Opportunities, investment strategies for developing Nigeria’s fossil fuels

By Sunny Chuba Nwachukwu, PhD

The Petroleum Industry Bill that was cleared by the National Assembly, and signed into law on 16th of August 2021, as the Petroleum Industry Act (PIA) 2021, after a prolonged stay at the National Assembly since 2009, represents the crossing of the first hurdle towards the economic emancipation of the country. It is so observed because the sector has been the key source of revenue and foreign exchange for the country (generating about 95 percent of the country’s foreign exchange earnings for decades).

This clearly distinguishes the oil and gas industry, as a critical enabler and a significant supporter and pillar of the economy, that keeps contributing to its future growth and development. The overhaul of the sector by the PIA (still counting), on 19th of September 2021, led to the appointments of the management and the constitution of a board for the country’s oil company (a state-oil firm, NNPC, to be incorporated within six months), with Ifeanyi Ararume as the chairman.

Oil companies and SMEs (average business people) operating in the downstream should be encouraged to leverage the series of concessions provided for investment at their various respective levels for fossil fuel development. These business entities are urged not to be deterred or be alarmed whatsoever, by any provision therein, as contained in the fears being expressed by major fuel marketers and other close observers and industry watchers; against a probable effective monopoly on fuel sales in the country, by any single operator in the industry. Competitive participation in the oil industry would definitely take place, through redistribution of income (wealth), once the regulatory authority discharges its obligatory duty, as enacted by the PIA, responsibly.

There are so many windows of opportunities for various industry players to be keyed into for financial benefits (in creating wealth), derived from a competitive open market economy so provided as public goods and services. These openings are maintained under an umbrella as governance obligatory functions, for thriving businesses to always be sustainable.

The newly created regulatory Commission (for upstream activities), and the Authority (for midstream & downstream operations) as enacted by law and contained in the PIA, fully gives room for all operations to be run as businesses for profit making. The PIA has also automatically reshaped the organisational structures of both regulatory bodies controlling the oil and gas industry. The Department of Petroleum Resources (DPR) and the Petroleum Pump Pricing Regulatory Authority (PPPRA), are now appearing with new nomenclatures, management teams and board.

However, it has to be recognised that fossil fuels now face rising challenges (including decline in demand), as a result of the innovative energy solutions currently trending as cleaner, renewable energy sources, vis-a-vis nuclear, wind, hydro and solar. The ‘climate change’ impact is being tackled globally through multilateral policies and agreements. These are constantly and seriously seeking for a robust management formula that would effectively contain environmental challenges like global warming caused by greenhouse gas/carbon emissions (GHG), in diverse shades and dimensions (including health and sustainability).

This aspect of social needs and environmental responsibilities for good governance from nations all over the world, throws open an opportunity for Nigeria to exploit economically (as a matter of urgency); and be emancipated from her present economic doldrum!

This can seriously be achieved by actualising the economic growth factors available in the industry. They are identified as current enablers in the contents of the PIA, to freely avail the private sector the chances of getting innovative solutions for faster growth of the country’s economy.

On this particular aspect, the investment strategies for fossil fuels development should not be left in the old mode of ‘business as usual’. It should open the nation to evolve transformative processes through an initiative with properly researched creative ideas that would move the economy forward, and reasonably affect both the nation’s microeconomic and macroeconomic fabrics.

The new trend should usher in a new economic order for the nation, in terms of exploits made in homegrown technique, to shift from the regular orthodox mode of operation that is highly expensive, and realise an indigenous productive process, technically.

This brings up the thought that we must, as a nation develop a homegrown, content-driven local refining technology, and patent it for other nations to key into (by patronising us), as a Nigerian made ‘capital goods’ for export.

The rich deposits of fossil fuels (especially in the oil and gas sector) ought to be critically looked into (as idle capital stock that must be transformed) through serious development research works in the relevant institutions and the recently created Authority, that will handle the downstream operations. Shifting from the old expensive trend of regular method of petroleum refining, the focus now needs to centre on ‘local refining techniques’ with invention of indigenous technology that can accommodate the teeming small private operators and business people (the SMEs) that are ready to invest in local refineries tailored to match our own subsistence economy, to serve our huge local market (i. e. inward integration, even moving beyond the overdue import substitution policy for the oil industry). Through a well instituted research and development centre, these smaller units of investors entering into the hydrocarbon business could be trained for production of scientifically and globally accepted standard refined petroleum products that will automatically shrink petroleum imports that has impoverished Nigeria’s economy (rated as the world’s poverty capital due to low GDP/poor productivity).

This message needs to seriously sink into the ears of those placed to man the oil and gas sector, as time is fast running out from full optimal utilisation of the country’s rich oil and gas reserves, up to the next four to five decades.

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Sunny Nwachukwu, PhD, a pure and applied chemist with an MBA  in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce. He can be reached on +234 803 318 2105 (text only) or schubltd@yahoo.com

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