Oil & Energy
Let There Be Sincerity In Subsidy Removal – Iwezor
The proposed removal of oil subsidy by the federal Government next year has generated a lot of controversy that Nigerians from all angles are expressing their divergent opinions about it.
In his view, a Port Harcourt-based businessman, Mr. Emeka Iwezor says there is nothing wrong about removing the subsidy and there is nothing wrong in keeping it.
Speaking during an interview with our The Tide in Port Harcourt, Mr. Iwezor, Managing Director/Chief Executive Officer of Emic Communications Limited said, however, the removal if implemented will affect the ordinary Nigerian citizens.
According to him the bone of contention is the insincerity of Nigerian leaders or government to keep or fulfil promises. The government had earlier said that it would use the money that will accrue from the subsidy for the well-being of the poor.
President Goodluck Jonathan while clarifying the issue explained that the subsidy removal will stimulate private sector investment to bridge infrastructure gap and create incentives for investment in refineries and the petroleum industry.
“The only thing in Nigeria is the insincerity of our leaders on that subsidy. If the Nigerian populace are sure that when subsidy is removed, the money accruing from it would be used judiciously by our leaders, nobody will shout, nobody will talk, nobody will complain because in reality, nothing happens so people disagree with government decisions”, he stated, adding “if you are removing the subsidy, use it to improve or provide quality education for our children improve on electricity supply, improve on road network and use it to improve on security of the country among others. If all these are done, there will be no hullabaloo”.
He observed that Nigerians are complaining because they are very much aware that the subsidy when removed will end in the private pockets of Nigerian leaders and politicians,” so, that is why we are saying let’s keep the one we are seeing, that is what the common man is seeing because if it is removed, we can’t see it again”.
Nigerians, Iwezor maintained, are tired of what is called jumbo promises and “we have heard much of getting this well, getting that well all are lies. We have heard enough of unfulfilled promises.
Our leaders are corrupt, I don’t know who can take us to the area we are expecting. Who is going to be the Messiah of this country?”
He said: “In the 2011 Presidential election, people voted for Jonathan, like myself, not because he is from the Niger Delta but I voted for him because of his perseverance, his utterances, his physical appearance and felt that he will be a likely Messiah for this country but from what I am seeing as a Niger Delta man, he has a lot to do to be the kind of Messiah we are looking for to salvage us. He should change.
He noted that Nigeria as a nation is yearning for who could salvage her while the citizens are looking for who can bring them out of the doldrums for them to be like their counterparts other developing countries, adding “we shouldn’t be wearing innocent faces when we are dying. By my observation on President Jonathan’s 100 days in office, I scored him 40 per cent so far and in all aspects of our life as a country, nothing new is happening.
According to Iwezor, “I was shocked when I learnt that the Federal Government is being owed several billions of Naira and even bargaining to pay the money instalmentally. Why should that happen?
Calling for major overhauling of the Nigerian National Petroleum Corporation (NNPC), the company Chief stressed the need to fish out the cartel that has been holding the country down and urged the leadership to build a political will to re-organise the whole system considering the fact that the NNPC is the life-wire of the country’s economy.
“If there is a mess or lull in the oil and gas sector, Nigeria is finished. The President should sack all the management and make them cough out all monies embezzled because we are aware of all the dirty deals going on in the corporation. Although petroleum products, especially fuel is at moment easily accessible at the filling stations, that’s not enough.
The Federal Government is not getting the real details about the NNPC and I put it to you that the company does not know the amount of crude produced in Nigeria”.
He regretted that the NNPC has no accurate statistics of what is being produced by the various oil and gas producing companies in the country as some of them operate illegally without the knowledge of the pilot firm, NNPC, pointing out that the companies have places they call “no-go-areas” where they carry out all sorts of illegal dealings.
“Why should Nigeria continue with such system whereby oil explored from our land is exported by other people thereby subjecting us to importation of finished products even when we have four refineries”, he questioned.
Iwezor recalled that when oil exploration started in Nigeria in 1956, the British Colonial masters signed what he called a Kangaroo agreement with the then leaders of this country as they (Nigerian leaders) were ‘blind folded’, saying that now that we are over 50 years in oil business, it has become necessary to write a new agreement with the oil companies.
He stated: “I don’t blame our leaders of those years because they had no choice but now that we have come of age, there should be a new agreement on how our oil should be explored and not that 40:60 ratio. The agreement should be such that will recognise the oil producing communities and states appropriately. Nigeria is an oil giant, so our leaders should take the bull by the horn and balance the equation to bring the country up to its expectations”.
On electricity supply in this country, the communication expert said “Nigerians are watching what the President has to do as he has been promising. We are waiting to see his plans materialise. If Jonathan’s government fails us, it will be bad and he will not believe his eyes about reactions of Nigerians. I am not a prophet but I hear what people say and their feelings so far.
“We all know how important power is in our daily life as well as the economic development of the country. The country’s economy lies in electricity and once power supply improves, there will be a lot of jobs as more investors will be attracted to invest in the country and shut down companies will resume operations. Government should not mind how much it is spending on power supply and it must also check the activities of manufacturers and importers of electricity generating equipment with the Power Holding Company of Nigeria (PHCN) and other stakeholders in that sector”.
Some of these firms are out to sabotage the efforts of government at ensuring constant electricity supply to the consumers, Iwezor emphasised, noting that it requires a strong political will for President Jonathan to tackle the problem of power supply in Nigeria. He has what it takes to do it.
The business magnate underscored the need to privatise the power sector and open the business to competent firms under the public-private partnership (PPP) scheme in order to achieve the Millennium Development Goals (MDGs) in that area. Constant electricity will create millions of job and new companies will spring up.
He opined that the problem of power is not caused by Nigerians but foreign companies who budget huge amount for the PHCN to sabotage government efforts and advocated the engagement of individuals and companies that can provide regular power for Nigerians and business organisations.
Many companies are spending heavily on diesel and fuel to run their plants, which is not meant to be. I know how much I spend in running my company on fuel and diesel and if any power generating company supplies me constant light and charges me about N10,000 per month, I will pay happily and employ more people. I service my generators and buy parts to repair them coupled with the pollution generated from them, Iwezor stressed.
So, the onus lies on the Federal Government to arrange the power sector in a manner that Nigerians will feel satisfied being part of a nation known as the giant of Africa, he said, pointing out that if the economy improves, it will benefit all and sundry including staff of the PHCN who are kicking against the privatisation of the company. He said: “If the payment of the N18,000 minimum wage to Nigerian workers is the rationale for the subsidy removal and increase in fuel price, that idea should be jettisoned. The whole thing should be directed towards improving the welfare of the citizenry and boosting the economy of the nation. If that is done, I will use my office and whatever available with me to companion for the removal”.
If the government is sincere and if the money will not be embezzled, Nigerians will be happy and support good plans of government, Iwezor declared and advised that “our oil and electricity installations should be properly secured and security agents armed with standard weapons while being well motivated. There is poverty and insecurity in the land”.
Shedie Okpara
The Federal Government has expressed optimism in attracting more investments by International Oil Companies (IOCs) into Nigeria to foster growth and sustainability in the energy sector.
This is as some IOCs, particularly Shell and TotalEnergies, had announced plans to divest some of their assets from the country.
Recall that Shell in January, 2024 had said it would sell the Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
According to the Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, increasing investments by IOCs as well as boosting crude production to enhancing Nigeria’s position as a leading player in the global energy market, are the key objectives of the Government.
Lokpobiri emphasized the Ministry’s willingness to collaborate with State Governments, particularly Bayelsa State, in advancing energy sector transformation efforts.
The Minister, who stressed the importance of cooperation in achieving shared goals said, “we are open to partnerships with Bayelsa State Government for mutual progress”.
In response to Governor Douye Diri’s appeal for Ministry intervention in restoring the Atala Oil Field belonging to Bayelsa State, the Minister assured prompt attention to the matter.
He said, “We will look into the issue promptly and ensure fairness and equity in addressing state concerns”.
Lokpobiri explained that the Bayelsa State Governor, Douyi Diri’s visit reaffirmed the commitment of both the Federal and State Government’s readiness to work together towards a sustainable, inclusive, and prosperous energy future for Nigeria.
While speaking, Governor Diri commended the Minister for his remarkable performance in revitalisng the nation’s energy sector.
The Federal Government has assured investors in the nation’s gas sector of the security and safety of their investments.
Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, gave the assurance while hosting top officials of Shanghai Huayi Energy Chemical Company Group of China (HUAYI) and China Road and Bridge Corporation, who are strategic investors in Brass Methanol and Gas Hub Project in Bayelsa State.
The Minister in a statement stressed that Nigeria was open for investments and investors, insisting that present and prospective foreign investors have no need to entertain fear on the safety of their investment.
Describing the Brass project as one critical project of the President Bola Tinubu-led administration, Ekpo said.
“The Federal Government is committed to developing Nigeria’s gas reserves through projects such as the Brass Methanol project, which presents an opportunity for the diversification of Nigeria’s economy.
“It is for this and other reasons that the project has been accorded the significant concessions (or support) that it enjoys from the government.
“Let me, therefore, assure you of the strong commitment of our government to the security and safety of yours and other investments as we have continually done for similar Chinese investments in Nigeria through the years”, he added.
Ekpo further tasked investors and contractors working on the project to double their efforts, saying, “I want to see this project running for the good of Nigeria and its investors”.
Earlier in his speech, Leader of the Chinese delegation, Mr Zheng Bi Jun, said the visit to the country was to carry out feasibility studies for investments in methanol projects.
On his part, the Managing Director of Brass Fertiliser and Petrochemical Ltd, Mr Ben Okoye, expressed optimism in partnering with genuine investors on the project.
Crude oil prices recently logged their second monthly gain in a row as OPEC+ extended their supply curb deal until the end of Q2 2024.
The gains have been considerable, with WTI adding about $7 per barrel over the month of February.
Yet a lot of analysts remain bearish about the commodity’s prospects. In fact, they believe that there is enough oil supply globally to keep Brent around $81 this year and WTI at some $76.50, according to a Reuters poll.
Yet, like last year in U.S. shale showed, there is always the possibility of a major surprise.
According to the respondents in that poll, what’s keeping prices tame is, first, the fact that the Red Sea crisis has not yet affected oil shipments in the region, thanks to alternative routes.
The second reason cited by the analysts is OPEC+ spare capacity, which has increased, thanks to the cuts.
“Spare capacity has reached a multi-year high, which will keep overall market sentiment under pressure over the coming months”, senior analyst, Florian Grunberger, told Reuters.
The perception of ample spare capacity is definitely one factor keeping traders and analysts bearish as they assume this capacity would be put into operation as soon as the market needs it. This may well be an incorrect assumption.
Saudi Arabia and OPEC have given multiple signs that they would only release more production if prices are to their liking, and if cuts are getting extended, then current prices are not to OPEC’s liking yet.
There is more, too. The Saudis, which are cutting the most and have the greatest spare capacity at around 3 million barrels daily right now, are acutely aware that the moment they release additional supply, prices will plunge.
Therefore, the chance of Saudi cuts being reversed anytime soon is pretty slim.
Then there is the U.S. oil production factor. Last year, analysts expected modest output additions from the shale patch because the rig count remained consistently lower than what it was during the strongest shale boom years.
That assumption proved wrong as drillers made substantial gains in well productivity that pushed total production to yet another record.
Perhaps a bit oddly, analysts are once again making a bold assumption for this year: that the productivity gains will continue at the same rate this year as well.
The Energy Information Administration disagrees. In its latest Short-Term Energy Outlook, the authority estimated that U.S. oil output had reached a record high of 13.3 million barrels daily that in January fell to 12.6 million bpd due to harsh winter weather.
For the rest of the year, however, the EIA has forecast a production level remaining around the December record, which will only be broken in February 2025.
Oil demand, meanwhile, will be growing. Wood Mackenzie recently predicted 2024 demand growth at 1.9 million barrels daily.
OPEC sees this year’s demand growth at 2.25 million barrels daily. The IEA is, as usual, the most modest in its expectations, seeing 2024 demand for oil grow by 1.2 million bpd.
With OPEC+ keeping a lid on production and U.S. production remaining largely flat on 2023, if the EIA is correct, a tightening of the supply situation is only a matter of time. Indeed, some are predicting that already.
Natural resource-focused investors Goehring and Rozencwajg recently released their latest market outlook, in which they warned that the oil market may already be in a structural deficit, to manifest later this year.
They also noted a change in the methodology that the EIA uses to estimate oil production, which may well have led to a serious overestimation of production growth.
The discrepancy between actual and reported production, Goehring and Rozencwajg said, could be so significant that the EIA may be estimating growth where there’s a production decline.
So, on the one hand, some pretty important assumptions are being made about demand, namely, that it will grow more slowly this year than it did last year.
This assumption is based on another one, by the way, and this is the assumption that EV sales will rise as strongly as they did last year, when they failed to make a dent in oil demand growth, and kill some oil demand.
On the other hand, there is the assumption that U.S. drillers will keep drilling like they did last year. What would motivate such a development is unclear, besides the expectation that Europe will take in even more U.S. crude this year than it already is.
This is a much safer assumption than the one about demand, by the way. And yet, there are indications from the U.S. oil industry that there will be no pumping at will this year. There will be more production discipline.
Predicting oil prices accurately, even over the shortest of periods, is as safe as flipping a coin. With the number of variables at play at any moment, accurate predictions are usually little more than a fluke, especially when perceptions play such an outsized role in price movements.
One thing is for sure, though. There may be surprises this year in oil.
lrina Slav
Slav writes for Oilprice.com.