Too Much Hype About Nigeria’s Oil

By

Madaki O. Ameh

madakiameh@hotmail.com

 

The centrality of oil to Nigeria’s economy is obvious, given the fact that it accounts for over 95% of her foreign exchange earnings and over 80% of her GDP.  Due to the wrong emphasis placed on this resource over time by successive governments, Nigeria has become a virtually mono-cultural economy, and whatever happens in the oil and gas sector creates shock waves all over the country.  A lot of bad blood has also been generated amongst the constituent units of the country over the way this resource should be controlled, with the Niger Delta States claiming absolute resource control, but in the interim, 25% share of the revenues from the resource based on the principle of derivation, with prospects of increasing to 50% over the next five years.

 

This controversy has threatened the successful completion of the on-going National Political Reforms Conference, with the South-South staging a walk out and vowing not to return until their demands are met.  As pointed out by Reuben Abati in his vintage piece in the Guardian on Friday 24th June 2005, the Obasanjo administration needs to address this issue once and for all, and not beat a cowardly retreat, as Nigerian governments are wont to do when faced with potentially explosive issues.  To do otherwise will be to postpone the evil day, and confirm the analysis of the recent US Intelligence Report to the effect that the Nigerian State is made up of disparate groups where all dislike each other but dare not leave. The plight of the Niger Delta States has been on long enough for it to be resolved in an enduring manner based on the principles of equity and justice.  There is no doubt that no other section of the country will endure the sort of daylight robbery the Niger Delta States have had to endure at the hands of the other component units in Nigeria.  It is on record that before oil became the mainstay of Nigeria’s economy, the derivation formula was different, as each region could keep up to 50% of the revenue accruing from its resources, and this was enshrined in the 1960 and 1963 Constitutions.  The fact that this position changed in 1969 with the promulgation of the Petroleum Decree, and later found its way into the 1979 and 1999 Constitutions does not mean that it has always been like this, and that things cannot change for a more equitable derivation principle. 

 

Even the 1999 Constitution envisages that the derivation percentage can increase, without the need for any recourse to constitutional amendment, by providing that not less than 13% of the revenue derived from any State should accrue to that State.  It is therefore surprising that so much furore has been generated by this issue at the Conference, when the other members should clearly see the advantage of quietly acceding to the request of the South-South, which they all know in their heart of hearts to be fully justified, without unduly overheating the polity over the matter.  What possible reasonable argument can any person have to counteract the position of the South-South in this matter, except an arrogant misconception that the resource, though located in one part of the country, actually belongs to another part, and that they alone should decide what the custodians of the resource can get from it. This appears to be the position adopted in the recent release by the Arewa Consultative Forum (ACF) which described the controversial adoption of 17% derivation at the Conference as “an act of excessive generousity”.  One wonders who is being generous to who in the circumstances, and expects that an organisation like the ACF should know better not to make such inflammatory remarks on such a sensitive issue of national significance.

 

Oil is a resource like any other one, and should not be treated differently now, simply because it is in the Niger Delta.  In fact, in demanding an ultimate percentage of 50%, the Niger Delta States are being very reasonable, because the ideal situation, which will finally transform Nigeria into a country of serious-minded component units, is for each State to control 100% of its resources.  The current primitive process of all States Accountants-General gathering in Abuja from every 15th day of the month to share revenue which most of them had no hand in generating is not only deceptive of our so-called unity, but also clearly unsustainable.  Even at the micro domestic level, if only one family member always brings all the money for the sustenance of the family, a day will come when he will legitimately ask for a bigger share of the meat from the pot. 

 

Given the penchant of Nigerians to degenerate into orgies of mindless violence over frivolous issues, this potentially explosive issue should not be allowed to create undue bad blood, but should be quickly nipped in the bud by the government having the courage to do that which they know to be right, without any further delay.  The South-South should also hold firm to their position, knowing that if they don’t win on this issue now that it is hot, it may be difficult for them to win in the future.  By calling the conference in the first place, President Obasanjo has inadvertently given them the platform to canvass for an all time resolution of this injustice, and to back down in favour of a negotiated political settlement, as the series of reported meetings are aimed at achieving, will not solve this problem which has festered for too long.

 

Having said that, it also behoves on the leaders of the South-South to call for restraint among their people, assuring them that the issues are being addressed, so that they don’t take the laws into their hands.  Oil and gas activities are already very difficult to carry out by the companies operating in the area without this controversy, and prolonging this crisis will further heighten insecurity and make things much worse, a situation we can all ill afford.

 

However, securing a higher share of the resources will not automatically translate to better living standards for the people of the Niger Delta.  The end of this struggle should be aimed at also entrenching responsible leadership across the area to ensure that the benefits really get down to the people.  At the moment, this is sadly not the case, as most of the Governors in the area do as they please, without any sense of accountability.  The huge revenue so far derived from the 13% formula has not translated to real physical development in the Niger Delta States, except for a few isolated cases. Even though this piece is not about projecting achievements and failures of the Governors in the zone, misguided expenditure, such as the recently reported procurement of an Air Ambulance by the Rivers State Government when the most basic amenities are still very much lacking in the hospitals, and the undue emphasis on praise singing without really putting anything tangible on ground, is a major frustration to people who live in the State and pay their taxes there.  One only hopes that when the battle for resource control is won at the State level, another agitation by the actual owners of the land will not start, due to mismanagement of the resources by the respective State Governors as has been largely witnessed, not only in the Niger Delta, but across the country since the inception of democratic rule in 1999.  The huge waste of the military era, which was attributed to the authoritarian nature of military rule seems to have been perfected, even in this democratic dispensation when the people are supposed to have a say.

 

On a final note, there is a basic hype about Nigeria’s oil, which needs to be corrected in order to put the analysis of this subject in proper perspective. In analysing Nigeria’s relationship with the United States, especially in the wake of the recent US Intelligence Report which has been wrongly touted to have predicted the disintegration of Nigeria in 15 years, many writers fall into the error of thinking that the interest of the US in Nigeria is predicated mainly on its oil and gas resources.  Nothing could however be farther from the truth. 

 

In his piece titled ‘Nigeria and the American Prediction’ published in The Guardian on Thursday, 23rd June 2005, Edwin Madunagu fell into the same error when he wrote: “…On the other hand, Nigeria may break up provided the oil-flow to America continues unimpeded, that is, provided the section or sections that eventually control the oil fields are secure and are prepared to allow the oil’s unimpeded flow at reasonable prices to where the ‘black gold’ is really needed and appreciated and where nature ought to have located it in the first place, that is, America.”

 

The above quotation underlies the fundamental fallacy that US diplomacy in Nigeria and other parts of the world is mainly oil dependent.  To start with, there is no such thing as Nigeria’s oil flowing to the US. Oil is an international commodity, traded on the spot market, and all the oil exported by oil exporting countries, including OPEC form part of that market and can be bought by any consumer, the US inclusive.  The impression should therefore not be created that all of Nigeria’s oil production goes directly to fuel the US economy, as Nigeria’s oil is not only sold to the US.  Secondly, the underlying assumption is also that the US does not produce any ‘black gold’ on its own.  This assumption does not take into cognisance the fact that, after Saudi Arabia, which is the world’s largest oil producer, the United States, is the second largest oil producer, with a daily production of 8.71 million barrels from 533,000 functioning oil wells.  The only snag however is that US daily oil consumption is 21.9 million barrels, leading to a shortfall of 13.21 million barrels per day, which is imported from the world oil market, of which Nigeria is a part.  Informed watchers of US policy in the region and the Middle East will therefore conclude that, even though oil plays a part, the US interest is actually in ensuring a free flow of oil to the international oil market in order to keep prices stable, and not all about getting access to oil from a particular country, as there is no such thing.

 

Viewed from the above, it is obvious that Nigeria’s daily production of 2.4 million barrels pales into relative insignificance, when one considers other heavy producers like Saudi Arabia – 9.5 million barrels per day, US – 8.7 million barrels per day, Russia – 8 million barrels per day, Iran – 3.9 million barrels per day, etc. Also, relative to its population, the national income from oil is too meagre to generate the hype that surrounds the resource in Nigeria today.  Nigeria’s total oil export revenue in 2004 stood at $27 Billion for a population of approximately 130 million people, accounting for 96% of Nigeria’s export earnings, compared to Iran with oil revenue of $32.5 Billion and a population of 68 million people, accounting for 80-90% of its export earnings, or Saudi Arabia with oil revenues of $100 Billion and a population of 26.4 million people, accounting for 90-95% of its export earnings during the same period. And these figures were attained in an era of very high oil prices, as the figure was much less before now.  In a country where the government is up and doing and providing the necessary amenities for its people, this income is not enough to make all the other states lazy and wait for the period of revenue sharing on a monthly basis, as is currently the case.  But because most of the money goes into funding the lifestyles of government officials and maintaining a bogus governmental structure without trickling down to the ordinary people who are meant to be the real beneficiaries, this fact of a gross inadequacy in national income is not an issue which occupies the pride of place it deserves in national discourse.

 

It is sincerely hoped that someday soon, the right focus will emerge, and Nigerians will all agree that the main challenge facing the country is institutionalising good governance at all levels, and diversifying the national economy, such that all the component units of the country become revenue earners rather than revenue sharers, as is now shamefully the case.

 

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**Madaki O. Ameh, a lawyer is a Chevening Scholar in Energy Law and Policy at the Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee, Scotland, U.K.