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Drivers in Lagos paid N162 ($0.40) per liter of gasoline last week, which is one of the lowest interest rates in Africa — a beneficiary of fuel subsidies that cost the continent’s largest crude oil producer billions of dollars each year.

This reminds us that although Nigeria’s President Mohamedu Buhari signed a major petroleum industry reform bill last month-which stipulates that fuel should be sold at market prices-Nigeria’s dying petroleum industry may be dependent on it. The economy is unlikely to change anytime soon.

The bill was first proposed more than two decades ago and will create an independent regulatory agency to commercialize national oil companies and support the emerging natural gas industry. The government says this move will help attract billions of dollars in new investment. As a concession to oil companies that have long called for increased financial certainty, it will simplify and reduce some royalties and taxes.

But as the gas station in Lagos made it clear, the bill will come into effect after Buhari’s signature, and it may take several years to fully implement it.

Kola Karim, chairman of the Nigerian oil company Shoreline, said that after decades of reform calls and corporate complaints about opaque and clumsy regulatory and fiscal structures, “at least now we have some clarity on the industry. And the direction on the surface”. “This is some of the best news from Nigeria.”

These reforms are “a series of dramatic changes… Fitch Ratings stated in a report last month that they aim to modernize and streamline all aspects of the industry”, adding that they will “significantly reduce future fiscal governance Uncertainty… and provide foreign companies with a stable basis for new licenses and investments, reducing the long-term risks of changes in fiscal and regulatory systems.”

A clause in the bill established a fund to allocate 3% of oil project expenditures to surrounding communities, which could provide millions of dollars to areas that have suffered economic and environmental damage from the oil industry for decades.

But Fitch warned that “impact [of the act] It will depend on the details of the implementation”.

Eurasia Group Africa Director Amaka Anku said that the bill should benefit the industry. But she doubts whether the government will be able to implement the entire bill within a year, as it implies, because of how much discretion it gives the country’s oil minister-78-year-old Buhari holds a portfolio, his nickname is “Baba Brother “-slow” implies his speed.

“Everything will slow down because Buhari is slow,” she said. Although a lot of work has been delegated to Junior Petroleum Minister Timipre Sylva, “Due to the way Nigeria’s bureaucracy works, he is not an official minister, but Buhari must sign. And you know what the situation is, Buhari doesn’t have much energy, so when he When everything has to be signed, everything becomes slow.”

The bill also emphasizes Nigeria’s commitment to oil. Oil provides half of its total revenue and most of its foreign exchange. Even if the wider world continues to develop, oil giants such as Shell are the cornerstones of its industry. Unplug Onshore development.

“We are now facing a decarbonized world, so invest… Entering the oil and gas industry is now even more terrifying,” Karim said. He added that Nigeria is no longer the only participant in sub-Saharan Africa. He refers to Senegal, Ghana and Côte d’Ivoire. “Capital has many choices, which market they go to,” he said.

But Mele Kyari, head of the state-owned National Petroleum Corporation of Nigeria, said that the Intermediate International Oil Company has approached the country on investment matters, but he declined to give the specific name.

Gasoline is sold in tanks in Lagos. Fuel is heavily subsidized in Nigeria © Pius Utomi/AFP via Getty Images

“The withdrawal of any of our partners [Shell] Don’t rule out other people’s entry. What we see globally is that mid-level players are entering the industry very, very quickly, so you don’t have to be a big player,” he said.

No matter how ambitious the government plan is, it is hampered by imported fuel subsidies. Spending billions of dollars a year to keep fuel prices low means that any benefit from rising oil prices is almost immediately offset. For fear of political backlash, successive governments are reluctant to remove subsidies.

The government’s long-term goal is to reduce the practical significance of subsidies by spending billions of dollars on domestic refining capacity, thereby reducing prices.

It also announced plans to spend US$3 billion to refurbish the dilapidated state-owned refinery and another US$2.7 billion to buy a 20% stake in the refinery built by Africa’s richest man Aliko Dangote on the outskirts of Lagos.

Kyari stated that Dangote’s shares made business sense and dismissed critics’ concerns that it was a bailout for the billionaire. It will be paid for through a US$1 billion loan from Afrexim Bank and US$1.7 billion in crude oil. Dangote Industries declined to comment.

Kyari told the Financial Times that the Dangote refinery has “huge potential and very positive economies of scale”. “We believe that doing so will allow us to expand our product portfolio and derive value from this refinery because we know we can recover all costs within three years.”

But Cheta Nwanze of SBM Intel, a Lagos-based consulting firm, and people who often criticize the government called the move “very strange, especially because it has not yet been put into operation and has experienced various delays.”

Kyari said Nigeria needs its own refinery and the integrated refining capacity of the Dangote project to meet local gasoline demand. He added that the cost of the renovation project is lower than the cost of building a new facility.

But critics say that decades-old refineries have a capacity of less than 10%, which is widely regarded as an outdated money pit. Whether their renovations will provide supplies that make subsidies a thing of the past is unclear.

“This is ridiculous, because what are you renovating?” Anku said. “I know everything about those refineries… it’s worthless.”

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