Omorogbe: Nigeria’s Power Sector, a Dismal Failure

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Prof. Yinka Omorogbe

Prof. Yinka Omorogbe, an expert in international economic law, was once a company secretary of the Nigerian National Petroleum Corporation. She was recently elected the first female president of the Nigerian Association of Energy Economics. In this interview, she explained to Chineme Okafor, how Nigeria’s poorly-run energy sector affects the country’s growth. Excerpts:

Congratulations on your election as NAEE’s new president. How has the Nigerian energy sector fared under President Buhari?

Thank you very much. I am delighted and honoured to have been elected. However, I must state that the views expressed here are mine and should not be taken to be the views of NAEE. The energy sector is composed of the power and petroleum sectors, which are administered by two different ministries in Nigeria. Both have not fared well for the past twenty years. The petroleum industry has been in standstill mode for the past three national assemblies, notwithstanding the appearance of motion that has been the norm over this same period. It is therefore true to say that President Buhari’s tenure did not see any significant changes to the status quo. No bill was passed, no legislative changes were made, and therefore no lasting structural change really occurred. Some will take me up on this because of the various changes that occurred under the immediate past Group Managing Director, Dr Maikanti Baru, these were quite significant, but they were administrative. Administrative changes, no matter how significant, cannot solve structural problems that need to first be addressed through legal reform. 

The power industry has fared even worse. Simon Kolawole’s article, which I read in The Cable online, captures the tragedy of this sector. He describes picking up a 1988 magazine headlined ‘NEPA – A Nation in Darkness’, which was a special focus on Nigeria’s power problems, and seeing that, notwithstanding the seeming movement, including privatisation and commercialisation and billions of dollars expended, the power situation in Nigeria had not improved. As he brilliantly puts it, ‘between 1988 and 2017, we have spent at least $30 billion on the power sector to generate uninterrupted darkness.’ We are in the second half of 2019, constant daily blackouts are still the order of the day, and generators are indispensable accessories for all who can afford them.

You were once at the NNPC and understand its processes, have you lately seen the corporation add value to its overall activities, I’m talking about upstream, midstream and downstream operations?

I was Secretary to the Corporation and Legal Adviser for two and half years, as part of a process that was supposed to, but did not, usher in reform. So, I came in as an outsider who was determined to see change, without a thorough understanding of the systems and structures within the government vis-à-vis the petroleum sector, and the extent to which certain higher echelons in the corporation were resistant to change. I was appointed by Dr Rilwanu Lukman, who was presidential adviser on petroleum, and chairman of the Oil and Gas Sector Implementation Committee (OGIC) that I was a member of, and who subsequently became minister of petroleum. During his tenure, there was a semblance of continuing reform although the anti-reform factors were already apparent. With his exit and the emergence of Diezani Alison-Madueke as minister, there were no real moves towards reform once it became apparent that an essential part of petroleum reform involves whittling away ministerial powers and increasing the powers of the regulators and other principal actors in the industry.

I left NNPC with a greater understanding of its processes and challenges, and with a greater appreciation of its existing systems, the demands that are often made on it, and the need for it to be able to operate as a functional national oil company, at par with other commercialised national oil companies. This can only happen when NNPC is empowered to be a strong and viable national oil company, or possibly a few national oil companies, depending on government direction. 

So, has NNPC been able to add value to activities in the petroleum industry? Definitely. Dr Baru was very successful as an administrator and manager and NNPC became far more efficient ant self-sustaining. However, he was clearly hampered by the absence of enabling laws that would have allowed for greater efficiency and commercialisation. I believe that is why Mr. Melee Kyari is already speaking about reform, and the need for a Petroleum Industry Bill (PIB).

It (NNPC) also talks confidently now that it has opened up its books for people to see through, but it does look like Nigerians still don’t understand how it works, and this is with exact reference to subsidy payment for petrol imported. How do you rate NNPC on this?

This is where energy correspondents and other members of the press come in handy. Your job is to first have a good inter-disciplinary understanding of the energy industry, and the Nigerian energy industry in particular, and then break down the concepts that you are dealing with into understandable language for your readers, so that they will truly be able to follow subsidy and other technical discussions pertaining to the energy sector. Truly, NNPC has become less opaque; and its left to those who wish to know to become more knowledgeable so that they can ask the right questions and get the information that they need.

Concerning subsidies, it is not purely an NNPC issue. The Petroleum Products Pricing Regulatory Authority (PPPRA) has a critical role to play. Also, subsidies cannot be critiqued without an understanding of the Nigerian state and the role it plays in perpetuating this practice. On several occasions, including as part of our communique issued at our last conference in May 2019, NAEE has clearly stated that the cost of petroleum subsidies outweighs the supposed benefits, and that the government should do a proper cost/benefit analysis of the scheme and commence other targeted interventions that would lead to sustainable, affordable and available energy for transportation, particularly for the vulnerable sectors of the populace.

Isn’t it a shame that Nigeria still relies on imported petrol to run her economy and what suggestions will the NAEE give to people in government on this, especially with regards to finding a good solution to the decrepit refineries of the NNPC in Kaduna, Warri and Port Harcourt?

Yes, the fact that a major oil producer relies on imported production for its domestic consumption is certainly a big tragedy. NNPC knows the state of its refineries better than anyone, and the new GMD Mr. Mele Kyari has already commented on their state. There are many seasoned downstream persons still in the Corporation, and many other very experienced ex-NNPC persons who remember the days of functional Nigerian refineries with nostalgia.

Mele Kyari, the new man at the helms of the NNPC has described as a reformer. What would be your thoughts and expectations from him?

I have known Mr Mele Kyari, right from when he was a manager in the Crude Oil Marketing Division. I know him to be a level-headed and quietly courteous man. He has been involved in reform for several years and has a sound knowledge of the petroleum industry and the workings of NNPC. He definitely knows about the imperative of reform and the need for a revamped and appropriate legal structure, which is why he has been talking about passing petroleum legislation almost from his time of resumption.

The NAEE has a very cordial relationship with NNPC, and I am sure that it will grow closer under Mele Kyari. The corporation has been part of NAEE from the onset and has always supported us. In fact, the first programmes of the association were in NNPC Towers. A lot of credit for this goes to Dr. Timothy Okon, who retired from NNPC as a Group Executive Director, who is presently an adviser on the executive council, and a Fellow of NAEE. I should also mention that our grand patron is a former GMD, Chief Funso Kupolokun.

Would NAEE support deregulation of the downstream petroleum sector, if yes, how best should it be done?

As previously stated, NAEE is of the opinion that the subsidy regime in Nigeria is ineffective, and it can therefore be said to support deregulation of the downstream. It is certainly willing to engage with the necessary institutions to discuss this, and can easily do this, as its many members include top personnel from all the energy institutions in Nigeria.

The government in recent times have been talking about ending flares and creating an autonomous gas market, what is your take on this?

The government has been talking about gas utilisation for many years. Unfortunately, moves to create a viable gas domestic market, and to stop the constant flaring have been caught up in the politics of petroleum reform. The result is that Nigeria actually increased its flaring in 2018 and was one of the top 15 highest flaring countries in the world in 2018. There are many plans for gas utilisation. If the government finally has the willpower to implement, and actually takes concrete steps – which must commence with the creation of a viable policy and legal framework for gas utilisation – that will be good for the country and for the environment. In the meantime, there are however promising initiatives, such as the work being done in the ministry of petroleum resources to structure and implement a programme to attract competent third party off-takers to invest in gas utilisation programmes, as part of the Nigeria Gas Flares Commercialisation Programmes.

How do you think the PIB should be approached going forward?

 

The Petroleum Industry Bill was first drafted by the Oil and Gas Sector Implementation Committee that I was a member of. Specifically, I was Chairperson of the Legal and Regulatory Subcommittee of the OGIC, which came up with the initial draft that was submitted to the National Assembly in 2008.  Since then, we have had various drafts and redrafts, but the end result has remained the same. Eleven years later, we have no petroleum industry law, the legal framework, which is undoubtedly defective has not changed, and the industry is not faring well, to put it mildly. Simply put, there is no alternative to reform. I just hope we move during this Assembly. The world isn’t waiting for Nigeria, petroleum discoveries are constantly being made in many other countries, and electric cars signal the end of the era of petroleum. I hope that Nigeria finally creates an optimal legal and regulatory framework that will allow the emergence of a petroleum industry that works for the good of Nigeria and Nigerians. Like I have earlier said, I believe that the new GMD understands the urgency and imperative of reform, and so I am expectant.

Nigeria has also stalled on marginal oil fields re-allocation, and experts consider this to be a bad decision, what do you think is responsible for that?

The problem of marginal field allocations is again structural, from a legal and policy perspective. Therefore, the problem is not so much the companies that currently have allocations, as much as the environment within which they operate, and the extent to which there are laws and policies which encourage their growth and existence. I would not say that marginal field companies are neither honest nor accountable.

Let’s look at the electricity industry – another troubled segment of Nigeria’s energy sector. What do you think needs to be fixed in that sector?

The electricity sector is actually much more than a troubled segment of Nigeria’s energy industry. So far, that sector is frankly speaking, a dismal failure, and until we come to terms with this fact, we will get nowhere in our quest for constant electricity for every Nigerian. That has to be our goal, because life without modern energy services – which incorporate accessible and affordable energy and clean cooking and motor fuels – is nasty, brutish and short. This is now a well-known and incontrovertible fact internationally, but somehow, we do not know this in Nigeria. We have become a nation where everyone has a generator, because of the epileptic nature of our electricity supply, even if you are connected to the electricity grid. In other countries, generators are backups in case of infrequent blackouts. In Nigeria, unfortunately, when there is not light for days, (and that is not an unusual occurrence) the generator is the primary source of supply. The result is that numerous businesses have at least two large generators, with all the attendant environmental and financial negatives. 

Right now, half of the population has no electricity, and those of us that do, suffer from frequent interruptions. Nigeria has an electricity access rate of 54 per cent, lower than Ivory Coast with 66 per cent, Gabon with 92 per cent, and Ghana which has 79 per cent. The Gambia has a 56 per cent electricity access rate while all of North Africa has 100 per cent access, with the exception of strife-ridden Libya, and even that troubled country has an electricity access rate of 72 per cent. Outside Africa, the average country has 100 per cent electricity access, including China which achieved 100 per cent access in 2017 for its 1.3 billion citizens. We may be Africa’s largest economy, but we are lagging far behind in this area, and this does not augur well for our development. Think of where we would be if all Nigerians had adequate energy? Clearly, having a virile electricity sector is not an insurmountable task. If other countries have done it, why can’t we?

Why Nigeria has been unable to achieve 100 per cent electricity access is a complex answer and I will not attempt to give my perspective on this issue comprehensively. However, I will say that Nigerians do not yet see that electricity is a necessity for all persons, irrespective of where they reside or their level of income, and this includes those who are supposed to be planning for electricity. 

To put this conversation in perspective, South Africa generates 51,000 megawatts (MW), from varied energy sources, has a population of 67 million; and produces 3.904-kilowatt hour per person per year. Egypt has 100 per cent electricity coverage from 40,000MW, and has nearly one hundred million people. However, Nigeria has an installed capacity of about 12,000MW, normally generates about 4,000MW daily, and has about 200 million people. For a country of nearly 200 million people to be planning for 20,000MW, as we did in our ‘Vision 2020’ document is very strange to me. 

From my engineering layman perspective, I would say that we need at least 100,000MW for the entire country, and that figures below this are premised on policy makers not factoring poor people into their country’s growth forecasts, possibly because they will not be able to afford it. We need to find out how other countries have approached and surmounted this issue of pricing, as electricity is essential to quality of life. Also, modern development as we know it is impossible without modern energy services. If some segments of the population don’t have energy, they will not develop sustainably. Are we saying that some Nigerians are not entitled to electricity?

How have you planned to spend your tenure at the NAEE, what do you intend to be remarkable about it and can you confirm if you’re the first female to lead the association?

Yes, I am the fourth and first female President of the Nigerian Association of Energy Economics. I am also the first lawyer to be President. Having a lawyer as President isn’t an anomaly. Anyone who has read one of my books, ‘The Oil and Gas Industry; Exploration and Production Contracts’, will know that in the course of my work I dealt with issues that petroleum economics are also concerned with. 

Foundationally speaking, I am an international economic lawyer, and have always approached energy law from that perspective, as it makes the study of the legal issues and frameworks come alive. A basic understanding of energy economics is necessary for any professional who wants to delve deep into energy research. That is why the association is not just for energy economists, but for all energy professionals with an interest in knowing more and advancing knowledge of energy economics. There are several engineers who are members. 

My tenure will definitely be characterised by sustained discourses and activities to promote enhanced access to modern energy services, which I am very passionate about. It is a great shame that Nigeria’s energy access rates are amongst the lowest in the world. We need to know these facts and more. We need to see the havoc that our present electricity situation is creating. We need to know that access to adequate and affordable energy has got to be seen as a right for all Nigerians, because it is only when we all have this that we will reach our true potential. 

NAEE is a great association with many distinguished and committed members, and every event of the Association provides an opportunity to meet and rub minds with serious professionals from government, industry and academia. It also provides great opportunities for student members, and a student representative is member of the Council. NAEE remains committed to making positive contributions to the advancement of energy studies, and definitely, increased energy access for all Nigerians, wherever they may reside.