My advice to President Tinubu on the oil sector – Ibe Kachikwu

Ibe Kachikwu

Many things are happening in the oil sector. The refineries are under repairs, subsidy is gone, Nigerian presidents and the position of oil minsiter and other issues. Prof. Ibe Kachikwu, a former Nigerian Minister of State for Petroleum Resources, and former Group Managing Director of the Nigerian National Petroleum Corporation,  recently spoke these and other issues.

Since the removal of fuel subsidy, the personal economy of a majority of Nigerians, has taken a very bad hit. Do you think the pump price of fuel wouldn’t have been this high if the nation’s refineries were working? 

I believe despite the emotional issues associated with fuel subsidy removal that it is the right thing to do and was long overdue. You will recall that in 2016 against the usual popular opinion, I championed and executed the repricing of refined petroleum products and indeed as at then removed the subsidy.

The Nigerian populace were very accommodating of my steps then because it stopped the fuel shortages almost instantly and I never had that issue till I left my office. More important, it dramatically transformed the balance sheet of federal income returns and probably was the singular act that saved the country from the looming financial crises the Government faced in 2015.

However, we are here again because the price modulation policy that was part of the product repricing that we introduced ,that would have seen prices do a pendulum swing according to world crude pricing ,and the liberalisation of the importation of petroleum products away from the monopoly of NNPC that was to force price drop through competition, were not adhered to.

I think the subsidy removal policy of the current government is the right policy action. However, I would have counselled a co terminus and collective process that would have taken along sustainable palliatives along with the policy move. Our palliative approaches when this happened in 2016 were founded on three platforms.

One, focus on getting the refineries to work at all cost because that will ensure long term product delivery and stable pricing sustainability. In this it was and still will be important that government refineries are positioned to compete with private refineries and provide regulatory agencies with pricing data to check profiteering.

Two, liberalise the importation of refined product and allow NNPC compete with private sector for the supply and distribution market without any special preferences to NNPC that distorts the market. Three, provide soft palliatives through the established unions and associations that reach the truly subsidy impacted people. Where necessary, a fingerprinted or coupon model can be used at designated supervised  filling stations  for road transporters for a minimal period so there is transition softening.

Do you subscribe to views that direct powers should be delegated to the supervisory minister of petroleum resources and not held by the president? 

On this, my views are influenced by my private sector leaning. Understandably therefore I have a different view with politicians. First, let me say that the issue here is not one of legality but adequacy. The President under an executive presidency is entitled and empowered by the constitution and practice to structure the government whichever way he wants and believes reflects his own focus and concerns ,so If a President decides to be a minister of petroleum in addition it is his call.

But that is where that argument ends. If you take the moral and efficiency compass, I would not advice a President to hold both portfolios or for that matter that of any other ministry either. The President is the primus interpares and under an executive presidency the Omega of his government. Petroleum is simply a commodity and I believe the supreme focus given it so far has been the problem with the sector. It is not different from other commodities, agricultural produce, minerals, and services.

I believe that ultimately the President is the fulcrum of all powers and approvals and holding on to Petroleum ministerial portfolio does disservice to the authority he has.

First, it creates a distraction. Second, it prevents the on seat minister of state from being able to run the sector.

Three, it creates room for presidential favouritism for close associates and prevents a fair playing ground in the industry.

Four, it prevents the President from being the needed appellate point if a minister reaches a wrong decision. Five,it chases away genuine global investors who see alarm bells in those arrangement.

Finally, it creates sectoral rascality and the agency heads who need to report out through the minister of state with day-to-day oversight of the ministry, prefer to bypass that channel. Ultimately experience has shown in the many decades of Nigeria’s experimentation with this model that the power gets usurped by presidential senior aides as the President cannot have the time for this role nor the supervision of the Ministry that goes with it. Interestingly ,at the time I was invited to serve, I also pointed this out to my boss. In his own case his initial intent of protecting the Ministry and me from the intrusion of politicians ,since I held a dual portfolio then  was well intended. But it was later to become a major problem for the sector.

These are my personal views from many years of observation and participation but may not necessarily be a panacea for solution.

President Bola Tinubu, on assumption of office, had set up a committee to look into the issue of the petroleum industry regulators like the NMDPRA, NCDMB and NUPRC, with the possibility of merging them  as one regulatory body. What will be the implication of that option? 

I don’t want to comment on that because, to be honest with you, I have not seen the policy paper. One of the things I never do is just make sensational commentaries. I have not read the full policy statement to understand the objectives, so till I see it, I really cannot comment on that.

The NNPC has been privatised at the instance of the PIA, after it was initially unbundled during your time as minister. What do you see of the post-PIA NNPC, especially that some industry stakeholders still think the law contains certain inadequacies?

We – myself and my NNPC team – worked very hard towards the unbundling of NNPC. Under the said unbundling, the corporation was broken into new profit centres and the independent tracking of profit performance of each unit was emplaced. For example, PPMC was split into two departments; NGC was split into two; NPDC was made more independent with its own internal board; refineries were split into individual profit centres;head office overhang over the monetary control of units was restricted, and so on , and of course the monthly publishing of our corporate performance was introduced and remained till I left the position of GMD.

Of course, a lot of these dramatic changes many of which are still there today, thanks to my successors, were made possible by two factors. First was the magnanimity of President Buhari who whilst I was NNPC GMD, gave me a lot of latitude to push reforms and supported my wholesome speed in doing this. Second was that the President very unprecedentedly allowed me to hold the positions of GMD and Minister of State Petroleum Resources for the period of 9 months.

This merger of oversight and authority allowed fast paced and bold reforms. It paid handsome dividend as we published a first month of profit for the Organisation in May of 2016, shortly before I was relieved of the position of GMD and continued as Minister of state for Petroleum and Chairman of NNPC board.

Needless to say that the unbundling framework came out of the identification of the gaps and problems that were militating against the ability of NNPC to achieve its desired growth and performance trajectory. We called it the 20 fixes, representing the 20 focus areas and problem diagnostics that if handled would allow NNPC to reach its full potentials.

As to your second question relating to the PIA, let me say unequivocally that the passage of the Act was a milestone long overdue. Many experts before me worked on the multiple drafts and my team in the Ministry expended a lot of effort working with the various Senate committees under the Saraki led Senate to fine tune the final draft bill that was passed by that Assembly.

Unfortunately, that draft bill was rejected. An amended draft that made some changes to the rejected bill was then passed after I had ceased being the Minister of State and that draft was finally assented to by The President in 2021. In my speech at the NIPS conference in 2022, I gave kudos to my successor Timipre Sylvia for taking the law past the finish line. I joked then that he was a better politician than I was.

And truly so and he deserved the credit. Whilst the delays in passing the PIA lasted, I had done a book titled ‘Petroleum industry Bill; Getting To Yes’. I am following up with another book ‘Petroleum Industry Act; the missing link’, which should highlight the areas of the Act still needing a second look and possibly further amendment work by the National Assembly.

I can only say that my personal opinion was and still is that the earlier draft Bill which was not assented to by Mr. President was more revolutionary and would have addressed amongst many others the issue of NNPC’s supervisory control of JV assets, the organisational framework for the new NNPC Ltd and many more.

You championed the concept of collocation of refineries, suggesting that new refineries be licensed to be built around the existing ones to share facilities and make them viable. But eight years later, those refineries are still not functioning. How do you see this and what do you think is the way forward?

Like many people, I obviously feel frustrated that the refineries are not working. In my time, we did all we could but were limited by the politics of the moment. When we looked at the refineries, we started from the basics which was, how do we, without spending too much money ,get any of the refineries to offer partial production restart to help the then lingering fuel scarcity crises that we met upon assuming office?

For this, we charged NNPC skilful engineers to do their bit and they did, and Port Harcourt was streamed in December of 2015, with minimal expenditure and the work of internal NNPC team.

We also looked at what was the main handicap of Port Harcourt, which was crude oil delivery limitations in the absence of a functional sabotaged Escravos pipeline.

I cancelled the marine delivery of crude which was too expensive and convinced the contractor to direct his attention to reactivating the pipeline. He did a good job at his own cost and once the crude began to flow, he was then paid. This contractor now later turned out to be a very innovative and creative private sector contractor that was later to be patronized by my successors.

Our second approach was to seek foreign investors who were willing to invest in refinery revamp and management. Given the scandals associated with past TAMs, whether true or false, as I had no empirical data to judge, I decided to stay away from using further government funds for the rehabilitation of the refineries. We got positive pledges from China and Saudi Arabia, but these were not approved.

The problem usually is the rather emotional but illogical patrimony protectionism of many that keeps the refineries hostage. The fear each time that investors would take over a prized national asset, the refineries, even when they had been lying comatose for years. The protagonists of this position won the day and so we could not push through the offers by these investors.

The third approach then was to give Nigerian investors in joint venture with foreign investors opportunity to revamp and manage at their cost the refineries on a business model that did not pass on any equity in same to them ,but granted them long 10-year leases to recoup their investments. In 2017 and 2018, a lot of efforts were expended on that and surprisingly many bids were received by NNPC, and successful bids were chosen for the three refineries.

I was not involved in the bid process as I was no longer the GMD, but I believe they were transparent, but again those were jettisoned as the management of NNPC decided to go with a preferred internally supervised turn around revamp at the corporation’s cost. Unfortunately, as per the time I left as Minister, that turn around had not brought back the refineries and was one of my sad frustrations upon exit. I want to believe that the present

Management is fully focused on achieving this goal for Nigerians. Our last focus approach was to liberalise the refining opportunities and so we encouraged whole heartedly the Dangote refinery and the modular refineries, some of which are operating today, with the Dangote refinery still in focus. My attitude was to push private sector players to be another parallel engine for refinery capacity building. I am glad that at least on this front we made some progress.

Given your experience, do you think they can ever work? 

Now on collocation model, the idea was to encourage some investors interested in modular refineries to collocate within NNPC refineries under an asset lease arrangement so they could share use of idle infrastructure and cut cost of starting their businesses. This would then generate income for our unprofitable refineries with which they could jumpstart the rehabilitation of our refineries free of government funding.

We did not get to have this take off before I left the GMD portfolio and I believe the idea was shelved thereafter. As to your question whether same is relevant still today, I do not know, as I do not have the requisite data or current business modelling to comment on this. But again, the situation has changed as NNPC is now private company registered under CAMA and only the shareholders, the government that is, and the board would determine if this model needs to be revisited.

When you were in office, Egina sailed from LADOL to its location offshore and local content mainstreaming began to move up, among other significant markers of your time. At the moment, who do you think are the people doing great and what exactly are they doing to keep these legacies alive? 

Yes, I remain proud of those many legacies. I am grateful to President Buhari for the opportunity to serve and his magnanimity in inviting someone from the private sector who was not part of his campaign foot soldiers at the time and entrusting such portfolio to him. In terms of identifying those who have kept the legacies on there are many.

The truth is that there are many talented people in the very rungs of NNPC and the regulatory arms who carry multi decades of experience, training, and commitment to hard work. Many times, they go unsung and only the sensational items make the headlines. Working in the Ministry and parastatals can be arduous, stressful, and thankless, and sometimes the politics of hierarchical struggles does not ensure that the best make it to the top.

But there are good people at all levels and in all the agencies. From the many at the leadership heights of NNPC , to its mid-level Managers, the policy wonks of the regulatory and enforcement Agencies, to the local Content policy drivers, to the team that helped me work on APPO reforms, I see many of them who have continued to carrying forward the legacies I left. I am for instance particularly proud of having identified the right Nigerians to lead OPEC and APPO as Secretary General and many of the top management of present NNPC.

If there was one area that stands out in my work during my four years, it is in the push to refocus NNPC and the regulators to begin modernizing to private sector principles and efficiency levels. In my time I recorded and played over 30 Issues podcasts for transformation. I see that urgency of now taking hold. There is still a lot of work to be done but there is a lot to be hopeful for.

You’ve been scheduled to speak at the African Energy Week in Cape Town,where energy transition will be an important theme for discussion. What important lessons will you be taking from Nigeria to South Africa? 

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