Many are of the opinion that rather than being a blessing, the discovery of oil in Lagos might end up being a curse. It is hoped that the relative peace and steady overall growth being enjoyed by Lagos would not be truncated by this discovery
By Benjamin Omoike
Lagos, August 9, 2018 – Nigeria has been an oil producer since 1958, when Shell brought the Oloibiri oil field online.
Over the next 15 years, Shell’s operations in Nigeria blossomed, and more major international oil companies, including ExxonMobil, Gulf Oil and Texaco, followed suit.
Since February 17, 1958, when the first shipment of oil was made from the country; to 1973, when Nigeria acquired 35 per cent interest in the oil companies, it has been one case of negativity or the other in the oil and gas sector. In 2003, a NEITI Report indicted the NNPC of failing to remit $3.5bn to the Federation Account. A 41-page KPMG report released in 2010 described the NNPC as a cesspool of monumental corruption and fraud.
The report detailed the corporation’s sharp business practices, violation of laid down rules and regulations, illegal deductions of funds belonging to the state, and failure to account for several billions of naira that should go to the federation account.
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. There have been other various allegations. Oil price is at its unprecedented lowest globally, with an economy that is ‘technically’ in recession, according to Finance Minister, Kemi Adeosun, and inflation rate which has hit 16.5 per cent, the highest recorded in Nigeria since June 2005.
The resurgence of the Niger Delta Avengers, their activities and the continued dip in the fortunes of the nation, what more could the discovery of oil in Lagos bring to the table. This report takes a critical look at what hitherto should have been cause for celebration but, sadly, has become an albatross for Nigerians.
When in May this year, the Lagos State Governor, Mr. Akinwunmi Ambode, said the state had officially joined Nigeria’s league of oil producing states with the discovery of crude oil by Tunde Folawiyo Petroleum Company Limited in Badagry, many were understandably ecstatic.
Governor Ambode had made the declaration when the management of the company led by Mr. Tunde Folawiyo, its Group Managing Director, paid him a courtesy visit at the Lagos House, Ikeja. He commended the firm for its doggedness and achievement of the feat after 25 years of hard work. The rapturous response which greeted the cheering news was intensified when the State’s number one citizen declared that Lagos would apply to the Federal Government for the 13 per cent derivation enjoyed by oil producing states.
“I want to thank you very much for this and I know that based on section 162 Sub-Section 2 of the Nigerian Constitution, Lagos has become an oil producing state. By virtue of this achievement, the 13 per cent derivation that is due to oil producing states, Lagos will start to partake from it by your very good gesture. So, we officially declare Lagos State an oil producing state. We also notify the Federal Government by this action that we would be sharing out of the 13 per cent derivation. All we need do is to apply and then we join,” Ambode said.
The governor said the feat had placed Lagos in the history books as the first state outside the Niger Delta to become an oil producing state and that it had also opened up a new page for revenue generation in the state.
Tunde Folawiyo said the discovery of crude oil in Aje field located in Block OML 113 offshore Lagos, took over 25 years to achieve and this had shown that there were possibilities when government lent support to indigenous investors and companies.
“We could have given up because it was a very rough road, but the point is that only a Nigerian company would have continued to do what we did. The main crux is that we need government and government needs us, and where government supports assiduously, it can only be success,” he said.
Folawiyo said the company had committed about 400 million dollars to achieve the feat. He said the current status of the oil well had the capacity to produce at least 12,000 barrels per day, with a possibility of increasing to 25,000 or 50,000 barrels per day in the nearest future. The highlight of the occasion was Folawiyo presenting Governor Ambode with a sample of the crude oil discovered by his company.
Laudable as this feat is, especially with all the accompanying accolades, the question on the lips of industry watchers, analysts, stakeholders, informed players and public commentators alike is; ‘should Lagos really be celebrating?
There seems to be more of those who believe that the Lagos State Government should tread softly at this time rather than get carried away by the discovery of the ‘black gold’ in its domain. They argue that the world over, history has it that wherever oil is discovered, in no distant time from such a discovery, there would be major challenges and all sorts of grappling issues in host communities and its environs.
The setbacks in the oil and gas sector today, is, to say the least, rather unbecoming. The price of oil globally hovers around $40 per barrel. Aside this shortfall, the Nigerian oil industry isn’t well regulated. The Petroleum Industry Bill (PIB), which is yet to be passed by the National Assembly is like a ghost that has continued to haunt the industry. This has proved a major stumbling block to any major recorded success in the sector.
It is an open secret that issues of transparency and accountability or the lack of it ravage the sector. A large per cent of the corruption being perpetrated at the federal level of governance is perpetrated through the Nigerian National Petroleum Corporation (NNPC). Matters arising from poor supply chain- this has ensured products do not get to end users. It has led to series of fuel scarcity experienced in the country. Untold hardship has been meted on the populace; it also has threatened to grind the economy to a halt severally.
While several estimates have been made regarding the cost to the national economy in lost revenue and pipeline repair, no one has calculated the cost to the environment and the livelihood of the people of the Niger Delta. No one has calculated the cost of restoring the environment, but extrapolating from the cost of aquatic life in the Gulf of Mexico following the BP Gulf Coast spill of 2010, the cost to the Niger Delta will amount to more than one $1 trillion
One cannot fail to mention the colossal loss of lives, not to mention the gross environmental degradation of monumental proportions- which destroys the ecosystem- associated with crude oil production. Illegal bunkering and vandalism of pipelines is rife in areas where crude oil is produced. There have been well documented reports of widespread cases where all of these have occurred. The case of the Niger Delta, especially the Ogoni situation is not far fetched.
Lending a voice to the matter, former Special Adviser to President Goodluck Jonathan on Niger Delta and Chairman Presidential Amnesty Programme Hon. Kingsley Kuku estimates the cost of restoring the Niger Delta environment to well over one trillion dollars ($1tn).
“While several estimates have been made regarding the cost to the national economy in lost revenue and pipeline repair, no one has calculated the cost to the environment and the livelihood of the people of the Niger Delta. No one has calculated the cost of restoring the environment, but extrapolating from the cost of aquatic life in the Gulf of Mexico following the BP Gulf Coast spill of 2010, the cost to the Niger Delta will amount to more than one $1 trillion.”
Kuku found a ready ally in Mr. Nnimmo Bassey, an environmentalist, who hazarded a 30-year clean up plan in Ogoni land alone, adding that “the money from oil cannot restore the environment.”
The clean-up of the heavily polluted Ogoni land was recommended by the United Nations Environmental Programme, UNEP, in its report in 2011. According to the UNEP, the clean-up will take 30 years to complete and cost the government and other stakeholders $1 billion.
According to Aisha Mohammed, Nigeria’s Minister of Environment, President Buhari approved the inauguration of a 13-member governing council and a 10-member board of trustees. She added that the constitution of the governing council and board of trustees will ensure that the process of the clean-up is transparent, accountable and sustainable.
From the foregoing, and without pessimism or a cynical view, a number of informed, active industry players posit that these are genuine causes for concern.
Many are of the opinion that rather than being a blessing, the discovery of oil in Lagos might end up being a curse. Their argument is based on facts which prove that in this clime, when it comes to this sector, governments have been more reactive than they are proactive. It is hoped that the relative peace and steady overall growth being enjoyed by Lagos would not be truncated by this discovery.
There seems to be more of those who believe that the Lagos State Government should tread softly at this time rather than get carried away by the discovery of the ‘black gold’ in its domain. They argue that the world over, history has it that wherever oil is discovered, in no distant time from such a discovery, there would be major challenges and all sorts of grappling issues in host communities and its environs
The Lagos State Government says its Internally Generated Revenue (IGR), has hit a staggering N24.5 billion in just one month, despite the economic crunch ravaging the country. Commissioner for Finance, Mustapha Akinkunmi, disclosed this at a news conference organised by the Lagos Internal Revenue Service (LIRS), in Alausa, Ikeja, where he said in January, that the agency contributed N24.5 billion in revenue to the coffers of the State Government.
As a follow up, the government said it was set to increase the IGR to N30 billion monthly in 2017 and N50 billion monthly in 2018 as well as a yearly budget size of N1 trillion by 2018. The state government said it had resolved to scale up and run efficient revenue collection machinery through the convergence of the Ministries, Departments and Agencies (MDAs) operations and utilization of cutting edge technologies. Now, all these ‘successes’ and projections have been made without oil in the picture.
It is no longer news that the price of oil is plunging by the day- and due to a whole lot of other factors like the discovery of Shale Oil for example, and the position of OPEC powerhouses such as Saudi Arabia, United Arab Emirates, Quatar, among others, on pricing- it doesn’t look like spiking any time soon. Also, as a result of sabotage, bombings of oil installations resulting in International Oil Companies (IOCs), selling of assets and oil blocks to indigenous players; many wonder how much really would oil contribute to this emerging economy?
What difference would it make especially coming at a time when financial experts and economists are crying for immediate diversification of the economy from overreliance upon a mono-product to other sectors such as agriculture, tourism and solid mineral development; with Nigerians having realized that the commodity has failed the nation? Is Lagos prepared to encounter- even for a moment- what people of the Niger Delta have been going through all these years? Could it just be that the gains might not be as commensurate with the losses of this discovery?
