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Presidency Panel Reveals Over $56bn Lost To Subsidy, Oil Theft

According to the Energy and Natural Resources subcommittees of the Advisory Council of President Bola Tinubu, Nigeria incurred a loss of $46.16 billion due to crude oil theft from 2009 to 2020. Additionally, the country suffered an annual loss of $10.7 billion as a result of subsidies on Premium Motor Spirit (petrol), also known as PMS. These figures were disclosed in the Policy Advisory Council Report, dated May 2023, which was prepared during Tinubu’s presidency-elect. Combining the losses from oil theft and subsidy, Nigeria’s total loss amounted to $56.86 billion. The report also highlighted that the absence of the Petroleum Industry Act resulted in a loss of $70 billion in investments in the petroleum industry since 2011. The Petroleum Industry Act was eventually signed into law by former President Muhammadu Buhari after years of being a bill in the National Assembly. Furthermore, the report emphasized that Nigeria’s revenue to Gross Domestic Product (GDP) ratio was among the five lowest in the world, standing at seven percent. Insecurity was identified as a major challenge in the sector, contributing to the significant financial losses incurred.

It read in part, “Insecurity is a major sector challenge. $46.16bn was lost to crude oil theft between 2009 and 2020. $10.70bn lost annually to PMS subsidy and inefficiencies associated with the purchase, distribution, and sale of PMS.

“Governance and regulatory concerns have eroded investor confidence, diverting private capital needed for the development of critical oil and gas infrastructure.

“Cumulatively, these have reduced the energy sector contribution to economic growth and deprived citizens of the necessary infrastructure and social amenities required for improving living standards.”

The council outlined some targets to be pursued by the President between 0 to 100 days, adding that there was a need to unify exchange rate window, reorganise the Nigeria Upstream Petroleum Regulatory Commission/Nigeria Midstream and Downstream Petroleum Regulatory Authority.

It said the reorganisation of the agencies would be to deliver set milestone goals, adding that there was a need to headhunt/place capable resources in critical positions.

“Head-hunt competent, tested, reform-focused leaders in NNPCL (Nigerian National Petroleum Company Limited), ensuring its function as commercial entity per PIA (Petroleum Industry Act); paying taxes, royalties and profit to Federation Account and properly regulated by NUPRC/NMDPRA/NCDMB.

“Deregulate PMS pricing and implement Federal Direct Cash Transfer Programme. Signal determination to end insecurity in oil producing states (Imo, Delta, Ondo, Rivers, Bayelsa, Akwa-Ibom) by engaging key political and community stakeholders

“Reform the operations of the military task force with clearly defined KPIs (Key Performance Indicators) and consequent management to tackle deficiencies. Improve financing, agree on cash call arrears and debt repayment framework. Transition to market prices for gas,” the report stated.

As part of the recommended actions to be carried out within a span of 18 to 24 months, the council urged the President to instruct the NNPCL (Nigerian National Petroleum Corporation Limited) and NUPRC/NMDPRA (National Upstream Petroleum Regulatory Commission/National Midstream and Downstream Petroleum Regulatory Authority) to resolve pending divestments and contractual matters to ensure clear project delivery.

“Strip NNPCL of policy making roles and keep NCDMB within its Act mandate. Consider integrating NUPRC, NMDPRA, and NCDMB into a single regulator or include all midstream activities into NUPRC scope.”

The council called for the expansion of domestic gas reserves and the promotion of the development of a diversified oil and gas industry by implementing reforms in the PIA including “network code.”

The council’s advice to the President included the need to establish a viable financial model and establish a framework for third-party gas pricing in the export market. They recommended that the President implement fiscal measures, through the Finance Act, to support the natural gas sector and deepwater projects. Additionally, they suggested expanding the stabilisation provisions within the Petroleum Industry Act (PIA) to include comprehensive credit coverage for levies and taxes after the final investment decision (FID) is made.

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