Nigeria’s president-elect Muhammadu Buhari’s priorities for the oil sector may be focused on ending corruption and reforming the opaque national oil company as opposed to fiscal-related issues, All Progressives Congress (APC) sources have confirmed to Reuters.
Senator Bukola Saraki, whose APC party controls both houses of parliament after a landslide win, told Reuters; “We need to address the structural issues and leave the fiscal for now”. “A more transparent NNPC (Nigeria National Petroleum Corporation) is needed with reasonable accounting,” he said.
APC leader Bola Tinubu, whose support was instrumental in Buhari’s victory and wields huge influence also told Reuters; “No way will we discuss that now”.
Buhari owes his March 28 victory against incumbent Goodluck Jonathan partly to a perception that Jonathan allowed corruption to get out of control — especially in the oil sector. A string of multibillion-dollar oil corruption scandals tainted the NNPC and other bodies that handle energy.
However, the fact that the issue of fiscal terms, seen as crucial by the industry, will have to wait on current thinking about oil and gas policies for Africa’s leading producer, is worrisome for some industry stakeholders.
Crude output has stagnated close to 2 million barrels per day over the past few years, owing partly to underinvestment arising from uncertainty over fiscal terms in the Petroleum Industry Bill (PIB) which was redrafted in 2012 and which has been delayed in the National Assembly for a decade.
The main concern for the oil companies here is tax. The Bill proposes a 20 percent tax on offshore projects and 50 percent for onshore. Shell, Exxon and other majors had all complained publicly that the terms are unfair, given the risk associated with operating in Nigeria.
“The worry is that there’s going to be a lot of time wasted in witch-hunting…That could take a year in which nothing else will happen,” said a Nigerian investment banker focused on upstream oil and gas projects, who declined to be named.
APC sources say the new administration will first sack and replace the top management of the state oil company, then it will review its accounts to restore credibility. It is also likely a Bill will be drafted to break the NNPC into four entities, as already prescribed in the latest PIB draft. But it will also, crucially, remove the oil minister from the NNPC’s board of directors to curb political interference, one APC source said. Another parliamentary APC source said the Bill could be submitted to the National Assembly in the first quarter of next year.