Nigeria’s Economy Stood No Chance Against Covid-19 Impact With Only $72m Fiscal Buffer – Tengi

Programme Coordinator, NNRC, Tengi George-Ikoli

The Programme Coordinator, Nigeria Natural Resource Charter (NNRC), Tengi George-Ikoli, in this interview with Extractive 360, says the impact of Covid-19 pandemic on Nigeria’s economy could have been minimized had the country a meaningful fiscal savings at the start of the crisis. Despite this hard lesson, she observed that the proposed Petroleum Industry Bill (PIB) still failed to conceive savings from oil as a deliberate front line item. She spoke on other key issues bordering on the oil and gas sector. Excerpts


Recent data released by the NBS shows Nigeria has officially slid into its worst recession since 1987. This is highly related to the impact of Covid-19 and international crude prices. Is there anyway the country could have prevented or minimized it?

Yes, Nigeria could have minimized the impact of the covid-19 crisis on the economy, if not prevented it. There were two factors to contend with; falling oil prices which is cyclical and the effect of the global pandemic. The cyclical nature of oil prices, if prepared for, would have also provided Nigeria some buffers against the effects of the pandemic on the Nigerian economy. Nigeria was not alone on the grave impact of the pandemic, developed countries like the United Kingdom, France, Germany, were all equally hard hit and were unable to prevent the impact of the covid-19 pandemic on their economies. Emergency health measures, bail out for failing sectors, social interventions for citizens and other responsive measures adopted to address the covid-19 crisis took its toll.

Nigeria for its part, could however, have mitigated the covid-19 effects if strong buffers were in place to mitigate the often cyclical and mostly predictable fall in crude oil prices. Other countries, with more proactive and responsive fiscal buffers through their sovereign wealth funds were able to better cushion the effects. Nigeria’s fiscal buffers at the start of the crisis was approximately $72 million expected to cater to approximately 200 million Nigerians while Norway had approximately $1 trillion to support approximately 5.4 million Norwegians generated from oil savings. If Nigeria had strengthened its fiscal buffers as warned by the NNRC, Nigeria Extractive Industries Transparency Initiative (NEITI) and other accountability actors, Nigeria would have certainly minimized the impact of the crisis on its economy.


In your assessment, did the proposed PIB do enough to provide for a sustainable savings mechanism for Nigeria?

It does make an attempt to increase contributions to the already existing savings mechanism; the Nigerian Sovereign Investment Authority (NSIA) by stipulating that royalties by price, when triggered would be to the credit of the NSIA. However, that is too uncertain a mechanism to rely on to fund Nigeria’s future. The funding of the Sovereign Wealth Fund (SWF) and the strengthening of mechanisms for engaging with funds within the Excess Crude Account (ECA) needs to be strengthened. Still, it is a positive step.

To build in sustainability however, Nigeria must commit to a more deliberate approach and in my view, this would require a comprehensive constitutional review. While Nigeria optimizes its take from the petroleum sector through opening its midstream and downstream, it is important to set the framework to protect Nigeria’s future even as oil loses its value and demand. Savings from oil must be a front line item and not an afterthought as conceived by the PIB.


The NNPC is to become an incorporated company with clear commercial mandate as proposed in the new PIB. Is the proposed law, as captured, adequate to transform the NNPC to compete with the likes of Petronas and Petrobras?

With the PIB passed, NNPC will have a more commercially oriented mandate than it does now; it will be more transparent and better able to perform in the petroleum sector. However, its competitors; Saudi Arabia’s Saudi Aramco, Norway’s Equinor, Brazil’s Petrobas, Malaysia’s Petronas and Algeria’s Sonatrachare exploring new frontiers; going beyond the petroleum sector and are now preparing for the impending low carbon energy transition. These institutions have stepped up research and investment in renewable; green hydrogen, and carbon capture, utilization and storage (CCUS) technology. Nigeria is poised to compete with what these institutions were, and not what they are or are going to become. Nigeria must consider her energy mix within the context of the global paradigm shift while still considering her domestic needs and concerns if the NNPC or Nigeria as a whole is expected to catch up with its counterparts.


There are views that the proposed bill has done nothing to address the issue of resource control, do you agree with this thinking?

The PIB in my view does not target resource control issues, this is why it is important for stakeholders to properly review the bill and the government transmits the contents of these laws in a way that the ordinary man could understand this 252-page document. The Bill; specifically, the host community component, focuses more on creating a legal framework that governs development contributions by oil companies in the host communities.


Stakeholders have expressed dismay at the 2.5percent earmarked in the bill for host community fund, suggesting it should be increased to 5percent, what is your take on this?

My concern here has more to do with the administration of the proposed framework. As is, regardless of the figure, if properly managed, coordinated with an objective to deliver comprehensive and holistic development, it could be successful and deliver value. The 2.5% or 5% is relative to the earnings of the company and this will differ by state and local community upon implementation leading to disparity in development enjoyed by communities, potentially introducing conflict.

The Niger Delta requires a more comprehensive, strategic and deliberate development to substantially transform the economy of the Delta. This in my view will not do it and does not address the coordination needed to ensure this initiative delivers meaningful development or provide for exit plans or sustainability where companies decide to pull out their business mid-stream of the implementation of some project. More has to be done in my view to strengthen the framework to ensure it delivers sustainable development to the region and ties into existing development programs. I don’t see the larger vision for the Niger Delta and this is quite worrisome.


Do you think the Presidential Amnesty Programme will be more effective when domiciled at the state level rather than centralized in Abuja? And should it be retained post PIB?

Again, the concern here for me is more about the structure of PAP’s interventions, the vision, transition or strengthening. It is credible that PAP is attempting to stay close to the pulse of the people to better monitor the effect of the intervention but the success is not dependent on the site.


The NNRC has been in the forefront of advocacy for the PIB passage. Overall, does your organization have major concerns with the proposed bill, or would you say it is sufficient to transform the Nigerian oil and gas sector and help attract investment?

The PIB introduces certainty lost when Nigeria announced to the world its intent to change its laws 20 years ago. It accommodates past operators; allowing them to take advantage of the terms proposed if interested, provides arguably competitive terms for new investors; now slim given the global economic downturn, provides a lot more stability, clarity and flexibility than Nigeria has previously enjoyed. It is certainly a step in a right direction and long awaited.


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