Sopuruchi Onwuka

The recent executive orders churned out by the federal government are meant to steer the Nigerian upstream petroleum industry into clear pathway towards delivering government’s prime economic aspirations for the energy sector.

Chairman of AA Holdings, Mr Austin Avuru, that now has clear sense of obligation to enhance operating efficiency by targeting the rewards built into the executive orders.

In two of the recent executive orders issued by President Bola Ahmed Tinubu, government has required the industry to significantly reduce process cycles as part of the earlier mandate to increase oil production by one million barrels per day in the short term.

In subsequent executive order, the government also floated incentives for companies to enjoy stirring performance-based tax incentives with the aim of attracting new investment in the sector while building on outputs that boost government revenue.

The Oracle Today reports that oil and gas exports produced by the upstream petroleum industry account for significant 95 percent of Nigeria’s foreign exchange income, 90 percent of total export commodity and about 80 percent of the country’s balance of payments.

With the current foreign exchange squeeze and ensuing galloping inflation in the country, the government has mounted intense pressure of the upstream petroleum industry to expedite operating processes that would yield rapid production boost, earn greater foreign exchange income to rescue the reeling Naira, and also tame inflation in the country.

It would be recalled that President Bola Tinubu had in late May announced new executive order that would cap tax credits at 20% for oil companies and introduce performance-based tax incentives with the aim of attracting investment in the sector while shielding government revenue.

Mr Avuru who spoke exclusively to The Oracle Newspapers explained that the executive orders from the president’s office are well thought out to address prevailing issues in the industry and in the economy.

Mr Austin Avuru is an eminent geologist who has earned immense experience in oilfield operations, high level executive management, high-risk high-return investments, industry leadership, policy advocacy and investment advisory.

Mr Avuru is the founding Managing Director of Platform Petroleum, founding Managing Director of Seplat Energy Plc, lead investor in Pillar Oil, and currently the Chairman of AA Holdings.

He is an eminent Fellow of the National Association of Petroleum Explorationists (NAPE), Society of Petroleum Engineers (SPE) and a member of Institute of Directors (IOD). He commands the respect and audience of industry leaders.

In discussing the recent executive orders in the industry, he said the mandate for accelerated processes and incentives for new investments complement each order in bringing more capital into efficient operating processes to achieve rapid results.  

“My interpretation of the executive orders so far is that they are all targeted at removing bottlenecks that we have seen in the implementation of existing laws. Each one of them is supposed to ease inflow of investment capital: whether it is in reducing the approval time frames, utilization of deep offshore gas or being incentivized for being efficient.

“When you look at all the executive orders, they are targeted at attracting capital, not just foreign capital but also local capital and promoting efficiency.

“All the executive orders are designed to achieve new capital import and enhanced efficiency. It is all about giving clarity on the route to be efficient and bring in more capital. They are well thought out and you have to praise those who sat down to think about them,” Mr Avuru declared.

The executive orders, The Oracle reports, might have become expedient in the face of lingering gap between government’s fiscal projection for the year and actual pace of recovery in the industry which suffered acute production decline in the past administration of the government.

Both production volumes and market prices continue to perform below the projected revenue from the upstream petroleum industry which has early mandate to rapidly boost production to match the budget outlook for the year.

Benchmark Brent crude oil prices averaged $64.09 per barrel in May, down 4.2% from April. On 30 May, the commodity traded at $63.92 per barrel, down 0.6% from 30 April, as OPEC+ announced plans for larger output hikes ahead.

However, prices rose in recent weeks due to the Iran–Israel conflict even though the flare in geopolitical tension has since dampened and prices are once again on decline as threats to supply have evaporated with the Iranian war.

On the production side, Nigerian oil output increased to 1.54 million barrels per day (mbd) in May, from April’s upwardly revised 1.52 mbpd; edging above Nigeria’s OPEC+ quota of 1.50 mbpd for the second month running.

However, analysts forecast higher Nigerian oil production in 2025 than in 2024, driven by rising demand from Dangote refinery. However, there are still fears that security situation in the oil-producing Niger Delta is expected to pose a key downside risk.

Analysts agree that only massive inflow of foreign exchange income from the petroleum industry would assist the country pull back from the precipice of runaway inflation; even as most Nigerians disagree with the Nigerian Bureau of Statistics (NBS) that inflation is imperceptibly lowering.

The Oracle reports the NBS as asserting that inflation eased to 23.0% in May from April’s 23.7%, marking the fifth month after the agency altered it methodology which lowered the influence of food prices on inflation. The new method modes price pressures for food, housing and transportation.

Consequently, according to the NBS, annual average inflation fell from 28.5% in April to 27.6% in May; and core inflation fell from 24.5% to 23.3% in May.

But, consumer prices rose 1.53% in May over the previous month, moderating from April’s 1.86% increase.