The emerging contemporary skyline of Victoria Island, Lagos. criminal investigation. While it is early days in the process, some constitutional tinkering could prove beneficial to the Fourth Republic, but as Canadians well know constitutional tinkering is never easy. tutional tinkering is never easy. Important economic sectors are likewise undergoing reform. After the global recession exposed the weaknesses of ten marginal Nigerian banks, the Central Bank and the entire industry stepped in to clean up the bad apples and recover assets stashed abroad. The long awaited restructuring of the Nigerian oil and gas governance and regulatory regime is inching along in the form of the omnibus Petroleum Industry Bill. Although some issues remain unresolved, and some international oil companies publicly worry about fiscal adjustments, a measure of certainty and clearer division between the federal government regulatory and operating functions will only enhance the sector. In the meantime some companies have taken a wait-and-see approach to new investment, and recent severe flooding in the east has impacted both oil and Liquefied Natural Gas exports. The Dance Around Subsidies and Refineries Then there is the fuel subsidy debacle: President Goodluck Jonathan tried to remove subsidies but immense pressure from both labour unions and fuel importers forced him to reinstate them. The subsidy only benefits a narrow few, mostly the licensed importers, and shortages abound. When petrol is available, it is rarely sold at the regulated N97/litre (C$0.62) price. And
there is no incentive to revitalize existing or build new refineries until the subsidy and the regulated price are removed. Hundreds of idle fuel tanker trucks sit at a junction between Lagos and Ibadan, waiting for orders to pick-up or deliver fuel across the country. Manipulation of supply creates black market rents, and a recent commission identified significant problems in the subsidy scheme, creating a political crisis at the highest levels. The country’s three giant state-owned refineries have been ordered to be back up and running by 2014, but they are old, in need of substantial maintenance and overhaul, and even at full capacity cannot meet the fuel requirements of the country. Other potential refineries are on the books, including Chinese, American, and Canadian-partnered projects. No one knows what national fuel consumption would be if supplies were plentiful. The entire Nigerian petroleum sector is in transition but there is hope, though not certainty, that it will function better after a difficult transitionary phase.
Power Struggle in Power Sector The petroleum sector is a huge export earner for the country, but power is the lifeblood of any economy and the quagmire of Nigerian reform efforts. In October, the privatization process stumbled ahead, with a number of preferred bidders awarded existing state-owned generation and distribution companies. These transactions will earn government well over $1 billion if all successfully close. On the generation front, over 1,100 MW were added to the grid this year, inching towards a target generation capacity of 6,000 MW in the near term (excluding the millions of emergency generators used by households and businesses). But compare that to the province of Alberta where oil sands development and population growth threatens to hobble an electrical system that already generates 14,000 MW. And increased power generation and rehabilitated distribution companies will alone not solve the problem: Nigeria’s transmission system requires both a technological and administrative overhaul.
Hundreds of fuel tanker trucks line the highway at a junction between Lagos and Ibadan.
THE RISING AFRICA MAGAZINE /// 37