Between 2010 and 2014 when oil price was at its highest ebb, the country made a whopping sum of $424 billion from oil sale, yet it has just about $1 billion in its Sovereign Wealth Fund
Benjamin Omoike
Nigeria, August 9, 2018 – Dr. Dauda Garuba is the Country Officer of the Natural Resource Governance Institute, NRGI.
He is of the opinion that there is nothing to celebrate when it comes to oil exploration in Nigeria, as the nation had ‘eaten her future’ unlike other oil producing countries such as Norway and Saudi Arabia, among others, who have been able to save substantially for the rainy day as it is being experienced today, with the massive plunge in global oil prices.
According to Garuba, if crude oil were to be discovered in Etsako, Edo State, where he hails from, he would not be carried away, but would rather tell his people to hold on for as long as possible so as to plan adequately before starting exploration of the product.
He believes that our values as a nation and a people need to be addressed urgently if we’re to come out of the quagmire we have found ourselves today. He underlines the entrenchment of transparency and accountability in the oil and gas business among other measures as a means of creating wealth in the sector.
“The oil and gas sector in Nigeria is very opaque in the sense that outsiders do not have information about the business going on there and this leaves room for sharp practices. There are many ways that revenue is lost, under the precept 10 which is on private sector investment.
President Muhammadu Buhari, since assumption of office, has fired senior staff at the Nigerian National Petroleum Corporation (NNPC) and approved a revamp of its structure. But in a published report, the Natural Resource Governance Institute (NRGI) said NNPC withheld around two thirds of the $6.3 billion of oil proceeds in the second half of 2015. NRGI said that was an increase of 12 percent from the proportion kept under the administration led by Buhari’s predecessor, Goodluck Jonathan, in 2013 and 2014
Is the government improving the business environment that allows the private sector to invest? Is the government improving the regulatory environment to allow the private sector to grow?
Precept 11 is on the role of home governments of the extractive company. Is the home government acting to inquire, enforce and propagate best practice in a way which supports efforts as the host community?
Are oil companies following best practices in contracting, operation and payments? These are questions to be answered.”
“Now, they say NNPC has been unbundled, but this is a farce as far as I’m concerned. The way I see it, this will still not solve any problem. Not until all the subsidiaries such as Nigerian Petroleum Development Company (NPDC) The Nigerian Gas Company (NGC) The Products and Pipelines Marketing Company (PPMC) Integrated Data Services Limited (IDSL) National Engineering and Technical Company Limited (NETCO) Hydrocarbon Services Nigeria Limited (HYSON), etc., are allowed to run independently, give account of their transactions separately and be made to run like SEPLAT, an indigenous oil company, who is doing very well, we might still not get the best result out of the NNPC,” he said.
According to Garuba, the accountability mechanism include the allocation of oil wells based on merit, proper engagement with oil producing communities to avoid restiveness which could disrupt oil exploitation and avoidance of non- profitable business deals.
He listed other measures to generate more income from oil to include expanding the value chain such as processing crude at home and using bye products from crude oil to drive petrochemical companies, which lead to massive job creation and income generation.
Dauda said past successive governments had mismanaged oil revenue which is the reason the country is facing difficult times now.
“The question is, is the country targeting the right balance between consumption and investment, or you are ‘eating’ tomorrow like we have done? We are eating all that we have earned from oil. There was the stabilization fund. The last time audit was conducted on that by NEITI, that was between 2007 and 2011, it showed that all the funds that we established including the cash call, the stabilization fund and the natural resource fund, Nigeria had been taking the money to do other things that they were not even meant for, to the point that even money was given to buy vehicles for a ministry.”
He stressed the need to increase oil exploration which he said drastically reduced since 10 years now, thus diminishing revenue prospect from the oil and gas sector. He says Nigeria missed the opportunity to save enough money for future use when she failed to realize that oil, being a non-renewable resource, could dry up or have its price reduced drastically, as it is now.
“For instance, between 2010 and 2014 when oil price was at its highest ebb, the country made a whopping sum of $424 billion from oil sale, yet it has just about $1 billion in its Sovereign Wealth Fund. What then is the savings for the future generation?”
Garuba however said the oil and gas sector could still profit the country if there is a spike in global oil price and if the agencies involved could entrench transparency and accountability in the sector, which he noted was lacking since oil exploration and exploitation began almost 60 years ago.
President Muhammadu Buhari, since assumption of office, has fired senior staff at the Nigerian National Petroleum Corporation (NNPC) and approved a revamp of its structure. But in a published report, the Natural Resource Governance Institute (NRGI) said NNPC withheld around two thirds of the $6.3 billion of oil proceeds in the second half of 2015. NRGI said that was an increase of 12 percent from the proportion kept under the administration led by Buhari’s predecessor, Goodluck Jonathan, in 2013 and 2014.
Now, they say NNPC has been unbundled, but this is a farce as far as I’m concerned. The way I see it, this will still not solve any problem. Not until all the subsidiaries such as Nigerian Petroleum Development Company (NPDC) The Nigerian Gas Company (NGC) The Products and Pipelines Marketing Company (PPMC) Integrated Data Services Limited (IDSL) National Engineering and Technical Company Limited (NETCO) Hydrocarbon Services Nigeria Limited (HYSON), etc., are allowed to run independently, give account of their transactions separately and be made to run like SEPLAT, an indigenous oil company, who is doing very well, we might still not get the best result out of the NNPC
The NNPC has previously said such accusations failed to account for its costs.
Nigeria’s oil sector, one-time Africa’s top crude producer, accounts for about 70 percent or more of her national income. The constitution requires NNPC to hand over its oil revenue and money is then paid back based on a budget approved by the National Assembly. But the act establishing NNPC allows it to cover costs before remitting funds to the government.
Nigeria’s Auditor-General and the Revenue Mobilization Allocation and Fiscal Commission both said NNPC failed to remit billions of dollars to the public purse during the Jonathan era. The NRGI report said that until there are agreed rules governing how much money NNPC can keep, and how it must spend the money, it will continue to “leak” out of the system.
“NNPC spending on this scale raises questions about fiscal responsibility, especially at a time when public finances are stretched and the Federal Government is looking to fund more of its budget with debt,” the report said.
NRGI praised Buhari’s work to reform oil sales, notably efforts to cut out “passive, well-connected middlemen”, and reforms of crude for oil product swap deals that have been replaced with revised agreements directly with oil refineries.
