President Tinubu’s administration to harness resources, transform Nigeria into productive and diversified economy

By Olu Verheijen

Nigeria is a very complex country of overachievers. We have over 200 million people living in a landmass the size of California. The entire US population is under 350 million. We have over 370 ethnic groups and speak over 500 languages. This small landmass is administered by a federal government led by President Bola Ahmed Tinubu, 36 state governors and an FCT minister, and 744 local government chairs.

Although Nigeria’s oil and gas sector contributes less than 10% to GDP, it accounts for 90% of foreign exchange earnings and 60% of fiscal income. The value of our currency, the government’s ability to invest in goods and services that markets cannot provide like public health and education – are all dependent on what happens in this sector. Our dependence on this sector has had a consequential impact on both our economic growth and poverty reduction aspirations.

You can see how the combination of complexity and a nation of overachievers create a unique set of problems. When we choose to have a problem, we typically pick the best-in-class problem.

The central priority of the new administration under the leadership of President Bola Ahmed Tinubu, is to harness all our resources to transform Nigeria into a thriving, productive and diversified economy.

How do we execute reforms that balance important trade-offs? On the one hand, we require significant investments to restore and grow production, but most of our current fiscal resources are also needed to fund urgent economic and social recovery programs.

Given the enormity of the task, we have consulted with industry and key stakeholders. The outcome of the consultations has provided us with a clear direction of travel.

First, we recognize that when considering where to deploy capital, investors consider the stability and predictability of the prevailing fiscal and regulatory environment. President Bola Ahmed Tinubu continues to send out the clear message that we are open for business. He took decisive steps to stabilize our fiscal environment by removing a costly fuel subsidy and shifting towards a market-driven exchange rate.

In addition, we are making a concerted effort to streamline approval processes, clarify scope of regulators to reduce the extensive project timelines and high cost premium associated with operating in Nigeria.

Second, we are taking decisive action to address security. We have decisive steps to curtail asset vandalism and illegal activities. These efforts have translated into a notable increase in our daily oil and condensate production, which currently stands at 1.6mbpd—a remarkable 12.4% rise from the production volumes in 2022. The establishment of the 3% Petroleum Host Community Fund is a significant stride toward fostering development in these host communities, enhancing the security of our operations, and reducing the cost of doing business.

Third, we have an unalloyed commitment to charting an economic development path that lifts millions of Nigerians out of poverty while avoiding the high-carbon choices that were the hallmark of the past.

To achieve our net zero goals in the electricity sector, we have identified several strategic interventions that will improve financial liquidity, performance of distribution companies, energy efficiency and integrate renewable sources into our energy supply mix.

The recent Nigeria Gas Flare Commercialization Program (NGFCP) auction by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) demonstrates our commitment to curb our emissions.

However, we will have no intention to curb our ambitions. We remain a vocal and leading advocate for a prosperous Africa fueled by all of its affordable low-carbon energy sources and natural gas clearly fits the bill. We will grow LNG exports, and petrochemical exports, and displace diesel/pms in various domestic end uses as underscored by the recently announced Presidential CNG initiative.

We will achieve this by enabling a range of policies and incentives. We will continue transitioning to market prices for gas and electricity and evolve the fiscal regime to being one that catalyzes investments rather than maximizes government takes. The federal government is also deploying catalytic capital from the midstream and downstream gas infrastructure fund by the Nigerian Midstream and Downstream Regulatory Authority.

In summary, our evolving oil and gas policy is shaped by factors that include our economic development needs, dependence on oil and gas revenues, resource size, and the protection of the environment. The reforms that we embark on will reflect the way that these policy objectives are balanced.

President Bola Ahmed has bold plans to reform key elements of the industry that will position Nigeria to compete favorably for investment. We also recognize that action by the government alone is insufficient. We need the market and industry to reward us with firm and timely investment commitments.

Our commitment to bridging the gap between Nigeria’s current and its potential is steadfast. The renewed focus on energy security has changed the pace of the energy transition. We intend to fully exploit this window of opportunity to the benefit of generations of Nigerians and Africans to come.