AFRICA: Nigeria's president assumes energy minister role

Umaru Yar'Adua, Nigeria's new president, has taken on the responsibilities of energy ministry and has appointed three junior ministers to support him in the role.

Odein Ajumogobia was named junior minister for petroleum, Fatimah Ibrahim for power, and Odusina Emmanuel for gas.

Dividing the energy ministry into smaller units and appointing a minister for gas highlights the importance that Yar'Adua has given to developing Nigeria's gas resources, which the previous administration stressed will become as important as oil, if not more important. Nigeria has 187 tcf of proved gas reserves, and Yar'Adua said he wants gas to be allocated for domestic power generation.

Analysts had mixed reactions to the appointments. Rolake Akinola, West Africa analyst at Control Risks, told OGJ: "With the scale of reform required in all three sectors, it probably makes pragmatic sense to split the portfolio. However, Yar'Adua is creating expectations about the government's delivery and will need to demonstrate that there have been improvements early on."

Jon Clark, director of oil and gas at Ernst & Young, told OGJ: 'Having different people responsible for different aspects of the energy chain (such as oil and power) is not uncommon. Oil companies will need to make sure they understand the new regime and have appropriate relationships in place for their business needs."

However Alex Gorbansky, managing director of Frontier Strategy Group, said the junior ministers were unlikely to have real decision-making authority or influence in the short-term and would look to accumulate influence and rents over time. "For companies, however, this new administrative structure means that they will now have to deal with yet another branch of Nigeria's corrupt and unwieldy bureaucracy and effectively another paymaster. To succeed, they will have to effectively play on both sides of the fence with the president and the junior ministers."

Priorities for the new staff in the energy ministry include gaining control over violence directed at the industry and kidnapping of oil workers by militants in the Niger Delta. They are demanding greater control of the resources, improved government accountability and transparency at the state level, and development of power generation for Nigeria's citizens, which Yar'Adua stressed in his election campaign.

Gorbansky added: "While most investors welcome the recent announcement from Nigeria as a continuation of free market policies, our views are less sanguine given continued violence in the Delta, the lack of diversification of the economy and the shock that could result from a significant drop in oil price, and the growing influence of China in the country."

nigerian_flagPetroleum pricing in Nigeria is a major issue that caused a recent labor strike because of the steep increase in domestic prices, which is affecting consumers and Nigeria's economy. The government has found it difficult to continue to subsidize fuel imports, although it has promised a 1-year cap on domestic fuel prices.

Akinola said the power sector, which is inefficient and has stalled in advancing privatization, also faces challenges: "The system is bureaucratic and there are some assets belonging to the old state power company NEPA that need overhauling. Investors need to sink in deep cash and in that sector you don't usually make any gains on money for years to come. Yar'Adua needs to keep on wooing investors, but they find it difficult to value assets because of the insecurity in the Delta, and the unions have occasionally accused the government of underpricing the assets."

This is not the first time Nigeria's president has taken control of the energy portfolio, as his predecessor Olesegun Obasanjo controlled it for the 8 years he was in power. Many Nigerians, however, felt that he delivered little benefit. Obasanjo, who picked Yar'Adua as his successor, is expected to wield considerable influence in the new administration.

According to Nigerian reports, Yar'Adua is expected to declare a state of emergency in the energy sector and then bring in Nasiru el-Rufai, former high-profile minister of the capital city, Abuja, to oversee it. Nasiru-el-Rufai has a track record of reforming Nigeria's slums and would be able to take on those opposing change within Nigeria's power sector.

The unveiling of Yar'Adua's new cabinet comes 2 months after he took the reins of power from Obasanjo May 29. The delay in picking a cabinet occurred because the legitimacy of Yar'Adua's mandate has been questioned. The election in April was widely condemned in and outside of Nigeria as being fraudulent, with wide instances of vote rigging. Nigeria's constitution also obligates each state to select a representative to be appointed minister, which has further complicated the process. Many groups have lobbied Yar'Adua for ministerial positions, and the new president has had to carefully negotiate these demands.

Via: Oil & Gas Journal
by Uchenna Izundu