By Ejeviome Eloho Otobo & Oseloka H. Obaze<\/p>\n
The oil resource curse has been Nigeria’s bane. This reality is well
\nknown. Yet no discernible effort is being made to transcend the pitfall,
\neven as Nigeria’s political leaders, business elites and experts
\ncontinue to exhort Nigerians to look beyond its oil era. In reality, it
\nis not the vagaries of the global oil market or the growing emphasis on
\nrenewable energy that has posed the greatest challenge to Nigeria’s oil
\npolitical economy, important though all these factors might be. Rather,
\nit is the lack of political commitment to diversification coupled with
\ncorruption. This exemplifies the dissonance that has hobbled the
\nnation’s oil industry and national growth. This paper highlights other
\nsources of policy dissonance that continue to bedevil Nigeria’s oil
\npolitical economy.<\/p>\n
One dissonance is exemplified by talking down the importance of oil,
\nreflected in statements like “agriculture will eventually overtake oil”,
\n“technology not oil will drive the economy” and “Nigeria’s biggest
\nexport is not oil but its people”. The last point references the fact
\nthat remittances by Nigerians in Diaspora, which stood at $25 billion in
\n2018, have virtually overtaken oil revenue. These assertions rest on a
\nflawed understanding of the dynamics at play. By constitutional mandate
\nand formula, revenue from oil is collected by the federal government and
\nshared with all the states. That is not the case with export earnings
\nfrom agriculture. Moreover, technology has remained the main driver of
\noil production ever since the first oil exploration in Pennsylvania in
\nthe late 19th century. Presently, advanced technology is also the prime
\ndriver in the evolving shale revolution. Thus, technology and oil are
\nco-joined drivers of economic growth.<\/p>\n
Individual Nigerian families remain the primary beneficiaries of
\nDiaspora remittances; and these resources are spent on business
\nformation, health, education, housing, wedding, burials, baptisms, and
\nother forms of extended- family support. Though increasing in volume,
\nhome bound remittances are informal and unregulated and hence inherently
\nunpredictable; and no credible fiscal policy can be predicated on flow
\nof remittances. They also rest on a paradigm of migration of some of the
\ncountry’s best and brightest professional and skilled workers.
\nRemittances are not shared revenue, but government is a residual
\nbeneficiary of remittances through possible accretion in capital
\naccount. Today, although oil accounts for 9 percent of the GDP, it
\ncontributes 90 percent of Nigeria’s export income and 70 percent
\ngovernment revenue. The compelling and real strategic challenge for
\nNigeria’s economic management is that there is no substitute on the
\nhorizon to oil as a source of export income and government revenue.<\/p>\n
Another dissonance is reflected in how oil producing states are
\ndetermined. Nigeria has 11 oil producing states, namely, Akwa Ibom,
\nRivers, Delta, Bayelsa, Cross River, Edo, Imo, Abia, Anambra, Ondo and
\nLagos. But pockets of oil deposit are believe to exist in states like
\nKogi, Enugu, Bauchi, Gombe, Adamawa, Taraba, Benue, Ogun and Borno. Yet
\nsome areas or states with oil deposits receive limited exploration
\nattention. Recognized vicissitudes of Nigeria’s oil industry include
\nhuge losses from militancy and oil theft. Both result in huge loss of
\nrevenue. However, several states sharing contiguous borders have also
\nexperienced partial or total loss of derivation revenue and accruing
\nbenefits due to policy dissonance, and specifically through delimitation
\nissues, and “arbitrary attribution of oil wells following the
\nimplementation of the Onshore\/ Offshore Dichotomy Abrogation Act 2004.”
\nAt issue is the loss of revenue rights and prevailing ambiguities as to
\nwhich federal institution can statutorily pronounce a state as “oil
\nproducing”. So long as these challenges and the attending dissonance
\nremain unaddressed, Nigeria risks being trapped in the quagmire of
\nextreme poverty amidst immense wealth and natural resources.<\/p>\n
The nexus between non-deregulation of the oil sector and rise in subsidy
\ncosts is yet also another source of dissonance. Notwithstanding its
\nranking as the largest crude oil producer in Africa, Nigeria has
\nremained heavily dependent on the importation of petroleum products to
\nmeet its domestic energy demands. A combination of circumstances \u2013 harsh
\noperational environment and huge downstream divestment by IOCs \u2013 compels
\nhuge production costs that can only be offset by subsidization.
\nMoreover, opaque government regulations and non-market-based pricing
\ncontinue to impact the industry negatively. Sectoral divestments
\ncontinue unabated. In 2016, ExxonMobil and Oando Plc respectively
\ndivested 60 per cent of their stakes in the downstream sector. Remedial
\nefforts by the marketers, to shoulder the cost of importing petroleum
\nproducts continue to be hamstrung by the Central Bank of Nigeria’s
\ninability to meet forex demands routinely or through Special Market
\nIntervention Sales. Based on its 2018 consumption pattern, Nigeria will
\nexpend some N746.79 billion in fuel subsidy in 2019. This is an average
\nof N2.046billion daily with the consumption of 55million litres per
\ndaily. This is reflected in the disparity between the landing cost of
\nfuel which is N171per litre, with NNPC selling at N138 per litre and the
\nindependent vendors at N145 per litre, leaving the taxpayers to
\nsubsidize N37 per litre. This subsidy amount could be dispensed with
\nthrough full deregulation.<\/p>\n
The tardiness in the enactment of the Petroleum Industry Governance Bill
\n(PIGB) is yet another source of policy dissonance, which has led to
\nmissed investment opportunities for Nigeria. The effort to articulate
\nand adopt a new framework for governance of Nigeria’s oil and gas
\nresources began over a decade ago. That effort initially focused on
\nadopting a comprehensive Petroleum Industry Governance law that had four
\ncomponents, namely unbundling the Nigerian National Petroleum
\nCorporation; Fiscal Framework; Host and Impacted Communities; and
\nPetroleum Industry Administration. Three years ago, that bill was broken
\nup into separate parts, with the current focus of the PIGB on creating
\nfour new entities to improve the efficiency and transparency of the
\nproposed new entities. In reality, the bill which has been passed by the
\nNational Assembly and awaiting presidential assent has as its main
\nobjective the privatisation of the oil and gas assets. Moreover, at
\npresent, there is a growing divergence \u2013 and indeed dissonance \u2014between
\nthe way oil and gas resources and solid mineral resources are managed.
\nThe stay of action by the President on the Nigerian Petroleum Industry
\nGovernance Bill may have a new justification \u2013 and indeed provides an
\nopportunity for \u2014 aconstitutional review on natural resources control
\nand ownership, and for a harmonized national policy framework between
\noil and gas, on one hand, and solid minerals, on the other.<\/p>\n
The desultory management of the environmental impact of oil exploration
\nin the Niger Delta is another source of dissonance. Successive
\ngovernments at the federal level have enacted a significant body of
\nenvironmental laws to govern the conduct of oil companies and the
\nmanagement of their operations, with a view to mitigating the adverse
\nconsequences of oil exploration and production in that region. The
\nmagnitude of the problem has been captured in a report drawn up by “a
\ngroup of independent environmental and oil experts have put the figure
\nof oil spill, both onshore and offshore at 9 to 13million in the 50 year
\nperiod (1956-2006)” . To put into comparative perspective, “people
\nliving in the Niger Delta have experienced oil spills on par with Exxon
\nValdez every year for the last 50 years” The wreaked Exxon Valdez oil
\ntanker spilled 262,000 barrels of oil in area known as Prince William
\nSound off the coast of Alaska in March 1989.<\/p>\n
Several reasons have been adduced to explain the broad and persistent
\npattern of poor compliance and enforcement of environmental regulations
\nin the oil and gas sector. These include lack of adequate funding for
\nmonitoring and enforcement activities; lack of technical expertise on a
\nrange of environmental policy and management issues; lack of adequate
\ninformation on the environmental impact of the oil companies;
\noverlapping regulatory responsibility for the oil industry; and the weak
\nregulatory regime. However, the real reason for lack of vigorous
\nenforcement of oil-related environmental degradation appears to lie
\nelsewhere: it is in the structural limitation, stemming from the nature
\nof the oil industry in Nigeria, in which the main foreign oil companies
\nare operated as joint ventures with the federal government. NNPC is the
\ninstitutional vehicle for the joint ventures between the multinational
\noil firms and the Federal government. NNPC\u2014which is a Federal public
\nenterprise \u2014 holds an average of 50-60 per cent in all the major foreign
\noil companies operating in Nigeria. The joint venture makes the federal
\ngovernment an owner. As an owner, the government seemingly has more
\ninterest in the revenue stream from the oil production than
\nenvironmental protection. There is thus an inherent tension between the
\nfederal government’s role as an owner and as a regulator. Amnesty
\nInternational echoed this observation when it noted that “the level of
\ndependence of Nigeria on oil and the fact that the Nigerian government
\nis the majority partner in joint ventures are fundamental problems which
\nunderpin regulatory failures” in the oil industry.<\/p>\n
Federal government’s ownership of, and direct involvement in, oil
\nexploration and production facilities ownership remain an aberration.
\nTypically, federal systems of government are marked by sub-national
\nlevel ownership and control of natural resources. Were Nigeria to adopt
\nglobal best practices, its revenue from that sector should, at best,
\nconsist of royalties and associated tax regimes on the oil earnings from
\nthe sub-national level. However, Nigeria has made oil as its major
\nrevenue earner, as opposed to taxation. Be that as it may, only a total
\nrecognition and acceptance of the full implication of the plethora of
\ndissonances that hobble the Nigerian oil political economy, and
\nconfronting then frontally, will lead to a paradigm shift in the ways
\nsuch challenges are tackled. Despite the oil sector’s huge potentials,
\nit remains a safe bet that until and unless there is a holistic
\nderegulation of all petroleum products, dissonance causing challenges
\nsuch as corruption, the proclivities of vested interests and
\npoliticization of oil policies will persist with clear consequences.<\/p>\n
\u2014\u2014\u2014\u2014\u2014<\/p>\n
Otobo is a Non-Resident Senior Fellow at the Global Governance
\nInstitute, Brussels.
\nObaze is Managing Director\/Chief Executive Officer, Selonnes Consult – a
\npolicy, governance and management consulting firm based in Awka<\/p>\n
By Ejeviome Eloho Otobo & Oseloka H. Obaze The oil resource curse has been Nigeria’s bane. This reality is well known. Yet no discernible effort is being made to transcend…<\/p>\n","protected":false},"author":1,"featured_media":65516,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[7],"tags":[],"class_list":["post-68061","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles-opinions"],"yoast_head":"\n