olaopa o.r (doctoral candidate, school of politics, ukzn, rsa); akinwale y.o; and ogundari i.o

©NACETEM 2013http://www.nacetem.org Email:[email protected]

Governance Institutions for Sustainable Energy Resources Management in Nigerian Federalism: Issues, Perspectives and Policy Agenda for Action.

Olaopa O.R (Doctoral Candidate, School of Politics, UKZN, RSA); Akinwale Y.O; and Ogundari I.O

National Centre for Technology Management (NACETEM) (Federal Ministry of Science & Technology)

Obafemi Awolowo University, Ile-Ife, Nigeria

A paper presented at the 6th NAEE/IAEE Conference organised by Nigerian Association of Energy Economics (NAEE)

April 22 and 23, 2013, at Sheraton LagosDate: March 21, 2013


OUTLINE Preamble

Introduction

Objective

Methodology

Presenting a workable agenda for Energy Sector Management: Policy Issues and Agenda for Action

Agenda for Action: Framework, strategies, policy options and mechanisms for establishing a governance institution for energy resources management.

Concluding Remarks 2


PREAMBLE

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Preamble

Harnessing and managing energy resources for sustainable development goes beyond:

generating new integrated knowledge towards actively applying this knowledge to real energy problems,

helping decision-makers evaluate the possible benefits and pitfalls of different response options,

facilitating implementation of required actions,

re-structuring and re-organization of the responsible ministry for energy resources, and

Designing energy policy4


Preamble (Cont’d)

What then is Required? Institutions for governance

any arrangements designed and used by a group or for a group to govern itself including considerations of the allocation and distribution of political power and for developing incentive structures

an essential ingredient of any strategy for managing energy resources in order to achieve sustainable development.

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Features/Roles of Effective Governance institutionsEffective institutions must be able to:

lengthen the time horizons for which individual and societal decisions are made;

broaden the orientation of governments to the needs of the many over the long-term;

enable individuals, firms, governments, and entire societies to consider short-term sacrifices that offer long-term improvements; and

include the capacity for rapid, constructive response to evidence of unsustainability of a certain course of action (ICSU, 2005).

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Introduction Over the years, there have been re-structuring and re-

organization of the responsible ministry for energy resources with the aim of addressing specific developmental challenges.

The consensus is strong that the Ministry of petroleum resources should be the sector ministry which should be responsible for the management and implementation of Nigeria’s energy policies and resources under the Presidency.

However, as at now the Ministry and its roles have not been adequately institutionalized and linked to sector-specific programmes in the other sectors’ ministries in a manner that guarantee the attainment of national objective of economic development.

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Reasons for the inadequate institutionalization of the Ministry and its roles

inadequate commitment to the adoption of better approach to energy policy design, implementation and the management of energy resources.

Majorly, is the limited or lack of properly established strong governance structure in the energy sector

This has resulted in the inefficiencies of existing structures to administer and

manage the country’s energy resources, due to a number of constraints including:

the nature of Nigerian federalism which requires the formulation of certain policies such as the federal character principle and quota system, principle of derivation among others, irrespective of their shortcomings, in the management of the country’s resources.

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Other problems faced by the sector

limited advocacy for and lip service attention paid to energy sector at high political and policy levels,

low maintenance and management culture for energy resources among the population,

weak mechanisms for the management of energy resources,

ineffective coordination, inadequate management of budget and resource allocation,

weak linkage between energy policy formulation and national development planning,

weak mechanisms for implementation, evaluation and review, weak inter and intra ministerial, departments and agencies’ linkages

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Objective And Methodology

Objective

to present a workable agenda from which we can learn how to improve the design and adoption of effective institutions for sustainable energy resources management in Nigeria.

Methodology the paper employs largely the qualitative method

which Liebscher describes as “methods that are appropriate when the phenomena under study are complex, are social in nature, and do not lend themselves to quantification” (Liebscher, 1998)

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Presenting a workable agenda for Energy Sector Management: Policy Issues and Agenda for Action

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Policy Issues in Energy Resources Management

Institutional infrastructure development

Programmes administered by different departments, institutions and agencies, and bureaucratic competition

Funding for energy sector’s activities

inept pricing of natural gas for the domestic market

level of industrialization

Energy policy and regulatory framework, and

Institutional/ governance /administrative structure and procedures . 12


Existing Governance Institutions for Energy Sector Management

In the energy sector management, four government institutions can be recognised. These are:

The presidency (the president and his top advisors).

The Ministry of Petroleum (sometimes called the Ministry of Energy, Mines and/or Power).

started as a Hydrocarbon section of the Ministry of Lagos Affairs in the 50s

Became a full-fledged Ministry in 1975

It formally “leads oil sector policy-making,” and technically oversees the DPR and NNPC, both of which operate separately under the Ministry (Iledare and Suberu, 2010). 13


Existing Governance Institutions (Cont’d)

The Department of Petroleum Resources (DPR).

Regulate the industry by overseeing or supervising the activities of all companies licensed to operate in the industry, including the NNPC.

Processes all applications for licenses and leases in the industry,

Ensures compliance of all industry operators with applicable national regulations and good oil producing practices,

Enforces safety and environmental standards,

Keeps and updates records on petroleum industry operations,

Ensures timely and adequate payments of all rents and royalties to the government,

Promotes and monitors progress towards the indigenization of (or the enhancement of ‘local content’) in the oil industry, and

Provides appropriate technical advice on oil industry matters to the government (Iledare and Suberu, 2010).

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Existing Governance Institutions (Cont’d)

The Nigerian National Petroleum Corporation (NNPC).

It is the commercial and business agency of the federal government

It is concerned with the most important oil and gas projects in the industry.

This includes joint venture arrangements, production sharing contracts, and related commercial partnerships with one or more oil multinational companies.

The functions notwithstanding, these structures have serious

shortcomings in the governance of the industry

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Shortcomings of the existing governance institutions

weak “DPR capacity, existed as a unit within the NNPC until 1988, “creating the

untenable situation of the regulator being subordinate to the industry’s largest player.

NNPC intrusion into regulatory and policy-making functions,

lack of NNPC oversight and accountability, and

weak incentives for efficiency and performance (Gillies, 2009)

To resolve these problems, Petroleum Bill was enacted 16


Components of the Petroleum Bill

It proposes three new sets of oversight institutions for the oil and gas sector in Nigeria.

It establishes the Nigerian Petroleum Directorate (NPD) as the overarching and coordinating petroleum policy-making institution in place of the Ministry of Petroleum Resources.

It establishes three regulatory institutions: the Nigerian Petroleum Inspectorate (NPI), and

the National Midstream Regulatory Agency (NAMIRA), and the Petroleum Products Regulatory Authority (PPRA) to regulate all matters related to the upstream, midstream and the downstream sectors, respectively.

The Nigerian National Petroleum Company was restructured and repositioned to focus on commercial activities of the industry.

All these efforts failed with respect to holistic funding, administration, management and coordination of the activities and resources of the energy sector.

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Reason for the failure The hitherto existing policies in the sector have been those

of individual energy subsectors such as electricity, oil and gas, and solid minerals

The policies were developed from limited perspectives of each of the subsectors and had resulted, in some cases, to conflicting policies and programmes, ineffective management and coordination, to the detriment of the country as a whole, and

Above all, they failed to provide and/or properly constitute holistic governance structure that is critical for administering, managing and coordinating the activities of the sector for national development (ECN, 2003).

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Challenges created by the failure The hitherto existing policies in the sector have been those of

individual energy subsectors such as electricity, oil and gas, and solid minerals

the performance of the sector is very low to generate the type of effects necessary to stimulate the expected sustainable national development and economic growth despite the government’s huge spending on it.

poor quality of public financial management at the sub-national level due to increased financial dependency of the constituent states

Inability to economically plan as a result of petroleum and energy price distortions, corruption and inefficiencies, and fiscal instability due mostly to crude oil price volatility.

Heavy spending on environmental, social political problems19


Agenda for Action: Framework, strategies, policy options and mechanisms for establishing a governance institution for energy resources management.

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Issues involved in creating governance institutionIn establishing or creating governance institution for sustainable energy resources management, attention needs to be paid to the following issues: government agenda;

mechanisms for developing and implementing energy policy;

quality education and vocational skills acquisition;

massive investments in energy infrastructural development; inter and intra ministerial coordination; national and international networking/collaboration;

funding; policy instruments and regulatory framework; and political commitment. 21


•

FFramework for creating a workable and effective governance structure for managing energy resources

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For sustainable energy resources management in Nigeria, there is need for the design of energy policy whose formulation process must be all inclusive and bottom-up to engender widespread stakeholders’ participation and ownership in order to muster adequate support for the policy and hence its effective implementation.

The policy must be fully integrated into the national economic development blueprint/agenda and complementary leadership coupled with the initiation of reliable funding mechanisms, Regulatory framework aimed at enhancing competition, breaking monopolies and improving effective functioning of the market and strategic partnership with international development partners as well as Public-Private sectors support for it to ensure considerable impact on the quality of life of the citizenry.

To this end, Nigeria must evolve a framework that provides strong, inclusive and broad based governance institutions which will enhance effective coordination, direction and management of energy sector activities in Nigeria. Some suggested institutions include the National Fund on Energy Resources Research (NFERR), National Research Council on Energy Resources (NRCER), National Council on Energy Resources Management (NCERM), among others, with specific roles as a cue from the Federal Ministry of Science and Technology’s (FMST) National Science, Technology and Innovation Policy.

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Concluding RemarksConcluding Remarks


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THANK YOU FOR YOUR THANK YOU FOR YOUR ATTENTIONATTENTION

olaopa o.r (doctoral candidate, school of politics, ukzn, rsa); akinwale y.o; and ogundari i.o

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