Tinubu: Decision To Remove Petrol Subsidy Challenging, But Necessary

President Bola Tinubu on Tuesday explained why he decided to withdraw subsidy on petrol, and maintained that although it was a difficult and challenging decision, it was necessary for Nigeria’s future and economic growth.

Speaking at the opening session of the 7th edition of the Nigeria International Energy Summit (NIES) in Abuja, Tinubu stated that by removing the subsidy, he had created a more transparent and accountable energy sector.

The theme of this year’s summit, overseen by Brevity Anderson, was, “Navigating the New Energy World Order: Security, Transition, and Finance.”

The president stated that Nigeria was currently at a crossroads of a rapidly transforming global energy landscape. He explained that energy security was of paramount importance, as it is not just a national concern, but a global imperative.

In the face of emerging challenges, both geopolitical and technological, Tinubu who was represented by Minister of Information and National Orientation, Mohammed Idris, stated that Nigeria must ensure the resilience of its energy infrastructure.

As a fallout of the decision to remove fuel subsidy and collapse the FX market, Nigerians have recently been experiencing economic hardship made worse by skyrocketing prices.

But the president stressed that the funds that were previously allocated to subsidising petroleum products were now redirected towards developing and upgrading energy and other social infrastructure.

Tinubu stated, “The decision to remove the petroleum subsidy is a challenging one, but it is a step we must take to secure our energy future and foster economic growth. Energy security is a paramount concern for any nation striving for economic stability and development.

“It encompasses not only the availability and accessibility of energy resources but also the resilience of our energy infrastructure. The petroleum subsidy has, over the years, strained our economic resources, leading to inefficiencies and, most importantly, hindering our ability to invest in critical areas of energy security.

“By removing the subsidy, we are creating a more transparent and accountable energy sector. The funds that were previously allocated to subsidising petroleum products are now redirected towards developing and upgrading our energy and other social infrastructure.

“Furthermore, the removal of the subsidy has encouraged further private sector participation in the energy industry with potential of attracting more local and international investors, fostering innovation and competition that will drive down costs and improve the overall efficiency of our energy sector,”

Acknowledging that he was aware of the immediate effect the decision might have on Nigerians, especially those with lower incomes, Tinubu said his administration was committed to implementing social intervention programmes to mitigate the short-term effects on vulnerable populations.

These programmes, he said, will ensure that the burden of the subsidy removal was shared equitably and that the most vulnerable among Nigerians were protected.

The president said, “The decision to remove the petroleum subsidy is not an easy one, but it is a necessary one for the long-term energy security and economic prosperity of our beloved nation.

“I call upon all stakeholders, including industry experts, policymakers, and the general public, to engage in constructive dialogue and collaboration as we navigate these challenging but transformative times. Together, we can build a resilient and sustainable energy future for Nigeria.”

According to him, adequate funding is crucial to support the development and deployment of cutting-edge technologies, infrastructure, and projects that will shape Nigeria’s energy future.

Tinubu said Nigeria must explore innovative financing models, engage with the private sector, and attract investments that will propel it towards a more resilient and diversified energy sector.

Speaking against the backdrop of the perception that the Nigerian National Petroleum Company Limited (NNPCL) was blocking International Oil Companies (IOCs) intending to divest from Nigeria’s onshore, Group Chief Executive Officer of the company, Mele Kyari, insisted that the role of NNPCL was that of a facilitator, and not an obstacle.

Kyari explained that by virtue of its statutory mandate as the enabler of national energy security, its role was to ensure that at the end of the day, there was optimal and sustainable production from the divested assets to guarantee energy security for the benefit of Nigerians.

Kyari also disclosed the company’s willingness to invest in the proposed African Energy Bank as a way of ensuring sustainable funding for energy projects in Africa to guarantee energy security.

On investment in energy infrastructure to drive energy security, the GCEO disclosed that the completion of the Obiafu-Obrikom-Oben Pipeline was in sight, as the tunnelling across the River Niger was currently ongoing.

He assured stakeholders of the company’s commitment to work with them to close the energy gap and create prosperity for Nigerians, adding that from all indications, all issues of energy scarcity in the country would be over in the next 10 years.

In his remarks, Minister of State, Petroleum Resources (Oil), Senator Heineken Lokpobiri, said the federal government was committed to safeguarding the country’s energy infrastructure, promoting regional stability, and ensuring a resilient oil and gas sector.

Lokpobiri stated that Nigeria should not count it as a loss that IOCs were divesting from onshore because the country’s indigenous oil firms were capable of taking over the assets.

He stated, “We must address the issue of energy security in Nigeria with utmost urgency. We possess rich and untapped reserves that can be easily harnessed to bring about economic prosperity for our nation and its citizens.

“However, the challenge lies in ensuring that only competent players with the requisite technical and financial capability to make the necessary investments are engaged. We must provide opportunities and create an enabling environment to attract these players.”

In comparison with the global decline of investments in the oil and gas industry between 2017 and 2022, investments in Nigeria, Lokpobiri said, declined by 69 percent when compared with the 28 percent global average decline.

According to him, Nigeria has an abysmal capital investment-to-reserve ratio of five percent compared with Angola (46 percent), Brazil (115 percent), Mozambique (92 percent) and Guyana (617 percent).

The minister said, “The window for attracting new investments and exploring our vast reserves is fast narrowing. If the global energy transition accelerates, approximately 60 percent of Nigeria’s reserves could be uncompetitive to produce.

“Against this backdrop, we have identified that there are so many licenses with proven reserves that are not being optimised in the hands of IOCs and others. In line with Mr. President’s Renewed Hope agenda, we are working on changing this narrative.

“One of the easiest ways to solve the current foreign exchange challenges faced in the country is to aggressively increase production, which will in turn bring in additional revenue for the government. The additional crude produced will serve as a feedstock to our state-owned, private, and modular refineries.”

Acknowledging that additional financing was crucial for growth in the oil and gas industry, Lokpobiri said it was imperative that Nigeria pursued the dream of realising the Africa Energy Bank, which will have an initial capital base of $5 billion within five years, and a gross asset base exceeding $120 billion by 2028.

With seven countries actively seeking to have the proposed African Energy Bank within their nations, Lokpobiri argued that Nigeria had made concessions in the past and it was time for African countries to allow the bank to be cited in Nigeria.

Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, also said Nigeria’s gas industry, with abundant proven gas reserves of more than 208TCF and further exploration potential, was crucial for enhancing energy security. In the light of the above, Ekpo maintained that Nigeria had no business with energy poverty.

He said, “In our transition to a sustainable energy future, Nigeria has chosen gas as our transition fuel, facilitating the shift from more conventional to new and renewable energy sources.

“With its lower carbon footprint and versatility, natural gas aligns with global climate objectives while providing a reliable solution for our energy needs. Nigeria, with significant gas reserves, should leverage this advantage to become a key player in the global energy transition and a regional powerhouse for gas processing and industrialisation.”

Ekpo said Nigeria currently faced challenges, but the challenges also presented the country a unique opportunity to seize the moment and define its future.

Secretary General, Organisation of Petroleum Exporting Countries (OPEC), Haitham Al Ghais, in his comments, said Nigeria’s role in OPEC’s past and present remained a tremendous source of pride.

Al Ghais said, “We anticipate a bright future for Africa’s oil industry with substantial opportunities for growth. The continent is home to five of the top 30 oil-producing countries and its proven oil reserves amounted to around 119 billion barrels at the end of 2022.”

Chairman of the Independent Petroleum Producers Group (IPPG), AbdulRazaq Isa, in his remarks, lamented the slow pace of the process of handing over divested assets from IOCs to Nigerians interested in buying them.

 Secretary General of African Petroleum Producers’ Organisation (APPO), Farouk Ibrahim, said Africa must chart its own energy pathway.

Ibrahim stated that those who had the biggest legacy carbon emissions must find a way to clean up their mess, rather than compel Africa to jettison fossil fuels.

Emmanuel Addeh