Prof. Adeola Adenikinju was recently elected as the 44th President of the Nigerian Economic Society{NES}. In this interview , the Professor of Petroleum Economics and former Director of Centre for Petroleum, Energy Economics and Law {CPEEL}, University of Ibadan, said the government must implement the provisions of the Petroleum Industry Act {PIA} to overcome challenges in the oil sector.
 The professor also called for privatisation of nation’s refineries for optimum performanceÂ
By Rotimi Agboluaje
You have been elected as the President of the Nigerian Economic Society. What changes are you bringing on board?
I was elected the 44th President of the Nigerian Economic Society. The NES is one of the oldest professional groups in Nigeria. It was started 1957 in London and we’ve had eminent economists who have  led the association, the likes of late Prof. Ojetunji Aboyade , who was  popularly regarded as the father of Economics in Nigeria. We have the late Prof Aluko, we had Prof Adedeji. Adedeji was formerly with the United Nations Economic Consult for Africa, Dr. Philips Asiodu, Prof. Ibi Ajayi, Prof Sam Olofin and so many eminent economists who have led this society.
In the last, there was a very good relationship between the government and the society. Anytime there was a problem with the economy, the people the government looked up to the Nigerian Economics Society. The government at that time valued the role of intellectuals and academics. We had a lot of permanent secretaries then who were well trained, who know how to interpret data and channel it in the area of economic policies.
In fact, that is one of the reasons the Second National Development Plan was regarded as one of the most methodical comprehensive and intellectually development plans we ever had. The team was led by the late Prof Aboyade. At some point, the government in collaboration with NES used to organise seminars every year to evaluate and critically analyze the budget and highlight the strength and weaknesses, of each and would come up with policy advisories for the government. There’s no better time than now that the country needs the Nigerian Economic Society. It is imperative because Nigeria is going through fundamental economic challenges occasioned by COVID-19, Russia/Ukraine War, and others. A lot of advanced nations are trying to stabilise their economies  because of the inflation which has affected global interest rate. Nigeria is facing a significant issue. We also have our own vulnerability. The fact that we so much depend on the oil sector is also a challenging  issue for us. Insecurity, effects of subsidy removal and so many others are contributing to our economic challenges. So, at a time like this, the government needs the NES to reset the economy. So, we are poised to give quality inputs to government policies.  This is a time that the Nigeria government should also engage with the Nigerian Economic Society so that we can come up with policies that are based on evidence, patriotic ideas that are not  based on personal or group interest rather  but what’s best for Nigeria. We can up with comparative analysis, what other countries have done that worked, come up with evaluation of policies. One of the things that we do is to look at the economy from a holistic sense as a system. The economy is such that what you do in what sector may have impact on another sector of the economy.
Our members include professors of economics, lecturers in Nigerian universities, graduates of Economics-related courses. The Society is not just for academics, we have our members in the private sectors who are in the research institutions, consultancy firms, government and so on.
How to solve multi-layer problems in the oil sector?
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You have to break it down. Up-stream where you do production, until recently,  there have been a lot of volatility. There was a time we were doing one million barrels per day because of security, pipeline vandalism, oil theft and so many challenges that were going on in the sector. Nigeria was losing a lot of money. In fact, from  the last four quarters, the oil sector has been contributing negatively to Nigerian economic growth. The oil gross domestic product{GDP} has been negative. As I have mentioned in some other meetings, we should not normalise and  accept that. That’s not the way to diversify the oil sector. It is not by losing money, it is by growing the sector. So, we need to address those challenges. There’s also something like divestment in the sector, the multinational oil companies are not investing much again, either because of the challenges of some of them trying to move away from hydrocarbons to other energies that are greener or because of some of the security challenges that they have and maybe because of the fiscal system that we have.   So, we don’t have enough investment.
In fact, we may not feel its effects fully now until later; because when you do investment, it takes years before it will translate into production. So, the low investment that we are experiencing now, its impact would be felt much later when the existing production fields start declining and we are not able to replace as well as expand what we are doing.
The unfortunate thing is that, when we shut down or not producing enough oil, that also affect our gas. Most of the oil we produce in Nigeria is associated gas. In fact, for some times, Nigerian Liquidified Natural Gas {NLNG} was not able to meet the quota of gas because the oil sector is not producing the required quantity. That was affecting the amount of gas that was available for the NLNG.
Is that why gas is expensive now?
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To start with, the price of gas and petroleum products are bench-marked on international prices. The seller of gas will look at how much is it in dollars; what’s the naira equivalent. If there’s depreciation in the exchange rate,that will affect the price of gas.
We are importing most of the gas we use. NLNG that is in charge of gas exports sells some locally. But we import a lot of LPG gas we use in Nigeria. So, hopefully there are some local refineries that are coming up to produce LPG. Also when Dangote Refinery comes up, that will be part of the products we will get from there.
On the completion of the Port Harcourt refinery, the government said it’d  be done this year and we hope it will be so. But that we will not meet our total demand but it will help to mitigate the challenges being faced currently.
I was listening recently to one of MKO Abilola’s interviews and he said something which I have also said in some of my publications and speeches. In the 90s, we were selling a barrel of oil to the refineries for $1 when the international barrel price was $21. So, we had been subsidising the oil for a long time, Nigeria has been doing this for a long time. MKO said it would remove it because Nigeria  was subsidising so much at the rate of $20 and we were losing so much money. When people look at subsidy, I know people have divergent opinions on the subsidy of petrol, because the other oil products are now market- determined while petrol is the one we have held on to for long. But if you look at the cost to the economy, it is humongous. Unfortunately, part of the problem we have now and why people are complaining is that the deregulation or the subsidy removal came at a time the exchange was also liberalized. That’s why the burden has become very serious on Nigerians.
Do modular refineries produce petrol?
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Yes, the margin of these refined product is very small. Crude oil is an International commodity, so it is the price they sell it here is what you get abroad. So, that’s the major components in the prices structure, you sell crude at the same price whether it is here or abroad.
That will not solve the problem because nobody will set up any business to make loss. So we have some modular refineries in Nigeria but they produce just diesel and kerosene, they can sell at their own price. Nobody will give you money to produce something that is subsidised, you must produce something that you’d be able to recover your cost. So, we have domestic refineries, there are about four or five of them, but they are only producing diesel and kerosene, and not petrol because of subsidy.
Many have called for privatisation of refineries. What is your take on this ?
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Government should sell out shares of the refineries. That’s privatization. Can anyone tell me one thing that government is doing that it is doing well. So, when people say government should do refineries, I just say it is like people are not students of history;  nothing the government does that it does well. Currently now they are not producing and government is spending billions on those refineries every month on salaries and all. Is there any business that will operate like that? it is only the government. The money spent is not on turn around maintenance, it is for those people working at the refineries, collecting salaries, going for training and incur expense of about N13billion in two years. So, the best thing is to privatise the refineries because the record shows that in Nigeria, the government has never run any business effectively and profitably.
Is the Petroleum Industry Act {PIA} not meant to make the sector effective?
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PIA wants to do that but we have been operating in disobedience to the PIA. At one point, that provision was suspended, the provision that says market forces must determine the price of energy products. We suspended it. The landing price of oil is over N600, but the commodity is being sold less than that amount. So, how can you say that you have removed subsidy?
I’m sure they will soon give license to private sector operators  so that these  one’s will import and sell at their own price.
How can the country solve the problems in that sector?
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One, we need to implement the PIA. There has been delay in implementing various aspect of the PIA. We need to be serious about implementing the entirety of the law to give confidence and assurance to the investors on the protection of their investment. There are many aspects of the oil sector that can generate jobs for this country, just like the telecommunications sector. In developed economies, companies and  multinational companies also set up refineries. Before 1973, the only refineries were being run by Shell. Shell had refinery here, it was this subsidy that took Shell away to take their products and refine abroad
The challenges in the power sector have been intractable. What are the issues in the sector?
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ItÂis very sad and unbelievable. In 2005, I was part of the team that developed the National Electricity Development plan, it was an inter-ministerial committee set up under President Olusegun Obasanjo. Obasanjo asked us to let him  know the electricity requirements for Nigeria to become a developed  country by 2030 and we did a plan. That plan showed that by 2030, we should be generating like 190,000 megawatts;  by 2007 we were looking at getting to 7,000 megawatts. By 2020, we are looking at 40/50,000 megawatts. SO, it is very sad that now we are talking about 4,000 megawatts. It is a shame.
What can the country do about the power sector privatisation?
When we privatised the power sector, big companies didn’t bid because they were suspicious of the process. There was no credibility.
I was reading somewhere that the contract will be expiring soon because what we have advocated was that we need to have a comprehensive overhaul of that sector. The sector has to be recapitalized so they can invest in infrastructure, meters, transformers, distribution lines, breakers and more equipment that will minimize the losses.We need to re-evaluate the privatization agreement. Many people those who bought into it were not technically capable and they don’t even have the economic resources to drive it. There were no foreign injections as witnessed in the telecommunications sector where they brought fresh money. They borrowed from local banks.
Again, we need to have proper consumer enumeration and know  many people are consumers.The DISCOS should enumerate those who are under their franchise.
Then, we also need this metering. People should be metered. But meters are not available in adequate quantity. We must be willing to pay for this cost of service, it is very important.
What impact do you think the electricity law Buhari signed before leaving office would have on the power Sector?
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One of the laws that President Buhari signed was allowing states to generate their electricity. It is a very good thing. Monopoly is never a good thing and it results in charging high price and supply low quantity. So, when you bring more people that will bring more supply, so states now can either go into partnership to produce electricity. It is opening up entry, expanding entry into the market. That would bring some level of competition, level of supply into the market.
But one of the problems that have to be resolved is the fact that in every jurisdiction, the DISCO companies have franchise. That means everybody that is coming in, either the government or the private sector, would have to negotiate with them. Those challenges are still there and they must be resolved. The law should allow for free access where we can have distribution lines.
The Naira is on free-for-all. How can this be reversed?
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There’s no free launch. The value of your currency is determined by many factors such as productivity, the  foreign reserve, earnings and others. So, we need to strengthen the naira  by producing more, selling  more,  getting more export that will bring in more dollars to the economy.
We need to make the economy very conducive to attract investment and productive in the medium to the long term. We need to pay up those debts and unfortunately the Nigerian National Petroleum Company {NNPC} has not been remitting money. The government must be transparent and be willing to make sacrifices.