Nigeria’s 12-month countdown begins: Implications of the 2023 elections for planned reforms to Nigeria’s oil and gas sector

Nigeria’s Petroleum Industry Act (PIA), which was initially proposed more than two decades ago, was finally enforced in Nigeria last August. The bill seeks to reform and encourage investment in the oil and gas industry where growth has stalled. More specifically, it calls for the creation of two new regulatory bodies for upstream and downstream oil operations to streamline regulation, the implementation of a new petroleum fiscal industry framework, and the development of host communities. 

The progress that the current government has made in carrying out the reforms has so far been limited. To complicate matters, in February 2023, federal and gubernatorial elections will take place. The upcoming elections are likely to produce political contests that could further stall the implementation of the bill. Certain reforms are at particular risk of being thwarted. 

The issue of fuel subsidies has already hindered the government in implementing the PIA. Despite being Africa’s largest oil exporter, Nigeria imports most of the fuel it consumes and its national subsidy equates to the difference between the landing cost of gasoline and the pump price. The PIA calls for the elimination of fuel subsidies within six months of its enactment. Last month, facing opposition from political parties and labour groups, President Muhammadu Buhari requested an 18-month extension from parliament. The removal of fuel subsidies would be a politically sensitive move as it could exacerbate inflation and incite popular protest. It is therefore no surprise that Buhari is now hoping to conveniently delay this until after the elections. 

Fuel subsidies are not the only problematic aspect of the new bill. In fact, the bill proclaims that 30% of profits made by Nigerian National Petroleum Company Ltd will be put into the Frontier Basin Development Fund. This fund serves to finance further oil exploration in the Northern regions of the country where supplies are smaller. This has been met with considerable criticism in the oil-rich Niger delta states in the South among politicians and local communities alike, as they see the bill as prioritising the interests of Northern states to the detriment of the South. For the impending elections, the tradition of rotating presidential candidates between the North and the South of the country is likely to remain. As the candidates from the main political parties were from the North in 2019, custom dictates that in 2023 they will come from the South, which in turn will provide the opposing views of politicians from southern states with greater publicity. Regional antagonism could have obstructed the implementation of proposed reforms in non-election years. The upcoming elections will  increase the likelihood of this. 

The PIA will help to bring much-needed reform to an outdated fiscal and regulatory framework of the oil and gas sector. That said, the contribution it will make to achieving sustained economic development, stimulating growth throughout the country as a whole and facilitating the clean energy transition is more questionable. In the pivotal twelve months that lie ahead, elections will consume the political sphere and politicians will act in line with their electoral game plans. This could help bring the bill’s shortcomings to light and in turn make the road to implementing the reforms even bumpier.