Analysis: Nigeria’s Buhari faces reform fight

OREANDA-NEWS. Nigeria's new government aims to make reform of the oil sector a priority when its new National Assembly convenes on 23 June.

President Muhammadu Buhari has spent most of his first weeks in office focused on how to combat the security threat posed by Islamist group Boko Haram. The threat, and the need to tackle endemic corruption, was the focus of Buhari's talks with G7 leaders in Germany on 7-8 June and at a summit of African Union leaders in Johannesburg on 14-15 June. Visits to neighbouring countries Chad and Niger have also resulted in Nigeria resuming leadership of the regional military response to Boko Haram.

Buhari has yet to appoint a petroleum minister, fuelling expectations that he will retain the post held previously by Diezani Allison-Madueke. Buhari did this when he was military ruler of the country in 1983-85. Buhari says the work of a transitional team set up to hand over power from the government of his predecessor Goodluck Jonathan should be completed before new ministerial appointments are made. The National Assembly is scheduled to reconvene on 23 June and will have the right to vote on appointments.

The newly elected leader of the Senate, Bukola Saraki, says passing the long-delayed petroleum industry bill — stalled in the assembly since 2008 — will be a priority. The bill's scope, complexity and potentially wide-ranging impact has made it prone to repeated review. Leading foreign upstream operators oppose the bill, mainly because it will increase the government's fiscal take from offshore oil fields. Legislative uncertainty has led to a sharp downturn in upstream investment in Nigeria.

The assembly may now tackle components of the bill in more manageable pieces to ensure their passage. "We will break down the bulkiness of the bill and tackle all the grey areas," Saraki says. He met with Shell Nigeria's managing director, Osagie Okunbor, on 17 June, and pledges exhaustive dialogue to break the impasse to produce "legislation that will make our country an investment destination".

Provisions of the bill include reform of state-owned oil group NNPC, to allow it to raise funds from international capital markets and operate as a more commercial firm. But the new administration has come under increased pressure to review how the firm accounts for national oil and natural gas revenues. Statutory transparency organisation Neiti has documented cases of mismanagement, underpayment of taxes, royalties, under-assessment and other lapses resulting in billions of dollars of lost government revenue. But implementation of Neiti's findings and recommendations has suffered from lack of political will.

Neiti this month urged the new government to recover \\$7.5bn from foreign oil firms for underpayment of taxes and royalties. The firms deny that payments are outstanding. Neiti repeated its claim that Nigeria LNG, in which NNPC has a 49pc stake, has not accounted for \\$11.6bn owed to Abuja in dividends from loans and interest repayments. NLNG, which also includes Shell, Total and Italy's Eni, denies this.