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Charting the course – Who dares, wins!

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By Constantine ‘Labi Ogunbiyi

The African continent stands at a pivotal juncture in the global energy sector, with abundant oil and gas reserves offering immense potential for economic growth. However, while the continent holds significant promise, navigating the upstream oil and gas sector in Africa comes with a plethora of risks and potential setbacks that demand careful consideration and strategic planning. This is against a backdrop of cutbacks in international capital for carbon-intensive oil and gas developments and increasing competition for the same sources of capital. Innovative financing solutions are thus required to fill the void, but can only be truly successful if tailored to specific needs and adopted and respected by all stakeholders.

Nigeria, Africa’s largest oil producer, epitomises the complexities and opportunities within the continent’s energy sector. Over the past decade, the Nigerian oil and gas industry has grappled with insecurity, asset vandalism, and community unrest, leading to a decline in investment. This coupled with the need for the sanctity of contracts and a properly structured fiscal framework has seen investment in the sector decline to about US$5 billion per annum from highs of about US$22 billion per annum in 2012.

Nigeria has an abundance of unexploited discovered natural gas (as well as significant prospective gas resources), now heralded as a “clean” transition fuel amidst global energy shifts. Nigeria should seek to attract significant investment during this transition era (which has also seen crude oil prices rebound) to take full advantage of this, thus retaining the value of crude oil and gas resources to enable it to position itself for its energy transition (towards net zero) agenda. A just energy transition, the paradigm that gained impetus at the December 2023 COP28 Conference, is intended to decelerate financing fossil fuel developments while supporting those most vulnerable to the impacts of climate change when facilitating the transition to clean energy. This is not simply a tweak to existing systems; it is a fundamental transformation towards a cleaner, more sustainable future. This shift is driven by environmental concerns, the changing balance of power on the global stage, and awareness that the energy-producing nations in the Global South (which produce only a fraction of global emissions) should be given a chance to “catch up” industrially, technological advancement as consumer demands. It is estimated that the country needs about US$25 billion of annual investment in the next 10 years to achieve crude oil output of three to four million barrels per day and 3 bcf per day of gas production for domestic consumption (an ambition). A lack of available infrastructure, whether because of existing compromised infrastructure through age or sabotage or simply a lack of new investment, and competition for capital regionally, poses challenges that will need to be overcome to achieve this. Inadequate infrastructure impedes the development and operation of oil and gas projects in Africa, increases project costs, delays timelines, and heightens operational risks.

The new Government has declared that it is “open for business” and will take urgent steps towards solving the fiscal, regulatory, security, and other issues discouraging investment and operations in the nation’s petroleum sector – something that is urgently required to help to push its oil and gas production to the ambitious levels being targeted. The mechanisms are in place – the Petroleum Industry Act (PIA) has done a lot to bring an enabling framework to the industry, including by allowing the Nigerian National Petroleum Corporation (NNPC) and its subsidiaries to raise capital on their own balance sheets, whether by divestitures or development partnerships on their blocks (including risk service contracts, financial and technical service agreements and the likes), crude forward sales, debt or equity capital raisings, etc. Still, there is a need to focus more on implementing the PIA in a manner that restores investors’ confidence and boosts oil and gas production, ultimately increasing jobs, the country’s earnings, and prosperity. Whilst international commodity traders have increased their activity and funding of oil production in Nigeria, they rarely support the development of appraisal and near-production assets. Access to innovative capital structures for such capital-intensive projects, involving a more risk-reward approach will be key to developing such assets, as will the deepening of regional capital markets to bolster the capital available from institutions such as the African Export-Import Bank and planned new initiatives such as the African Energy Bank. Effectively, more “home-grown” solutions will be required.

As international oil companies shift focus to deep offshore and gas-rich assets, indigenous companies and smaller operators are stepping in to fill the void. However, accessing capital remains challenging. Innovative financing models, such as the contractor risk service  model, offer a promising solution. This model, which involves contractors taking financial risks and receiving payment from production, incentivizes efficient asset development while mitigating risk for owners and operators.

The contractor taking such risk, is effectively a co-financier of, and investor in, the development of the oil block – ensuring a service that would otherwise require immediate payment, to benefit from payment from oil and gas production (therein lies the contractor risk).

The success of such models hinges on the support of all stakeholders, including operators, joint venture partners, financiers, regulatory authorities, and local communities. By aligning incentives and sharing risks, these partnerships can drive sustainable development and enhance investor returns. The recent completion of the FSO ELI Akaso infrastructure project by the Century Group (CG) (part of an alternative crude oil evacuation system (ACOES)), facilitated by the contractor risk service model, exemplifies the potential for collaboration to unlock value and foster growth. The ACOES is being developed as a result of the need to enhance production and supply security from oil blocks in the Eastern Niger Delta due to infractions and prolonged outages of the Nembe Creek Trunkline (historically one of Nigeria’s major oil transportation arteries evacuating up to 150,000 bopd of crude from the Niger Delta to the Atlantic coast for export). The CG model is “Made-in-Nigeria-for-Nigeria” but can be rolled out regionally (and globally too), in countries where access to capital for oil and gas developments is tough. Contractors work in a vacuum: the aim of which is to optimise oil production to ensure that their clients thrive so that they do too. However, they rarely take financial and production risk executing a “pay-as-you-go” model (often including mobilisation and other hefty prepayment-type fees), which can leave operators hanging where assets under-perform. They also get the job done without involving themselves in the issues that may affect joint venture partner relationships.

Local and international investors, including UK-listed San Leon Energy plc, World Carrier Corporation, and GT Bank plc have invested heavily in Energy Link Infrastructure Limited (ELI), the sponsor of the ACOES and owner of the FSO ELI Akaso and relevant pipeline infrastructure to develop the ACOES. With the advent of COVID and a lack of production available from anchor clients, ELI needed to look for alternative sources of capital to ensure that the FSO ELI Akaso is ready for operations. Without CG’s involvement in a contractor risk service model, the FSO would not be operationally ready and now established as a terminal for oil export. As the Akaso starts to take on barrels from various oil producers, the business should thrive. CG, as an investor by the application of its contractor risk service model, should also be rewarded and feted for having stood by the business at a time when access to alternative capital was proving difficult. With the success of this approach, CG is ensuring that the contractor risk service model should be considered by the industry as an alternative, proactive, and additional funding source for the development of energy projects.

Looking ahead, achieving sustainable development in Africa’s oil and gas sector demands collaborative action from all stakeholders. Local investors, operators, and contractors play a crucial role in de-risking opportunities and crafting an appealing investment narrative that attracts capital. By leveraging local expertise and fostering partnerships, these stakeholders can unlock the sector’s full potential while mitigating risks. Regulatory frameworks also play a pivotal role in shaping the investment landscape. It is imperative that these frameworks prioritize ease of doing business and uphold contract sanctity to instil confidence among investors. Additionally, addressing bottlenecks to investment and exits is critical for maintaining investor interest and sustaining growth momentum. Addressing the need to resolve the long-standing saga and delay in the consummation of the $1.3 billion ExxonMobil sale of its 40% stake in Mobil Producing Nigeria Unlimited (MPNU) to Seplat Nigeria Plc, the Nigerian Minister of State for Petroleum Resources, Heineken Lokpobiri said on 16th April 2024: “Now that the whole world is campaigning against investment in fossil fuel, if we close this transaction and Seplat expands their investments, Bonga North, which is predicated on that resolution, comes on board, and the whole world will know that Nigeria has become a new investment destination and that is the objective of this government.”

In charting the course for Africa’s upstream oil and gas industry, daring innovations and strategic partnerships will be indispensable. By embracing risk and seizing opportunities, the continent can harness its energy potential to drive economic prosperity and sustainable development for generations to come. More local investors, operators and contractors (like Century Group) will need to step up to help to de-risk opportunities and ensure the investment narrative is attractive, properly articulated and understood. With traditional international financing techniques becoming more difficult to secure for oil and gas projects, the contractor risk service model is an invaluable additional tool to ensure the continuing development of energy projects.

About the Author

Constantine ‘Labi Ogunbiyi has been involved in the energy (including renewables), fintech, and logistics sectors as an investor, Strategic Advisor, and/or Director on several boards. He has more than twenty-five years of experience in international capital markets, private equity, acquisition, structured, trade and project finance, and public and private partnerships in the African energy, technology, and infrastructure sectors, in particular. Labi,  was a founder and Executive Director of Afren plc responsible for business development, strategy, and growth, leading Afren’s negotiating team in Nigerian acquisitions and equity and debt financings (capital raising of more than $1.7 billion) between 2005 and 2009. In 2009, he founded First Hydrocarbon Nigeria Limited (FHN), a leading indigenous upstream oil and gas exploration and production company in Nigeria, and functioned as its Chief Executive Officer, selling the business in 2013.

Presently, he runs his family office, Phoenix Generation Limited, a direct investment and strategic investment advisory service company. He holds Legal Qualifications from the Universities of London (King’s College), Passau (Germany), and the Oxford Institute of Legal Practice.

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Opinion

Mr Olabode Gabriel Omowayeola: A cut above the rest

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Mr Olabode is a cut above the rest, and so is the University of Ibadan where our path first crossed.

He was doing a Master’s degree programme at the time. His focus level while reading a huge book in the library reminded me of a scientist investigating a piece of matter under a microscope. That was the first point of attraction.

Mr Olabode is a different breed of Philomath who loves cross-border education even more than a monkey loves banana. From the University of Ibadan, he proceeded to Uskudar University Turkey where he studied Turkish language and Literature.

I relied on the far-reaching, long arm of coincidence to cross our paths for the second stint, and Oh Sweet Goodness, we crossed paths again at Uskudar University Turkey – sumptuous camaraderie! We spoke Turkish language; ‘Merhaba, seninle tekrar tanýþtýðýma memnun oldum’ meaning ‘Hello, nice to meet you again.’

Again, at Istanbul Kultur University Turkey, it was a ray of sunshine as we crossed our paths for the third stinct. This time, it was for a Master’s degree programme in International Relations and Government.

Like a piece of iron on a magnet, we not only went in the same direction, but shared the spoils as the overall best students.

As yearning as the deer for running streams, Mr Olabode’s yearning for knowledge and career advancement is in the zone – he proceeded to Memorial University of Newfoundland Canada as a research student of Political Science.

He stands tall amidst the massive collection of researchers of International Relations and Political Science in terms of contribution to new knowledge.

On the humanitarian side, Mr Olabode is as satisfying as a glass of chill water after a marathon.

He reminds me of the biblical seed that fell on a rich soil. Blind people who encounter him are able to climb the Iroko tree with their hands in pocket – a practically inspirational genius of the 21st century.

Cheers on your annibirthsary!

Jamesleo Oche, Researcher, Cranfield University, British Defence Academy, England, United Kingdom

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Opinion

Dapo Abiodun: After five phenomenal years, three glorious years beckon

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By Kayode Akinmade

He came into office amid ceaseless assaults by a violent Establishment. He had no handover notes. But he had an agenda, a steely resolve, and a burning passion to transform the Ogun environment. Today, five years on, even the most cynical observer would admit that the Iperu-born prince and boardroom genius has turned the Gateway State around, infused a climate of excitement into governance and state management, building joy and hope for the future in the populace. This is remarkable in a country long hobbled by politicians’ failed promises.

Perhaps the most salient aspect of Abioduns’ leadership is the climate of peace actively fostered in the state. Peace pervades the length and breadth of the land because the Sheriff in charge is determined to leave a lasting legacy of life-changing projects behind, and would not be drawn into political brawls even when a predecessor, taking advantage of the calm in the land, tours the senatorial districts, staging hate campaigns. That is not by accident. Abiodun is a transformational leader, and transformational leaders, as the leadership expert and presidential biographer James MacGregor Burns tells us, are those who, in company with their followers,  advance to a higher level of morals and motivation. The fact cannot be disputed that through the strength of their vision and personality, transformational leaders inspire their followers to a higher level of intellectual stimulation, and hence social change.

Against this backdrop, Ogun being rated as Nigeria’s most peaceful state comes as no surprise. People tend to copy what they see their leaders doing. Ogun people have not forgotten the highly instructive incident that took place shortly after their Governor assumed office. Some pastors of the RCCG had been kidnapped while he was away in Abuja on official business. Given the viciousness of the outlaws, hope was low regarding their rescue. But the Governor simply requested for and obtained helicopters for aerial surveillance of the target area, and all the clergymen were rescued unhurt. Jubilations erupted in many places…

The Abiodun administration initiated the Security Trust Fund, rallying stakeholders to contribute to the fight against crime. It procured over 100 patrol vans, motorcycles, walkie-talkies, and other security equipment  to enhance the operational efficiency of security agencies. Then came an additional 25 patrol vans and surveillance drones in collaboration with Lagos and Oyo States to monitor activities along the Lagos-Ibadan Expressway. And then came Amotekun, deployed at flashpoints…

Because Ogun is calm, the strides in agriculture, the mainstay of the Nigerian economy, have been simply phenomenal. Through the Anchor Borrowers Programme, the Abiodun administration has revolutionized youth involvement in agriculture. It created the Ogun State Investment Promotion Agency (OGUNIPA) and the Ogun State Business Executive Council (OGUNBEC)  to make the Gateway State the destination of choice for investors. The administration empowered thousands of farmers through training, capacity building and provision of farming inputs, and Ogun is now a leading producer of rice, maize, and cassava in Nigeria. The story cannot be different with Abiodun’s heavy investment in the development of agricultural infrastructure, including irrigation systems, farm roads, and storage facilities.

 When a government fosters partnerships with private sector players, attracting investments and driving growth; implements initiatives to improve livestock production, including the distribution of breeding stock, veterinary support, and establishment of grazing reserves, the result is bound to be refreshing.

The Abiodun administration has strengthened extension services, providing farmers with access to expert advice, technology, and best practices to improve their productivity and efficiency. It has supported farmers to produce high-quality products and linked them to markets and processors. It has created thousands of jobs in the agricultural sector, having developed and implemented policies like the Ogun State Agricultural Policy and the Ogun State Livestock Development Policy. There is no space to detail the government’s  empowerment of  farmers with solar pump machines; the N50 million Ijebu Development Initiative for Poverty Reduction (Eriwe) meant to develop the fish subsector in the state; the empowerment of over 40,000 agripreneurs in cassava cultivation, or the distribution of motorcycles to extension agents to reach farmers in remote areas across the state.

In education, the abolition of all levies spiked enrolment in primary schools, even as the government adopted a school per ward for development as a model school. The promotion of teachers and equipment of schools and higher institutions and revolution of the transcript processing system has restored dignity to Ogun schools. And among the giant strides of the Abiodun administration, the Gateway International Airport, an agro-cargo facility situated in Remo North, has garnered global attention, with dignitaries and investors expressing interest in its immense socio-economic benefits. It will generate approximately 50,000 direct and indirect jobs. Fittingly, President Bola Ahmed Tinubu has  approved the Special Agro-Cargo Processing Zone as a Free Trade Zone. Actually, what is on the ground is an airport city, with an agricultural processing zone located close by. Exporters of farming produce are about to experience an absolute windfall.

Although the state of federal roads—and they are so many—in the state presented challenges during Abiodun’s first term, the story is fast changing. Go to Ota and see things for yourself. In any case, listing the roads constructed by the Abiodun administration is a daunting exercise. Infrastructure is the first pillar of the ISEYA mantra but accorded  it a top priority attention in the scheme of programmes being executed. Notable among these roads already completed are the 3.41km Olomore Sanni Road,0.9km Elega Mokola Bridge Entrance, 2km Idi -Aba Elite, Oke Lantoro Road, 1.62km Ijaiye-Oke Ejigbo-Iporo Ake Road,7.8km Obantoko Road (Fajol America junction-Unity Estate Gbonagun, 5.7km Somorin-Kemta Idi -Aba Road, 42km Abeokuta Sagamu Expressway, 3km Panseke Adigbe Road, 6.6km Siun Owode Road, 2.35km Arepo Road,8km Revised s Scope Mowe Ofada Road, 1.5km Kuforiji Olubi Quarry Road Adigbe and 1.85km Iyana Oloke junction to Mapoly School Gate. Then we have the 3.1km Ikoritameje Adenrele/Olose Titun Vespa Road,2.4km Olusegun Osoba Toyin Agbado Road,1.5km construction of Sango Ota -Oke -Aro-Ojodu Abiodun Road Lagos End(Yakoyo to Mr Bigg),2.0km Inner Roads,Itori Junction Road, 4km Oba Erinwole Road,Sagamu,13km Sagamu -Ode Lemo Road,3km Idarika Street Road,8km Orile Oko Road,3km Awujale Road,Stadium and Oke Aje,1.2km Ogbagba Street, Ijebu Ode, etc. The Atan-Lusada-Agbara roads are a marvel. Housing estates covering different strata of society complement the good roads.

Enter the health sector, a sector for which even the Federal Government acknowledged Ogun’s exemplary status during the COVID-19 pandemic. We are talking of an administration that inaugurated State Emergency Medical Treatment Committee to enhance the Ambulance and Emergency Service delivery, conducted training for health workers on comprehensive screening for newborns to tackle sickle cell disease and secured, for the first time in 45 years, full accreditation and upgrade of the Ogun State Schools of Nursing and Midwifery to collegiate status. We are talking about an administration that targeted 1.4m school-age children as change agents, promoted partnerships across the three tiers of the health sector, introduced free Covid-19 rapid testing of residents in health facilities, inaugurated Sexual Therapy and Assaults Referral Center in Olabisi Onabanjo University Teaching Hospital (OOUTH), the Family Planning Center at the State Hospital, Ijebu-Ode, and distributed over 25 Tricycle Ambulances to rural areas.

The administration upgraded and increased the fleet of Ogun State Ambulance and Emergency Services from four vehicles inherited to 26 in two years, introduced 24-hours Ambulance and Emergency Services across the 20 LGAs, carried out free eye surgeries, contained cholera outbreaks, distributed 3.7m insecticide treated nets, commissioned two  molecular laboratories to boost the State’s testing capacity for COVID-19 and other epidemiological diseases, and contained COVID-19 with less low fatalities. Have you been to the Clinical Skills Development Laboratory at the School of Midwifery, Abeokuta? It is the work of the same government that increased the ambulance fleet from 6 to 30 to cater for emergencies, distributed ultrasound machines to facilities across the state, commenced 24-hour ambulance service, inoculated students against cervical cancer and established Ambulance Points in all the nine federal constituencies.

With Abiodun’s strategic foresight, Ogun can look towards the future with hope. Long before the FG removed subsidy on fuel, Abiodun initiated CNG-run vehicles, tricycles and motorcycles in the state. Long before the economic downturn that attended subsidy removal came, he floated the Ogun-Kebbi Joint  Commission on rice production. Ogun, as attested to by multiple awards,  including:

  • Best State in ICT Penetration and Adoption by the National Council on Communication and Digital Economy
  • Best State in ICT Infrastructure Development also by the National Council on Communication and Digital Economy
  • Best State Governor with the Most Improved State in Security Infrastructure by Business Day Newspaper
  • Best Governor in Education by the National Parent-Teacher Association of Nigeria
  • Best Governor in Agriculture by the Nigerian Agriculture Awards
  • Best Governor in Housing Delivery by the Nigerian Housing Awards
  • Best State Governor with the Most Improved State in Agriculture and Economic Empowerment by Business Day Newspaper

Outstanding Political Brand Personality of the Year by Marketing Edge Summit and Awards

Best Governor in Infrastructure in the South West by the Nigeria Union of Journalists (NUJ) B zone.

Best Governor in Industrial Revolution at the Award of Excellence in Public Service by President Muhammadu Buhari

2023 “Governor of the Year” Award by Sun Newspapers

2023 “Man of the Year” Award by Silverbird Television and the Daily Independent Governor of the Year award 2023 in Nigeria’s ICT hub. The technology-driven state is poised for greater heights. That is the story of the state under Dapo Abiodun.

Akinmade is Special Adviser on Media and Communications to the Governor of Ogun State.

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Opinion

Tinubu, the opposition and the Nigerian honey pot

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By Professor Kayode Soremekun

As the Tinubu administration approaches the one year mark, it is important to effect a review of what has transpired in the last twelve months.

At the level of sheer policy postures and pronouncements, much has been done and so much is also  being done, such that it is almost impossible to keep  pace .

In this narrative however, I have decided  to dwell on an unusual aspect of the last twelve months.

On this note, the thrust of my argument is this:Nigeria is a lucrative honeypot for external actors and their local collaborators. It is a situation in which every achievement of  this administration translates into a loss for external actors and their interests. These indeed are the various indices of the opposition which will continue to stalk this administration.

At the instinctual level, and unfortunately, the average reader is likely to view the opposition in terms of predictable variables like the: PDP, LP and possibly the various indices of civil society.

But this piece is not preoccupied with these.

Rather our attention is focused on the implications of the evolving dynamics of Air Peace (AP)and the competition in the aviation industry.

It is instructive to recall here that, as soon as  AP ticked off  on the Lagos-London route, the other  airlines came into some form of self-serving  epiphany. They changed tack through the  process of fare reductions.

The implications of this on-going process are deeper than one may think. As long as Nigeria was absent on the Lagos-London route, the route was something of a honey pot for the other airlines. It  was a sybaritic  situation in which all the other  airlines were busy enjoying themselves at the expense of Nigerians and Nigeria.

In my innocence I  thought  that the only airline that  was benefitting from this bazaar of the Lagos- London route was British Airways (BA) whose ancestors were  the original predators of what  passes for the Nigerian state. Little did I know that other Airlines like Air Maroc and Egyptair were also partakers of this largesse.

On this note, the mind remembers the goggled General, Sani Abacha. In the light of the inclement interplay between his regime and Britain, British Airways was banned from Nigeria. But as soon as he died, BA resumed its lucrative foray into Nigeria. One can imagine how much BA must have lost in the light of that move by the General.

The implication is that for every omission or commission on the part of Nigeria, someone out there is smiling home with huge profits. Such forces and individuals constitute at one level the opposition that anyone who  occupies Aso Rock, has to contend with. Needless to say, our Nigeria is  a huge honeypot since we are  talking here of a huge  market  of 200 million Nigerians.

The situation also partly explains why the Naira will continue to go south since for most of our basic needs, we depend heavily on the external realm. It also explains why anybody who occupies Aso Rock is not just up against the  usual opposition  at the domestic level, he is  also up against  the various indices of opposition beyond Nigeria.

And here we are talking about hard-headed interests and zero-sum games in which what one entity loses, is gained by another  one.

This brings to mind another major area in which over time, Nigeria continues to be a spectator in the scheme  of things.

Our specific reference here is the Nigerian oil industry. Nigeria continues to be passive in this industry. So passive that as an oil producing country there are  no backward linkages like refineries and petrochemicals. Even as I write, there are rumblings to the effect that there are jitters out there. This is because, should Nigeria succeed in bringing on stream her own  refineries, very many jobs will be lost by refiners in places like Rotterdam and South Korea. These are some of the entities who export refined oil to an oil producing Nigeria. Again as regards petrochemicals, should Nigeria come into her own in this vital  area, then our imports of raw materials will reduce drastically. In the light of what is  happening to Air Peace, we should expect a fight-back from relevant interests out there.

Very much the same thing can be said for our steel industry.Till date, it remains comatose. No thanks to international conspiracy ably aided by a wayward ruling class.This is invariably a  sad feature which stretches far back  to the dawn of our political independence. Again, Nigeria’s attempts to come into her own in this vital  area will be resisted, and vigorously too, by  the relevant external forces out there in collaboration with their internal allies. So as PBAT Tinubu settles into his second year in office, he will do well to remember and appreciate that he will be contending with various indices of the opposition at the external   various ways these have their tongues and fingers in the Nigerian honey-pot.They will not give up easily.Which is why, the Tinubu presidency should give these self-serving domestic and external forces a good run for their greed and avarice.

There is some hope however. This cautious optimism lies in the fact that, in the course of  that historic outing in Abeokuta where Tinubu openly staked his claim to the Presidency he also pronounced with equal gravity  on his place  in history. Specifically he opined that he would not want to be a footnote to the Nigerian narrative. So all said and done, it is possible to contend  here that in the light of what can be regarded  as his self-conscious place in history; PBAT has his work cut out for him in critical and vital  areas of our national life like: the steel industry, our oil industry and of  course the Aviation  sector.

Success  in these various  areas can only mean that the Great Black Hope is ready to come into her own.

Soremekun, a professor of political science was the second vice chancellor of Federal University Oye Ekiti, Ekiti State.

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