PIA was still alive.
Despite this zealous approach, history is doomed to repeat itself, unless Tinubu offers an alternative approach. The combined security efforts of both the Nigerian military forces and several government agencies can address the missing millions of litres of petroleum products.
This deals with the dire oil crisis at hand, saving substantial revenue for the crude oil sectors. Unfortunately, this does not address the downward trend of its portion rate. The main cog in Nigeria’s oil crisis is its lack of proper infrastructure.
If the industry cannot meet the quota for its importers, Nigeria’s Petroleum Industry is prone to fail. Efforts to overhaul the crude oil sector date as back as 2000. At the time, Obasango’s administration inaugurated the Oil and Gas Reform Implementation Committee. The PIA was still no more than a draft that would set the pace for the country’s economic development.
Fortunately, reforms have been implemented, like the transition of the Nigerian National Petroleum Company to the NNPC Limited. This move was among the many reforms outlined in the PIA.
The NNPC limited became free from the Federal Executive Council oversight, opening more opportunities for Nigeria’s Petroleum Industry. In addition, it became more public-facing with a stock market listing and faced competition from other state-owned petroleum companies. The new NNPC limited has engaged in several renegotiations of the production-sharing contract tied to the deep-water blocks. Fortunately, there was able to successfully settle the dispute that raged for more than a decade.
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To salvage Nigeria’s oil crisis, old reforms must be discarded
The PIA has done little to change the current trajectory of Nigeria’s petrol industry. With its documentation, the PIA outlined several reforms, if implemented, that could turn this crisis into an opportunity. However, the years of failure have made the PIA a failed project, and its government must establish new policies to ensure growth.
The Petroleum Industry Bill is considered the net iteration of the PIA. The PIA has several limitations causing its steady implementation, but the PIB sets the pace for genuine change.
To transform Nigeria’s Petroleum Industry, President Tinubu and his administrations have understood that to change the oil crisis overnight is nothing short of impossible. As a result, the Policy Advisory Council released a report covering the agenda for the first 100 days to set a pace for a brighter future.
The document explained how Nigeria’s Petroleum industry can achieve a sustainable production rate of 4mmbpd of oil and 12 billion cubic feet per day for natural gas. President Tinubu intends to recruit and replace corrupt officials that have consistently prolonged Nigeria’s oil crisis.
Furthermore, the West African country has sought aid from its peers in other international organizations. Acquiring the proper infrastructure requires massive capital the government cannot afford. Angola proved the practicability of this approach as it outpaced Nigeria in oil production through the intervention of international organizations like Azule Energy and Italy’s Eni.
Nigeria’s Petroleum Company has massive potential if it can address its insecurity and poor infrastructure. Currently, Nigeria’s Oil Crisis is significantly underutilizing the nation’s production rate. If President Tuinubu can acquire and achieve his agenda, Nigeria may regain its title as Africa’s largest oil producer.
