In July, Nigeria’s state-owned oil company, the Nigerian National Petroleum Corporation (NNPC), got a new group managing director. Mele Kolo Kyari, formerly head of the corporation’s crude oil marketing division — who also doubled as Nigeria’s representative to OPEC — replaces Maikanti Baru for what is perceived as the number two policy role in the oil sector.
One of the key issues on Kyari’s agenda is to tackle the current consumer fuel subsidy regime. The current subsidy programme ensures that the NNPC is the sole importer of all fuel products into the country. Kyari wants to convince the country’s government and people to remove the subsidy regime which is something previous governments have tried and failed to do.
Despite Nigeria’s massive oil potential (as the continent’s largest oil producer), it lacks significant capacity to refine its own products. Plans are in place to change this amidst the development of the Dangote refinery in Lekki, Lagos State, a private sector project sponsored by the Dangote Group. But this will not come on steam before 2022. In the meantime, the NNPC is forced to import refined products through a series of contracts with petroleum suppliers known as Direct Sale Direct Purchase (DSDP) contracts.
Subsidies are a highly politically sensitive issue and Kyari will have to tread very carefully to push through any changes. For example, the Goodluck Jonathan government had tried to do so in 2011 but rescinded the decision due to popular protest. Kyari’s ability to do away with the subsidies will be highly dependent on who eventually replaces Ibe Kachikwu as the new Minister of Petroleum Resources – the perceived number one policy role in the oil sector. This is because the minister will be the one to promote the policy at the ministerial meetings which Kyari is not permitted to attend. Whether or not Kyari’s ambitions will be met are unknown right now, but the fact that removing fuel subsidies is on the agenda is a positive outcome in and of itself.