Nigeria: Oil rally should force reforms

Crude oil prices look set to surpass $70 per barrel in months judging by the trend of recent upward movement of the commodity. All over the world many countries are strategising to take advantage of the trend. Nigeria should too.

Buoyed by the rally, Saudi Arabia is in advanced stages of plans to diversify its economy away from oil, ramping investments in other sectors, especially tourism. Norway is still growing its investment funds and searching for new areas to invest in other parts of the world.

The best model for urgency in response to the rally is the speed at which financial institutions who provided loans to troubled assets in the oil sector are moving to refinance and renegotiate terms for the abandoned assets on account of bearish oil prices.

Shoreline Energy International, an indigenous oil producer, recently said it was doubling its crude output to 100,000 bpd and gas production to 500 million standard cubic feet a day from 100m scf, after agreeing terms for a $530m finance deal with Vitol Group and some local banks. Similar deals are also in the pipeline, according to informed sources.

Nigeria needs to move with the same speed in tackling vexing issues of militancy, clean-up of Ogoni land, passage of the fiscal, administrative and host community aspects of the Petroleum Industry Bill, meeting cash call debt obligations, and deregulation of the downstream sector of the industry.

But the current lethargic pace of this administration does not indicate an awareness of the urgency of these reforms. The lawmakers are not quick to enact laws that will engender badly-needed reforms, having taken over a decade to pass the Petroleum Industry Governance Bill.

The oil sector will get a new lease of life with a quick assent of the PIGB by the president, which will unbundle the NNPC and subordinate it to market rules. NNPC has always been accused of being a cesspool of corruption because its finances are not subjected to audits and the corporation keeps revenue accruing to the nation without accountability.

It is not clear when the current oil rally will run out of steam, but Nigeria will be best served if it takes advantage of it.

ISAAC ANYAOGU

The writer can be reached via isaac.anyaogu@ businessdayonline.com or +2347037817378.