VZCZCXRO6067
PP RUEHMA RUEHPA
DE RUEHUJA #1638/01 2111511
ZNR UUUUU ZZH
P 301511Z JUL 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 0451
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 7522
RUEHWR/AMEMBASSY WARSAW 0488
RUEHCD/AMCONSUL CIUDAD JUAREZ 0483
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
UNCLAS SECTION 01 OF 02 ABUJA 001638
SIPDIS
SENSITIVE
SIPDIS
DEPARTMENT PASS TO USTR (AGAMA)
DEPT OF ENERGY FOR CAROLYN GAY
E.O. 12598: N/A
TAGS: ENRG ECON PGOV NI
SUBJECT: NIGERIA: PRESIDENT YAR'ADUA HOLDS ENERGY PORTFOLIO
REF: A. ABUJA 1614
B. ABUJA 1607
C. ABUJA 1582
D. ABUJA 1575
E. LAGOS 494
F. ABUJA 1376
ABUJA 00001638 001.2 OF 002
1. Summary. (U) President Yar'adua will act as Minister of Energy,
following the footsteps of his predecessor. To assist managing the
portfolio three deputy ministers have been appointed to oversee
Power, Petroleum, and Gas. This decision is connected to the
president's campaign promise that he would declare a state of
emergency in the energy sector. Yar'adua believes that the energy
sector is vital to solving Nigeria's economic problems. End
summary.
.
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Is This New?
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.
2. (U) On July 26, President Yar'adua inaugurated his cabinet and
announced portfolios for 39 ministers. Like his predecessor
Olusegun Obasanjo, Yar'adua will supervise the energy ministry. He
named three deputy ministers -- for power - Fatima Ibrahim; for
petroleum -Odein Ajumogobia; and for gas - Odusina Olatunde
Emmanuel.
3. (U) Former President Obasanjo held the portfolio of Minister for
Petroleum Resources during the first four years of his
administration, and did not appoint a deputy minister until 2005.
Appointing three deputy ministers to manage the power, petroleum and
gas portfolios is in line with Yar'adua's vision to tackle Nigeria's
energy problems, and focusing on each of the problems individually.
.
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Power Problems
--------------
.
4. (U) During the election campaign, Yar'adua announced that he
would declare a state of emergency in the energy sector to solve the
nation's energy problems. The GON has set ambitious targets to
generate 10,000 MW of electricity by the first quarter of 2008, and
27,000 MW by 2011. The unreliable supply of electricity is a main
cause in the collapse and non-profitability of many businesses in
the country. Owners are forced to provide power using generators
with its attendant high fuel costs. Nigeria has an installed
generation capacity of 6,000 MW, but rarely generates over 2,000 MW
despite the GON spending 396 billion naira ($3.1 billion) to
refurbish power generation plants and distribution systems as well
as to construct new power stations and transmission lines in the
last eight years.
.
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Gas Problems
------------
.
5. (U) Much of Nigeria's gas is flared and a large quantity of gas
that is gathered is exported through the various liquefied natural
gas projects. The GON's drive to increase the nation's power
generation capacity relies heavily on building gas-fired power
plants, and the current gas production will not be sufficient for
both exports and domestic use. Yar'adua wants concerted efforts to
increase gas production to serve both exports and domestic use,
which accounts for appointing a deputy minister responsible for
gas.
.
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Petroleum Problems
------------------
.
6. (U) Nigeria is the eleventh largest producer of crude oil in the
world, however, imports all its domestic refined petroleum product
needs. Its four state-owned refineries are in disrepair. The GON's
policy of deregulation in the downstream petroleum sector and the
reduction of subsidies on petroleum products during a time of rising
oil prices has resulted in continuous increases in the domestic
price of petroleum products in line with the international market.
Rising fuel prices regularly has triggered industrial action by the
labor unions.
7. (U) Yar'adua faced this problem during the first week of his
administration when labor unions called a general strike to protest
ABUJA 00001638 002.2 OF 002
price hikes in petroleum products and the sale of the refineries
towards the tail end of Obasanjo's administration. When the strike
was called off, Yar'adua made a commitment to review the sale of the
refineries and effected a marginal reduction in the pump price of
fuel.
8. (U) The refinery sales were cancelled after July 21, and
Yar'adua ordered the Nigerian National Petroleum Corporation to
ensure that the refineries worked at between 70 to 80 percent
capacity by the end of the year. The appointment of a deputy
minister for petroleum is connected with Yar'adua's desire to ensure
the refineries work efficiently and to coordinate policies in the
downstream petroleum sector.
.
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Comment
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.
9. (SBU) Keeping the reins of the Energy Ministry in his own hands
probably is a move by Yar'adua to consolidate his power, as energy
is the fountain of money and power in Nigeria. Nigeria has major
issues that need resolving in each of the three sectors of power,
gas and oil, so giving each of them a high level overseer is
probably wise. On the other hand, forcing every issue to go through
the President could slow action. None of the three deputy ministers
has experience or expertise in energy issues, which is another
concern; even if capable they may have significant learning curves.
While it is clear that the President recognizes the importance of
energy issues, it is not clear that he has team in place or specific
solutions to tackle the problems. It is not at all clear, for
example, how a state of emergency could improve the power
situation.
QUAST