The Economist: Nigeria Missing Out On Rare Global Oil Boom Opportunity

Nigeria has continued to waste the rare opportunity presented by the global rise in oil prices to grow its economy like other oil-producing countries, London-based The Economist has stated.

While a surge in oil prices could do astonishing things, like in Saudi Arabia where a futuristic city was planned to rise from the desert or Angola where its currency has suddenly become one of the strongest performers against the dollar, it noted that in Nigeria, the reverse was the case.

The report came just as the leadership of the Senate on Monday asked heads of military and security agencies in the country to start prosecuting suspected members of the public who are involved in oil theft.

The upper chamber of the National Assembly also tasked the Judiciary, to grant accelerated hearing to matters on oil theft and other forms of economic sabotage.

Also commenting on the matter which is largely behind the country’s economic woes, the Labour Party presidential candidate, Mr. Peter Obi, who on Monday said he was not going to blame past government in the country for their failure when elected president next year, but would rather focus on fixing the economy, alleged that trillions of naira of crude oil had been stolen from the country.

In the Middle East and Central Asia, The Economist stressed that exporters could pocket $320 billion more in oil revenues this year than previously forecast, adding however that Nigeria has been a conspicuous absentee from the merry petro-party.

“Africa’s most populous country, around 220m-strong, desperately needs the money an oil boom could bring. Some 40 per cent of its people live on less than the equivalent of $1.90 a day.

“The government is struggling to service its debts. Social services are dire. The woeful economy has contributed to the violence that afflicts much of the country. In the first half of this year, nearly 6,000 people were killed by jihadists, kidnappers, bandits or the army,” the paper stated.

According to the news outlet, price controls remain the biggest reason the boom was ruining the public purse, noting that whereas elsewhere, as the price of crude rises, drivers pay more at the pump, it was not so in Nigeria.

“In January, President Muhammadu Buhari reneged on his latest promise to reform the system, leaving the government to pay for the vast gap between Nigeria’s low fixed price and the global one,” the report added.

With the subsidy covered by the state-owned Nigerian National Petroleum Company, the paper stated that the “prognosis is grim”.

Recalling that in June, the World Bank projected that the government will spend N5.4 trillion or $12.6 billion on fuel subsidies this year, more than three times what it coughed up last year, the news medium said that that is more than the increase in revenue the government will get from higher crude oil prices.

“As a result Nigeria’s net oil revenues are likely to be about 40 per cent lower than last year, despite the high global price. That squeezes everything else. In this year’s amended budget the government allocated more to the fuel subsidy than to education, health care and welfare combined.

“Price-fixing has other ill effects. Because petrol is artificially cheap, Nigerians burn more of it. Consumption of petrol has risen from about 58 million litres a day in 2021 to around 70 million this year,” quoting NNPC’s figures.

Another reason Nigeria’s public finances benefit so little from high oil prices, it reasoned, was that production itself has slumped to 1.13 million barrels per day, the lowest in more than 50 years, which is partly why the oil industry has also been a drag on headline economic growth.

“One reason for falling output is that the NNPC is so short of cash after paying for petrol subsidies that it struggles to cover production costs for pumping crude oil. Yet another is that a lot of oil is never counted as part of Nigeria’s output because it has been stolen,” it stressed.

Though estimates vary, it quoted the oil industry’s regulator as disclosing that thieves are snaffling 108,000 barrels a day, about seven per cent of production. This, it said, cost the government $1 billion in the first quarter of this year alone.

“The Trans Niger pipeline, which can transport 180,000 barrels a day (about 16 per cent of the country’s current production) suffers so much theft that its flow has been halted since June.

“Another big pipeline that carries 150,000 barrels a day has also been repeatedly attacked. Shell, a big oil firm, has declared force majeure since March on all its exports of Bonny light, a high-quality crude, permitting it not to meet its contractual obligations,” The Economist added.

According to the report, one way to steal the commodity was to overload legitimate shipments with more oil than is declared. Another, the report stated was to break into pipelines and siphon oil off, then cook it up in bush refineries before selling.

Plenty of stolen crude goes straight into the international market, it noted, adding that small boats glide along the delta’s canals, filling up from illegally tapped pipelines.

“They deliver it to offshore tankers or floating oil platforms. Sometimes the stolen crude is mixed with the legal variety, then sold to unknowing buyers. Much of it, however, is bought by traders who pretend not to know it is stolen, or do not care,” it maintained.

“Buhari has promised a crackdown. The NNPC’s first move was to hire private security firms to protect the pipelines—a telling indictment of the army. But it is unlikely to solve the problem.

“Two of the firms are part-owned by a former warlord, Government Ekpemupolo, better known as Tompolo. He led a guerrilla campaign in the 2000s for the locals to control the delta’s oil, before agreeing to a deal whereby he would stop blowing up the pipelines in exchange for an amnesty—and for lucrative security contracts.

“That has fallen apart under Buhari’s government, which in 2016 issued a warrant for his arrest. Yet Tompolo is now bizarrely both a government contractor and still on the wanted list of Nigeria’s anti-corruption agency, which says he has earned $105m through graft. He denies wrongdoing,” the paper added.

Prosecute Suspected Oil Thieves, Senate Orders Military, Security Chiefs

Meanwhile, the leadership of the Senate on Monday asked heads of military and security agencies in the country to start prosecuting suspected members of the public who are involved in oil theft.

The upper chamber of the National Assembly also tasked the Judiciary, to grant accelerated hearing to matters on oil theft and other forms of economic sabotage.

President of the Senate, Ahmad Lawan, stated this in his remarks before a closed session involving the principal officers of the red chamber and the military and security chiefs to review the progress made in the fight against insecurity in the country.

With Nigeria’s petrol subsidy bill skyrocketing in 2022, the estimates for the whole year would exceed the total expenditure by all the states of the federation in 2021, which was $9.8 billion, a new report by a member of President Muhammadu Buhari’s Economic Advisory Council and Chief Executive Officer of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, indicated on Monday.

The report came as the Nigerian National Petroleum Company Limited (NNPCL) also revealed that crude oil theft was taking a severe toll on its performance. NNPCL disclosed that it lost 470,000 barrels of crude oil per day, which amounted to about $700 million monthly, saying this is in addition to security challenges that hinder oil production in some terminals.

Group General Manager, National Petroleum Investment Management Services (NAPMS), Bala Wunti, made the revelation during an interview with journalists in Abuja.

The meeting with the Senate was a follow up to a similar one held early in August and it was presided over by Lawan.

It was attended by the Deputy Senate President, Ovie Omo-Agege, other principal officers of the Senate and Chairmen of security related committees of the Senate.

Also in attendance were the Chief of Defence Staff, the three Service Chiefs, Inspector General of Police, Directors-General of National Intelligence Agency(NIA), and the State Security Service(SSS).

Others were, the Commandant General of the National Security and Civic Defence Corps while the Acting Comptroller General of the Immigration Service was represented.

Lawan lamented the massive theft of the nation’s crude oil and insisted that the development must be halter while the perpetrators must be arrested and prosecuted immediately.

He said, “Those who have made every effort to steal our oil at an industrial scale, I’m sure some of them may not be that lucky to escape.

“We want to see trials of people who are caught because when that happens, citizens will know that nobody, no matter how high that person is, can go scot free if he or she decides to get involved in this kind of criminal activities.

“Of course, I will appeal to our courts – judiciary – once we have cases like this, we must give expeditious consideration, because these are the issues that, today, are militating against our stability and even against our democracy.

“We lose so much of our oil. As at the last count, the report was that we export just little above 900,000 barrels. And that is just about 50 percent because it is supposed to be 1.8million barrels per day and that is halving our revenues and our resources for development.

“So I want to appeal to the judiciary to give a special consideration once a suspected oil thief is taking to Court. We must prosecute them. It is not enough to just take away whatever they have stolen and say go and sin no more.”

Lawan said the meeting was to review the earlier one held early in August meant to look into the security situation in the country.

He expressed delight that the security situation in the country had improved tremendously after the August engagement with the security and military chiefs.

He said, “Before we closed for our annual summer recess, Distinguished Senators and indeed, members of the National Assembly expressed so much concerns with respect to the security situation prevailing and we felt we must engage our security agencies so that together, we will continue to fight these challenges in our country.

“I am happy and I’m sure I’m speaking the mind of my colleagues, that after that meeting, till today, we have seen remarkable difference in the fight against insecurity in our country by our Armed Forces and other security agencies and we are very proud of that.

“We pray that this continue because we have seen the initiative and it is for us to finish the job. When Mr. President spoke of ensuring that we return to normalcy by December 2022, I’m sure he had in mind what you have been doing recently.

“I believe that you, our Armed Forces and other security agencies have everything in terms of the morals and determination, even though we still have to give some other support. This meeting therefore is to review what has happened so far.

“While we fight the insecurity in the country, sometimes we capture bandits alive.”

Lawan also appealed to the Security Chiefs to take them (lawmakers) into confidence during the closed door session.

“We are responsible people. There are things that we know are very sensitive but some things are treated better when we are on the same page so that we also don’t legislate blind folded or without the necessary background information.

“Where there are requests or requirements to enhance the capacity and the competence for Armed Forces and other security agencies, I think we should consider that as a priority as well,” the Senate President said.

Emmanuel Addeh, Sunday Aborisade and Emameh Gabriel in Abuja

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