Anambra state government and teachers in the state are at loggerhead over the issue of computer. Whereas the state ministry of education is said to have made it compulsory for each teacher to purchase computer set from its agency at the rate of of N90,000.00, the teachers have described it as unconscionable and unacceptable. The secretary of Nigeria Union of Teachers (NUT), the umbrella teachers’ body in Anambra state, Ms. Nnenna Okonkwo, said that the teachers could only buy the computer for N50,000.00 each. Okonkwo said that teachers who would retire in the next 18 months should not be expected to buy the computers, the positions which she said, have been made known to the government. “We have asked them to reduce the price of the computer to N50,000 each and that teachers who will be due for retirement in the next 18 months should not be compelled to buy the computers. “We say this because government had compelled us to sign consent forms, compelling teachers in the state to buy the computers from them, only for the commissioner to withdraw from that stand last week. “How can somebody compel teachers to buy the computers at that high cost? Some of the teachers have their own computers and somebody still wants them to buy another one; it is callous and we have rejected the plan.” The state Commissioner for Education, Professor Kate Omenugha, has however denied that the government made it compulsory for teachers to purchase computers, but said that what is important is that henceforth any teacher that is not computer literate will not be promoted. Omenugha said that teachers nearing their retirement age would not need to buy the computers, adding that the computer literacy is part of National Policy in education. [myad]
The Joint Admission and Matriculations Board (JAMB) has pegged minimum entry requirement for admissions into Nigerian Universities at 180 score, while that of Polytechnics and Colleges of Education is placed at 150. The decision was arrived at today in Abuja, after the sixth combined policy meeting of awarding institutions on admissions to degree, Nigeria Certificate in Education, National Diploma. Stakeholders at the meeting also agreed on the admission implementation ratio, approving a 60-40 ratio for science and arts related programmes in all universities, while 70-30 ratio goes for technology and non-technology related courses in the Polytechnics. [myad]
A total of 27 partnerships have been struck by Nigerian and British companies in the annual Nigeria-UK engagement programme. It is being sponsored by the Shell Nigeria Exploration and Production Company Limited (SNEPCo).
The partnerships cover a wide range of oil and gas activities, including engineering, maintenance, fabrication and support services and were the outcome of several business summits held in Lagos, Abuja, London and Aberdeen. Working closely with the United Kingdom Trade and Investment (UKTI), SNEPCo initiated the business summits in 2009, creating valuable opportunities for Nigerian and British companies to collaborate to close the technical gaps that exist in the oil and gas industry as a result of the enactment of the Nigerian Oil and Gas Industry Content Development Act, 2010. The collaboration has helped to improve local capacity in innovation and technology. This model has now been replicated in Kazakhstan and Iraq. Chairman, Shell Companies in Nigeria and Managing Director of the Shell Petroleum Development Company of Nigeria Limited (SPDC) Osagie Okunbor said: “We are pleased with the progress that has been made with the collaboration of UKTI and Shell.”
The UKTI led by the Director of Trade in Nigeria, Chris Maskell, had paid him a courtesy call. Okunbor added: “We will continue to support the initiative given the benefits and potential to drive growth in the Nigerian economy.” Commenting on the partnership, Mr. Maskell said: “The partnerships have significantly increased the scope of operations for both the British and Nigerian companies and can only get better as they explore more areas of co-operation. We are grateful for the continued support of Shell for this initiative.” A recent reform of the programme ensures that Nigerian suppliers now take the lead in deciding potential UK companies that they would like to meet and partner with for project delivery in areas of key needs. The 2015 Nigeria-UK business summit is slated for this month (July) in Lagos where UK companies will be looking to take advantage of prequalification and tendering activities scheduled for 2015/16. About 90% of contracts in Shell Companies in Nigeria were awarded to Nigerian companies in 2014. The use of locally manufactured goods and Nigerian service providers creates employment opportunities in communities in which Shell companies operate. [myad]
The Nigerian Communications Commission (NCC) has announced that the number of internet users on the Nigeria’s telecom networks has increased to 88,284,193 as at May this year.
The commission, which is the regulatory body, made this known in its Monthly Internet Subscriber Data. The data revealed that there was an increase of 1,228,711 internet users on both the Global System for Mobile Communications (GSM) and the Code Division Multiple Access (CDMA) networks in May.
According to the data, 87,055,481 users were recorded on the networks as at April.
It showed that of the 88,284,193 internet users as at May, 88,136,580 users were on GSM networks while 147,613 others were on the CDMA networks. The GSM gained additional Internet customers of 1,231,875 in May, up from the 86,904,705 users recorded in April.
However, the CDMA networks lost 3,166 Internet users in May, down from the 150,779 being serviced in April.
Out of the 88,136,580 internet users recorded on the GSM networks in May, MTN Nigeria had 40,830,146 customers browsing the internet on its network.
It said that MTN had an increase of 1,309,861 internet subscribers in May, after it recorded 39,520,285 users in April.
According to the data, Globacom had 19,340,990 subscribers surfing the net with its network in May, down from the 19,690,526 users in April. Globacom lost a total of 349,536 internet users on its network.
Airtel Nigeria, it said, had 17,634,885 internet users in May, as against 17,272,665 customers recorded in April.
The data showed that internet users on the Airtel Nigeria network increased by 362,220 in May.
It indicated that Etisalat had 10,330,559 of its customers browsing the internet in May, against the 10,421,229 users in April.
The data showed that those browsing the net on Etisalat’s network decreased by 90,670 in May.
The NCC data also revealed that the CDMA operators (Multi-Links and Visafone), had a joint total of 147,613 internet users on their networks in May.
It showed that the only surviving two CDMA networks in the country listed a loss of 3,166 internet subscribers in the month under review, from the 150,779 users they recorded in April.
According to the data, Visafone recorded a decrease of 2,765 customers surfing the internet in May, reducing to 147,487, compared to the 150,252 users in April.
It also showed that Multi-Links had 126 internet users in May, losing 401 customers from the April record of 527 users. [myad]
No fewer than 18 students of the University of Nairobi (UoN) have threatened to commit suicide if President Barak Obama fails to visit their institution during his official visit to Kenya later this month. 31 students of the institution have also threatened to urinate on the tree President Obama planted in UoN in 2006 should he not visit UoN.
The Students’ Union Leader, Mr. Babu Owino wrote a letter to the US Embassy requesting it to include University of Nairobi (UoN) in President Obama’s schedule two day visit to Kenya, saying: “…so far, at least 18 UoN students have threatened to commit suicide if President Barack Obama fails to visit UoN; also 31 female students have threatened to urinate on the tree President Obama planted in UoN in 2006 should he not visit UoN.”
Babu added that both students and staff will be ready anytime -day or night- to have the US President address them at Taifa Hall.
“All students and staff will be eagerly awaiting his eminent visit and address at the great Taifa Hall. We are ready and willing to listen and constructively dialogue with President Barack Obama at any time of the day or night.”
The White House announced earlier that President Obama will travel to Kenya this July for the Global Entrepreneurship Summit.
The press secretary, Josh Earnest said in a statement: “The Government of Kenya has agreed to co-host the 2015 Global Entrepreneurship Summit (GES) this July. Organized annually since 2009, the GES has emerged as a global platform connecting emerging entrepreneurs with leaders from business, international organizations, and governments looking to support them. This will be the first time the GES will take place in sub-Saharan Africa.”
“President Obama will travel to Kenya in July, where he will hold bilateral meetings and participate in the GES. His trip will build on the success of the August 2014 U.S.-Africa Leaders Summit and continue our efforts to work with countries in sub-Saharan Africa, including Kenya, to accelerate economic growth, strengthen democratic institutions, and improve security. This will be President Obama’s fourth trip to sub-Saharan Africa during his presidency.”
It will be the president’s first visit to the country since taking office. Obama has made two separate trips to the continent as president, traveling to Ghana in 2009 and Senegal, South Africa and Tanzania in 2013.
The decision not to visit Kenya in 2013 came as Uhuru Kenyatta, the country’s newly elected leader, was expected to stand trial at the International Criminal Court on charges of crimes against humanity related to post-election violence in 2007 and 2008.
“We also as a country have a commitment to accountability and justice as a baseline principle. And given the fact that Kenya is in the aftermath of their election and the new government has come into place and is going to be reviewing these issues with the ICC and the international community, it just wasn’t the best time for the president to travel to Kenya at this point.” [myad]
Global experts have suggested the use of Islamic Finance to serve as a strong and non-traditional source of financing the Sustainable Development Goals (SDGs) across the world. This position was canvassed at a seminar organized by the Islamic Development Bank (IDB), on the sidelines of the United Nations’ Third International Conference on Financing for Development which began yesterday in Addis Ababa, Ethiopia. The seminar, entitled “Mobilizing Non-traditional Sources of Finance to Achieve Sustainable Development Goals (SDGs): The Role of Islamic Finance,” had as panelists, Dr. Savas Alpay, Chief Economist, IDB, who represented the IDB President, Dr. Ahmad Mohamed Ali; Dr. Mahmoud Mohieldin, Corporate Secretary & President’s Special Envoy, World Bank Group, Dr. Sami AlSuwailem, Manager of the Islamic Financial Products Development Centre, IDB; Dr. Ayo Ajayi, Director, Africa Team, Bill & Melinda Gates Foundation and Mr. Johannes Majewski, Program Coordinator, GIZ. Dr. Savas Alpay, said that the SDGs, which contain 17 goals and 169 targets, and are expected to replace the Millennium Development Goals (MDGs), could address major global challenges and promote financial inclusion, especially to the under-privileged segment of the society. He called on world leaders to move faster, take strong and decisive actions in order to fulfil the commitments made by governments and international agencies for the implementation of the SDGs. “Islamic finance has footprint in Asia and Middle East, is ripe for growth in South America and Europe and has future markets in North America, Central Asia and Australia. Its global assets have grown considerably and are estimated to have reached US$1.8 trillion by 2014 with compounded annual growth rate of about 15-20 percent,” the Chief Economist said. Dr. Savas Alpay reassured the participants that IDB is a pioneer in initiating innovative means of Islamic finance, and the instruments applied in this mode of financing have the potential to address key targets of the SDGs, such as food security, provision of shelter, building infrastructure, providing sustainable energy and ensuring financial inclusion. He added that Islamic financial instruments like Sukuk (Islamic capital market instruments), could be utilized as an effective non-traditional means of mobilizing resources for the implementation of the SDGs. Dr. Alpay said that IDB has used such instruments in funding a number of short term and long term development activities. Dr Sami Alsuwailim of the IDB said that the concept of Islamic finance is a participatory system of financing and that its core principles are accepted globally, irrespective of faith or nationality. In his intervention during the panel discussion, Dr. Mahmoud Mohieldin of the World Bank, said that there are several advantages provided by Islamic financial services, and that is why the World Bank is paying significant attention to them. He said that during the financial crisis, the World Bank noticed that Islamic financial institutions developed some resilience, and because of the provisions of Islamic law that prohibit certain types of transactions like gambling and speculation, Islamic finance is linked with the real economy and prevents institutions from accumulating debt beyond reason. Dr. Ayo Ajayi of the Gates Foundation dwelt on the innovative financing mechanisms introduced between IDB and his institution, adding that these mechanisms will enable low income countries to access financing through the $2.5 billion Lives & Livelihoods Fund, established by IDB and the Gates Foundation. He said that this shows the enormous potential of Islamic finance which can be harnessed in mobilizing resources for the actualization of the SDGs. Mr. Johannes Majewski, Program Coordinator, GIZ, the German Corporation, extolled the strength of Islamic finance through its emphasis on asset based financing and its focus on common welfare. “There are 650 million Muslims living on less than $2 a day and having no access to formal finance.” But the contribution of Islamic finance to the SDGs according to Mr Majewski, is that it has the ability to reach the unbanked segment of the population. Meanwhile as part of its commitment to the SDGs, the IDB announced that it will increase its funding of SDG related activities through its ten year strategic framework, from $80 billion recorded during the MDGs, to $150 billion over the next 15 years (2016-2030). The Islamic Development Bank is a multilateral development institution with headquarters in Jeddah, KSA. It consists of 56 member countries in Africa, Asia, Europe and Latin America. The purpose of the bank is to foster the economic development and social progress of Muslim countries, and Muslim communities in non-member countries. The Bank has regional offices in Kuala Lampur (Malaysia), Rabat (Morocco), Almaty (Kazakhstan), Dakar (Senegal), and several gateway offices and field representatives in different parts of the world. [myad]
There is every danger that addressing a topic like this might yield another exercise in vain lamentation when what our country needs to do is take and give effect to rational decisions about the oil sector. For instance, the discourse around the resource curse has had a deep resonance for many Nigerians because it vividly sums up the paradox between the huge earnings from oil and the reality of poverty and underdevelopment for most Nigerians.
Thus we have jobless growth, a fact that statistics touting high GDP growth rates tend to obscure but which is painfully real for many people. And we continue to suffer the consequences of our affliction with the Dutch disease. The easy money from oil has led to the neglect of other endowments, most especially agriculture.
Yet talk we must when a problem persists i the embarrassing dimensions that Nigeria’s oil debacle represents, in the hope that we can deepen understanding about the precise nature of the problem, and build national consensus about the possible solutions. Even the crafters of the topic of this lecture imply that something is rotten in the governance and outcomes of Nigeria’s oil industry. Yet they helpfully infuse an air of optimism by not describing it as oil misfortune. Thus I approach this assignment not as an fortune-teller, but as a Nigerian who has had the duty and the interest to pay more attention to this issue than most of my compatriots. During the Obasanjo years, I had the responsibility to constitute Oil and Gas Implementation Committee that led to the drafting of the original Petroleum Industry Bill as an instrument for reforming the oil sector. Eight years after the exit of that government, the PIB has not become law, mainly through the wilful neglect of the successor governments that prioritized their personalized stranglehold on the sector’s revenues above its reform and efficient performance for national benefit. We now have another chance to anchor our oil sector reform agenda on the current and projected realities in that sector. And we must do that in the knowledge that the world is not waiting for us, that while we dallied new suppliers have come in to the global oil business and buyers have more choice. Some of our traditional customers have become self-sufficient, while others have developed alternatives thus reducing their reliance on our ‘light, sweet crude oil’.
Is there an oil fortune?
In fiscal terms, the answer is a massive yes. That the revenues have declined, or not been used to build human capital or enduring physical infrastructure is another matter. Nigeria’s oil reserves relative to our population is puny by comparison to the Gulf states. But you only need to imagine what national budgets would look like without the oil receipts to appreciate the fact that some oil is better than no oil. And we are not talking peanuts here. Despite a 60% fall in oil price between June 2014 and the end of that year, Nigeria still earned USD 77 billion from oil exports in 2014. The Punch newspaper of 2 April 2015, quoting figures from the United States Department of Energy, placed oil export earnings for the year 2011 at USD 99 billion. Indeed in the five Jonathanian years, Nigeria earned nearly USD 500 billion from crude oil and gas sales.
The 2014 earnings of $77 billion is rather small compared to the $246 billion that Saudi Arabia made, but it cannot be sniffed at. So there are oil fortunes and there are oil fortunes. What we need to interrogate is how responsibly we have managed that fortune, how diligently we have tried to expand and sustain it and whether having that national fortune has impacted significantly on the fortune of the average Nigerian.
About 40% of Nigerians are estimated to be very poor. That is about 70 million living people living below the poverty line in a country that has earned at least 1trillion in current dollars from oil in 50 years. For our vast masses, oil is no fortune. It is more of a mirage, but a more insidious kind, because the fortune is visible in the lifestyles of a few thousands of the privileged elite but is stubbornly inaccessible to tens of millions of ordinary people. Our rich enjoy the lifestyles of the richest in the world, while our poor are truly the wretched of the earth. This inequality is most unfortunate. That wide gulf in living standards is clearly problematic. It is, in my view, a major responsibility of a democratic government to strive to move more people away from the attrition that extreme poverty inflicts. This is not attained by wishful thinking, or by merely affirming the intent. It is about managing our resources in a way that sustainably builds our people, diligently collecting revenues and applying them in a determinedly cost-effective and result-oriented manner. The best fortune a country can have is its people. But like many gems, they have to be polished and nurtured for their talents to glow. Spending efficiency and effectiveness is best reflected in outcomes such as more educated and healthy people, living longer lives productively and happily.
That, for me, is the major reason we must seek to enhance and responsibly manage Nigeria’s oil fortune. It must become the people’s fortune.
Sketching the Oil Industry
Let us examine some statistics to give us a picture of the oil industry in Nigeria. In 2014, Nigeria was producing on the average about 2.2 million barrels of crude oil per day, while importing most of its daily consumption of 43.5 million litres of refined petroleum products. That reliance on imports of refined products has seen unsustainable expenses on questionable subsidy payments, exemplified by USD 8.99 billion in the 18 months between January 2012 and June 2013. About N971 billion was budgeted for subsidy payments in 2014 alone (more than twice that was eventually paid). You all recall how trillions of Naira were paid out as oil subsidy in 2011, when only N254 billion was appropriated. No one has been successfully prosecuted for this scam. Huge deficits in gas supply have ensured that the country’s thermal plants cannot produce power at optimal levels. In the eight years leading up to 2014, joint venture production declined by 50.4%. Some 100,000 barrels per day, about five percent of total production, is estimated to be lost to organized theft. And we all dread the ease and rapidity with which supply shortages lead to endless queues, widespread panic and mortal consequences for the many victims of tanker accidents.
The long and short of the situation of our oil industry is best exemplified by the parallel government called the NNPC. In 2012, it sold N2.77 trillion of ‘domestic’ crude oil but paid only N1.66 trillion to the Federation Account. In 2013, it earned N2.66 trillion but paid N1.56 trillion to FAAC, in 2014 N2.64 trillion but remitted N1.44 trillion, while between January and May 2015, it earned N733.36 billion and remitted only N473.2 billion! That means that the NNPC only remitted about 58% of the monies earned between 2012 and the first half of 2015. A company with the audacity to retain 42% of a country’s money has become a veritable parallel republic!
The NNPC feels entitled to consume more resources than the 36 states, the FCT and the Federal Government combined! The example just given is only with respect to domestic crude oil sales. Similar leakages exist in NPDC, NAPIMS procurement and subsidiary budgets.
How could a country so dependent on oil revenues have been so lax about the proper governance, efficiency and security of its oil industry? How can a mono-product economy be so relaxed that it takes up to 24 months or more to make decisions on vital oil industry projects? Why is it that in this most crucial of sectors it has been possible for briefcase companies to walk away with big assets, billion naira subsidy payments and ‘local content’ contracts? Can an oil industry with virtually no serious barriers to entry yield fortunes beyond a narrow circle? For so great are the miracles that oil has performed in the lives of a few, there is not much left for the many.
Having strayed into lamentation in describing the Nigerian oil industry, let me quickly return to trying to draw lessons and to suggest ways by which we may successfully navigate a different track. We can agree that what passes for the oil industry is a mismanaged, costly, corrupt and grossly inefficient operation. These negatives are not the way to grow or retain fortune.
So what should we consider doing?
Let us first learn the appropriate lessons. We are neither immune from the laws of economics nor from the consequences of sheer folly. Now that more countries are producing and selling oil and gas, we can safely assume that barring a new phase of explosive global economic growth, oil will remain relatively cheap at the $50-$60 per barrel range, for the foreseeable future. What do we intend to do with these diminished earnings? If we persist in indulging our appetite to consume rather than save, import rather than produce domestically, or neglect to prioritize capital investments, we will simply sink deeper into poverty. We must resolve to spend wiser, and do more with less.
Our general national orientation has been impacted for worse due to our attitude to the oil cash cow. Let us firmly resolve that growing our people’s potentials will be a primary goal, and that in the pursuit of that aim, we shall commit to an efficiently and transparently managed oil industry. We can demonstrate this new purpose by slaying three huge dragons: (1) A fixation with public ownership and control of every major oil asset, (2) the corruption and distortion that oil subsidy is inflicting on our economy, and (3) the NNPC in its current form is in our collective national interest.
End the fixation with public ownership: You will recall the outcry when the Obasanjo government sold two of our refineries shortly before it left office in 2007. The successor-government reversed the sale. Eight years and millions of dollars in turn-around maintenance later, the refineries are at best a minor component of our supply sources for refined products while remaining a suction pump of our resources. One of the men whose purchase of the refineries was aborted is now building his own, and it can be expected to be more modern, far more efficient and more productive than the public facility we turned into an object of baseless veneration. Let us be realistic enough to choose the most pragmatic options when we confront national problems. We should incentivize competent investors to acquire majority shares and management control in all our refineries and sell to them crude oil at market prices, and remit the proceeds directly into the Federation Account!
Tackle the corruption and distortion in subsidy regime: I daresay that the oil subsidy regime has neither grown our people nor guaranteed stability of refined product supplies. What subsidy has achieved is create a huge hole in the budget and a new array of overnight billionaires. The downstream oil business in Nigeria has morphed into one optimised for the pursuit of subsidy payments. We see thinly-disguised periodic hostage-taking as the subsidy barons seek to pry open government coffers. It is time to tackle the corruption in the subsidy regime. We can discuss how the resulting subsidy savings will be spent to improve lives, while guaranteeing stability of supply to the domestic market. We have a president with both the integrity to responsibly manage the savings and the experience of managing special interventions based on subsidy savings. Let us say bye to foreign exchange drains, opaque crude swaps, offshore processing agreements and other devices that have derailed and distorted the subsidy regime, to our national detriment.
Reverse missed opportunities: I have already highlighted the fact that our country has neither saved nor wisely invested oil proceeds from the five oil booms that my sister Oby Ezekwesili identified. I may only add that the oil industry itself is a victim of this lack of proper investment. We have been as unable to utilize what it yields us as we are remiss about expanding what it can yield us, by prudent and focused re-investment.
Nigeria’s oil reserves are not growing at a fast enough pace. The gas potential is still largely that, an untapped potential amidst pressing needs. Since Bonny LNG we have not been able to complete and commission any other – Brass and Olokola LNG projects remain on the drawing board. The implementation of the national gas masterplan has stalled since 2009. And so there is simply not enough natural gas collected and dried to feed our power turbines, industries and households. There has to be a commitment to sustained investments to stimulate a proper gas sector. The multiplier effects of this will be immense, from contributions to improving the country’s power capacity, fuel homes and industries, create jobs and improve export earnings. We must be ambitious about what we can achieve here.
We similarly need to encourage more local refining, and not just to assure stability in the supply of refined products for the domestic market but to cut costs and save jobs. We also have untapped potentials in petrochemicals, which can help fast-track domestic industrial activity and improve export earnings.
In short, we must take steps to reposition our oil and gas sector as one that is properly integrated into the national economy, helping to create jobs, raise skills level, drive industrialization and earn more from exports. The rents therefrom can then be applied towards investments in human capital, physical infrastructure and economic
Diversification
How do we attain this wish list?
We need a mix of fresh strategic thinking and a firm commitment to reform. We need to define exactly what we want the oil industry to be and to achieve, and then define the structure that can best deliver it. An efficient and productive oil sector, able to create jobs, spur industrialization and earn more revenues requires that we tackle the monster that the NNPC has become. This country can no longer afford to maintain an NNPC that arrogantly, unlawfully and unconstitutionally spends an unhealthy proportion of national oil earnings on itself.
We should replace the NNPC with brand new organizations that are fit for purpose: – among others – a commercialized and corporatized national oil company and new industry regulators. This new national oil company should be capitalized once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties. The corruption and nonchalance that have hobbled the NNPC are symptoms that its best days are over. We should give it a deserved funeral so that a new institution, active and nimble, can promptly replace it. NNPC’s subsidiaries and associated companies can be reviewed, restructured and privatized or commercialized as appropriate consistent with national interest and objectives.
The government should review the Joint Venture strategy, with the governing principle being to shift the financing and operational risks to the markets and operators respectively. Government should avoid owing the oil companies, and should more proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it.
No one is better qualified to do this than the person that birthed the NNPC through the merger of the NNOC and the Ministry of Petroleum in 1977 – President Buhari himself. No one can appreciate the gap between the vision of NNPC’s founding fathers, the beautiful baby of 1977 and the 38 year-old monster it has become better than President Buhari. The NNPC of today must make Chief Sunday Awoniyi of blessed memory squirm in his grave. Something fundamentally decisive must be done to tame this monster. We must have the political will to make all oil industry transactions transparent. There should be clear rules and processes for licensing, concessioning, procurement and contracting. Opaque systems tend to be corrupt, and it is time to shine the light. The president has already taken the commendable step of directing that all revenues be remitted either to the Federation Account or the consolidated revenue fund as required by sections 80 and 162 of the Constitution. President Buhari is therefore clear that oil industry revenues will no longer be treated as some slush fund of the federal government.
It is the national consensus that we arrive at regarding the oil sector that we can finally codify in a new petroleum act, which should be a simply worded, concise piece of legislation that spells out the general governing principles for the industry. Specific matters can then be based on subsidiary legislation, regulations and agreements. Complex and densely worded laws conduce to opacity and should therefore be avoided.
I am by no means underestimating the titanic struggles that might be necessary to change the Nigerian oil industry. The vested interests will be all out to thwart change and uphold the status quo. The media and civil society organizations (CSOs) have the major role of pushing for transparent disclosures and adherence to due process. No other institutions have the power of CSOs and media to advocate, educate and enlighten the public to support and demand the most pragmatic, rational and effective measures that can make Nigeria’s oil fortune become the people’s fortune. The media in particular must lead from the front in this effort.
To be in a position to accurately educate, the media must itself be knowledgeable about the issues. Apart from the obvious advantages of having specialists leading the reporting of certain industries, the media performs an immense service when it affords the public the resources to partake in informed debate. And the media must enhance its capacity for follow-up, to focus on an issue long enough to report its resolution. It must use the Freedom of Information Act maximally to ensure that wrong-doing and impropriety are not protected by official secrecy. If we successfully remake the oil industry, we would have significantly remade our country. And our poverty stricken majority will be the better for it. This, ladies and gentlemen, is the burden of responsibility placed on us as leaders in our various spheres of influence.
Thank you for listening. God bless the Federal Republic of Nigeria.
Nasir Ahmad El-Rufai OFR, Governor of Kaduna State delivered this lecture at Wole Soyinka Centre Annual Media Lecture In Abuja on Monday, July 13, 2015. [myad]
Governor Nasiru el-Rufai of Kaduna state has referred to the Nigeria National Petroleum Corporation (NNPC) as a monster that must be tamed. “Something fundamentally decisive must be done to tame this monster and we must have the political will to make all oil industry transactions transparent.” At the 7th Wole Soyinka Centre Media Lecture series in Abuja entitled “Nigeria and the Oil Fortune,” el-Rufai was sure that no one “can appreciate the gap between the vision of NNPC’s founding fathers, the beautiful baby of 1977 and the 38-year-old monster it has become than President Buhari.” “The corruption and nonchalance that hobbled the NNPC are symptoms that its best days are over. “We should give it a deserved funeral so that a new institution, active and nimble, can promptly replace it.” The governor wanted the NNPC’s subsidiaries and associated companies to be reviewed, restructured and privatised or commercialised as appropriate and consistent with national interest and objectives. He also wanted the government to review the Joint Venture strategy with the governing principle being to shift the financing and operational risks to the markets and operators respectively. He asked the government to avoid owing the oil companies, and to proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it. “No one is better qualified to do this than the person that formed the NNPC through the merger of the Nigerian National Oil Corporation and the Ministry of Petroleum in 1977, President Muhammadu Buhari himself. The Kaduna Chief Executive said that there should be clear rules and processes for licencing, concessioning, procurement and contracting, adding that the existing systems tend to be corrupt. El-Rufai is happy however that President Buhari has already taken the commendable step of directing that all revenues be remitted either to the Federation Account or the consolidated revenue fund as required by sections 80 and 162 of the Constitution. He said that the President was clear that oil industry revenues would no longer be treated as some slush fund of the Federal Government. [myad]
President Muhammadu Buhari has made it clear to the new service chiefs whom he appointed yesterday got the jobs because of their good records. “All of you, including the national security adviser, were chosen on merit. Your records gave you the jobs. Save for the new chief of army staff whom I briefly met at his command at the multi-national joint task force, in Chad, I don’t know any of you. Your records recommended you.” The President spoke yesterday when he briefly met the service chiefs and the National Security Adviser (NSA) at the Presidential Villa, Abuja to welcome them on board his government. He advised them to rebuild the reputation of the armed forces and prove that they were appointed on merit. He asked them to show utmost commitment to their duties. “Legally, you are in acting capacity until the national assembly accepts you. It is only then that you will take the oath of office. Thereafter, we will sit down and talk in more detail.” President Buhari assured them that their nominations would soon be forwarded to the National Assembly for confirmation. Buhari yesterday appointed Abayomi Olonishakin as chief of defence staff; T.Y. Buratai as chief of army staff; Ibok-Ete Ekwe Ibas as chief of naval staff and Sadique Abubakar as chief of air staff. He also appointed Riku Morgan as chief of defence intelligence and Babagana Monguno as National Security Adviser. [myad]
Chairman of the National Hajj Commission of Nigeria (NAHCON), Alhaji Abdullahi Muktar has announced the introduction of cash awards to the best air carriers in the hajj operations from this year. The announcement was made at the signing of an agreement between the air carriers and the Commission yesterday.
He advised the air carriers to go into competition by working in the best interest of the pilgrims even as he made it known to them that the Commission is going to have a monitoring team to evaluate performances.
“We are also going to give out prices to the best performed air carriers at the end of the Hajj exercise.’’
Muktar, who signed the agreement on behalf of the Commission in Abuja, advised the selected air carriers to put the interest of the pilgrims above personal and financial aspects of the agreement for successful and fruitful exercise.
He advised them not to compromise standards and quick service delivery like other countries, being the ultimate when it comes to Hajj operations.
This, he said, would move Hajj operations forward “because every year the Saudi Authority always expect the best services, especially in the area of airlift of pilgrims.
“The agreement should not be between the air carriers and the Commission alone, but the target should be the pilgrims, especially their welfare. The agreement is just like taking an oath between the Commission and Allah, the creator.”
Muktar advised them to have the fear of Almighty Allah in whatever they do, as He was always watching us.
He stressed the fact that President Muhammadu Buhari was not only concerned and passionate about Hajj but would do everything possible to put the country at par with international best practice.
He promised to work with the State Muslim Pilgrims Welfare Boards, especially in the area of visa in order to have a hitch-free Hajj.
The selected carriers are; Top Brass Aviation, MedView Air , Kabo Air, Fly-Nass Air, Skypower Air, among others.
In his remarks, Alhaji Nura Harazimi, the Executive Director, Top Brass Aviation, who spoke on behalf of others, expressed gratitude to the Commission for the confidence reposed in them.
He promised that they would give their best, particularly in the area of service delivery to the pilgrims.
“We will work as partners in progress to give this year’s Hajj a befitting success. We are also going to comply strictly with the rules and regulations guiding Hajj operations.” [myad]
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Anambra state government and teachers in the state are at loggerhead over the issue of computer. Whereas the state ministry of education is said to have made it compulsory for each teacher to purchase computer set from its agency at the rate of of N90,000.00, the teachers have described it as unconscionable and unacceptable.
Oil Fortune And Misfortune, By Nasir Ahmad El-Rufai
There is every danger that addressing a topic like this might yield another exercise in vain lamentation when what our country needs to do is take and give effect to rational decisions about the oil sector. For instance, the discourse around the resource curse has had a deep resonance for many Nigerians because it vividly sums up the paradox between the huge earnings from oil and the reality of poverty and underdevelopment for most Nigerians.
Thus we have jobless growth, a fact that statistics touting high GDP growth rates tend to obscure but which is painfully real for many people. And we continue to suffer the consequences of our affliction with the Dutch disease. The easy money from oil has led to the neglect of other endowments, most especially agriculture.
Yet talk we must when a problem persists i the embarrassing dimensions that Nigeria’s oil debacle represents, in the hope that we can deepen understanding about the precise nature of the problem, and build national consensus about the possible solutions. Even the crafters of the topic of this lecture imply that something is rotten in the governance and outcomes of Nigeria’s oil industry. Yet they helpfully infuse an air of optimism by not describing it as oil misfortune.
Thus I approach this assignment not as an fortune-teller, but as a Nigerian who has had the duty and the interest to pay more attention to this issue than most of my compatriots. During the Obasanjo years, I had the responsibility to constitute Oil and Gas Implementation Committee that led to the drafting of the original Petroleum Industry Bill as an instrument for reforming the oil sector. Eight years after the exit of that government, the PIB has not become law, mainly through the wilful neglect of the successor governments that prioritized their personalized stranglehold on the sector’s revenues above its reform and efficient performance for national benefit. We now have another chance to anchor our oil sector reform agenda on the current and projected realities in that sector. And we must do that in the knowledge that the world is not waiting for us, that while we dallied new suppliers have come in to the global oil business and buyers have more choice. Some of our traditional customers have become self-sufficient, while others have developed alternatives thus reducing their reliance on our ‘light, sweet crude oil’.
Is there an oil fortune?
In fiscal terms, the answer is a massive yes. That the revenues have declined, or not been used to build human capital or enduring physical infrastructure is another matter. Nigeria’s oil reserves relative to our population is puny by comparison to the Gulf states. But you only need to imagine what national budgets would look like without the oil receipts to appreciate the fact that some oil is better than no oil. And we are not talking peanuts here. Despite a 60% fall in oil price between June 2014 and the end of that year, Nigeria still earned USD 77 billion from oil exports in 2014. The Punch newspaper of 2 April 2015, quoting figures from the United States Department of Energy, placed oil export earnings for the year 2011 at USD 99 billion. Indeed in the five Jonathanian years, Nigeria earned nearly USD 500 billion from crude oil and gas sales.
The 2014 earnings of $77 billion is rather small compared to the $246 billion that Saudi Arabia made, but it cannot be sniffed at. So there are oil fortunes and there are oil fortunes. What we need to interrogate is how responsibly we have managed that fortune, how diligently we have tried to expand and sustain it and whether having that national fortune has impacted significantly on the fortune of the average Nigerian.
About 40% of Nigerians are estimated to be very poor. That is about 70 million living people living below the poverty line in a country that has earned at least 1trillion in current dollars from oil in 50 years. For our vast masses, oil is no fortune. It is more of a mirage, but a more insidious kind, because the fortune is visible in the lifestyles of a few thousands of the privileged elite but is stubbornly inaccessible to tens of millions of ordinary people. Our rich enjoy the lifestyles of the richest in the world, while our poor are truly the wretched of the earth. This inequality is most unfortunate.
That wide gulf in living standards is clearly problematic. It is, in my view, a major responsibility of a democratic government to strive to move more people away from the attrition that extreme poverty inflicts. This is not attained by wishful thinking, or by merely affirming the intent. It is about managing our resources in a way that sustainably builds our people, diligently collecting revenues and applying them in a determinedly cost-effective and result-oriented manner. The best fortune a country can have is its people. But like many gems, they have to be polished and nurtured for their talents to glow. Spending efficiency and effectiveness is best reflected in outcomes such as more educated and healthy people, living longer lives productively and happily.
That, for me, is the major reason we must seek to enhance and responsibly manage Nigeria’s oil fortune. It must become the people’s fortune.
Sketching the Oil Industry
Let us examine some statistics to give us a picture of the oil industry in Nigeria. In 2014, Nigeria was producing on the average about 2.2 million barrels of crude oil per day, while importing most of its daily consumption of 43.5 million litres of refined petroleum products. That reliance on imports of refined products has seen unsustainable expenses on questionable subsidy payments, exemplified by USD 8.99 billion in the 18 months between January 2012 and June 2013.
About N971 billion was budgeted for subsidy payments in 2014 alone (more than twice that was eventually paid). You all recall how trillions of Naira were paid out as oil subsidy in 2011, when only N254 billion was appropriated. No one has been successfully prosecuted for this scam. Huge deficits in gas supply have ensured that the country’s thermal plants cannot produce power at optimal levels. In the eight years leading up to 2014, joint venture production declined by 50.4%. Some 100,000 barrels per day, about five percent of total production, is estimated to be lost to organized theft. And we all dread the ease and rapidity with which supply shortages lead to endless queues, widespread panic and mortal consequences for the many victims of tanker accidents.
The long and short of the situation of our oil industry is best exemplified by the parallel government called the NNPC. In 2012, it sold N2.77 trillion of ‘domestic’ crude oil but paid only N1.66 trillion to the Federation Account. In 2013, it earned N2.66 trillion but paid N1.56 trillion to FAAC, in 2014 N2.64 trillion but remitted N1.44 trillion, while between January and May 2015, it earned N733.36 billion and remitted only N473.2 billion! That means that the NNPC only remitted about 58% of the monies earned between 2012 and the first half of 2015. A company with the audacity to retain 42% of a country’s money has become a veritable parallel republic!
The NNPC feels entitled to consume more resources than the 36 states, the FCT and the Federal Government combined! The example just given is only with respect to domestic crude oil sales. Similar leakages exist in NPDC, NAPIMS procurement and subsidiary budgets.
How could a country so dependent on oil revenues have been so lax about the proper governance, efficiency and security of its oil industry? How can a mono-product economy be so relaxed that it takes up to 24 months or more to make decisions on vital oil industry projects? Why is it that in this most crucial of sectors it has been possible for briefcase companies to walk away with big assets, billion naira subsidy payments and ‘local content’ contracts? Can an oil industry with virtually no serious barriers to entry yield fortunes beyond a narrow circle? For so great are the miracles that oil has performed in the lives of a few, there is not much left for the many.
Having strayed into lamentation in describing the Nigerian oil industry, let me quickly return to trying to draw lessons and to suggest ways by which we may successfully navigate a different track. We can agree that what passes for the oil industry is a mismanaged, costly, corrupt and grossly inefficient operation. These negatives are not the way to grow or retain fortune.
So what should we consider doing?
Let us first learn the appropriate lessons. We are neither immune from the laws of economics nor from the consequences of sheer folly. Now that more countries are producing and selling oil and gas, we can safely assume that barring a new phase of explosive global economic growth, oil will remain relatively cheap at the $50-$60 per barrel range, for the foreseeable future. What do we intend to do with these diminished earnings? If we persist in indulging our appetite to consume rather than save, import rather than produce domestically, or neglect to prioritize capital investments, we will simply sink deeper into poverty. We must resolve to spend wiser, and do more with less.
Our general national orientation has been impacted for worse due to our attitude to the oil cash cow. Let us firmly resolve that growing our people’s potentials will be a primary goal, and that in the pursuit of that aim, we shall commit to an efficiently and transparently managed oil industry. We can demonstrate this new purpose by slaying three huge dragons: (1) A fixation with public ownership and control of every major oil asset, (2) the corruption and distortion that oil subsidy is inflicting on our economy, and (3) the NNPC in its current form is in our collective national interest.
End the fixation with public ownership: You will recall the outcry when the Obasanjo government sold two of our refineries shortly before it left office in 2007. The successor-government reversed the sale. Eight years and millions of dollars in turn-around maintenance later, the refineries are at best a minor component of our supply sources for refined products while remaining a suction pump of our resources. One of the men whose purchase of the refineries was aborted is now building his own, and it can be expected to be more modern, far more efficient and more productive than the public facility we turned into an object of baseless veneration. Let us be realistic enough to choose the most pragmatic options when we confront national problems. We should incentivize competent investors to acquire majority shares and management control in all our refineries and sell to them crude oil at market prices, and remit the proceeds directly into the Federation Account!
Tackle the corruption and distortion in subsidy regime: I daresay that the oil subsidy regime has neither grown our people nor guaranteed stability of refined product supplies. What subsidy has achieved is create a huge hole in the budget and a new array of overnight billionaires. The downstream oil business in Nigeria has morphed into one optimised for the pursuit of subsidy payments. We see thinly-disguised periodic hostage-taking as the subsidy barons seek to pry open government coffers. It is time to tackle the corruption in the subsidy regime. We can discuss how the resulting subsidy savings will be spent to improve lives, while guaranteeing stability of supply to the domestic market. We have a president with both the integrity to responsibly manage the savings and the experience of managing special interventions based on subsidy savings. Let us say bye to foreign exchange drains, opaque crude swaps, offshore processing agreements and other devices that have derailed and distorted the subsidy regime, to our national detriment.
Reverse missed opportunities: I have already highlighted the fact that our country has neither saved nor wisely invested oil proceeds from the five oil booms that my sister Oby Ezekwesili identified. I may only add that the oil industry itself is a victim of this lack of proper investment. We have been as unable to utilize what it yields us as we are remiss about expanding what it can yield us, by prudent and focused re-investment.
Nigeria’s oil reserves are not growing at a fast enough pace. The gas potential is still largely that, an untapped potential amidst pressing needs. Since Bonny LNG we have not been able to complete and commission any other – Brass and Olokola LNG projects remain on the drawing board. The implementation of the national gas masterplan has stalled since 2009. And so there is simply not enough natural gas collected and dried to feed our power turbines, industries and households. There has to be a commitment to sustained investments to stimulate a proper gas sector. The multiplier effects of this will be immense, from contributions to improving the country’s power capacity, fuel homes and industries, create jobs and improve export earnings. We must be ambitious about what we can achieve here.
We similarly need to encourage more local refining, and not just to assure stability in the supply of refined products for the domestic market but to cut costs and save jobs. We also have untapped potentials in petrochemicals, which can help fast-track domestic industrial activity and improve export earnings.
In short, we must take steps to reposition our oil and gas sector as one that is properly integrated into the national economy, helping to create jobs, raise skills level, drive industrialization and earn more from exports. The rents therefrom can then be applied towards investments in human capital, physical infrastructure and economic
Diversification
How do we attain this wish list?
We need a mix of fresh strategic thinking and a firm commitment to reform. We need to define exactly what we want the oil industry to be and to achieve, and then define the structure that can best deliver it. An efficient and productive oil sector, able to create jobs, spur industrialization and earn more revenues requires that we tackle the monster that the NNPC has become. This country can no longer afford to maintain an NNPC that arrogantly, unlawfully and unconstitutionally spends an unhealthy proportion of national oil earnings on itself.
We should replace the NNPC with brand new organizations that are fit for purpose: – among others – a commercialized and corporatized national oil company and new industry regulators. This new national oil company should be capitalized once and for all, and then freed to fend for itself like other national oil companies do, seeking its financing independently from the financial markets and paying due taxes and royalties. The corruption and nonchalance that have hobbled the NNPC are symptoms that its best days are over. We should give it a deserved funeral so that a new institution, active and nimble, can promptly replace it. NNPC’s subsidiaries and associated companies can be reviewed, restructured and privatized or commercialized as appropriate consistent with national interest and objectives.
The government should review the Joint Venture strategy, with the governing principle being to shift the financing and operational risks to the markets and operators respectively. Government should avoid owing the oil companies, and should more proactively review the terms and implementation of the Production Sharing Contracts (PSCs) and concentrate on collecting the royalties and taxes due to it.
No one is better qualified to do this than the person that birthed the NNPC through the merger of the NNOC and the Ministry of Petroleum in 1977 – President Buhari himself. No one can appreciate the gap between the vision of NNPC’s founding fathers, the beautiful baby of 1977 and the 38 year-old monster it has become better than President Buhari. The NNPC of today must make Chief Sunday Awoniyi of blessed memory squirm in his grave. Something fundamentally decisive must be done to tame this monster.
We must have the political will to make all oil industry transactions transparent. There should be clear rules and processes for licensing, concessioning, procurement and contracting. Opaque systems tend to be corrupt, and it is time to shine the light. The president has already taken the commendable step of directing that all revenues be remitted either to the Federation Account or the consolidated revenue fund as required by sections 80 and 162 of the Constitution. President Buhari is therefore clear that oil industry revenues will no longer be treated as some slush fund of the federal government.
It is the national consensus that we arrive at regarding the oil sector that we can finally codify in a new petroleum act, which should be a simply worded, concise piece of legislation that spells out the general governing principles for the industry. Specific matters can then be based on subsidiary legislation, regulations and agreements. Complex and densely worded laws conduce to opacity and should therefore be avoided.
I am by no means underestimating the titanic struggles that might be necessary to change the Nigerian oil industry. The vested interests will be all out to thwart change and uphold the status quo. The media and civil society organizations (CSOs) have the major role of pushing for transparent disclosures and adherence to due process. No other institutions have the power of CSOs and media to advocate, educate and enlighten the public to support and demand the most pragmatic, rational and effective measures that can make Nigeria’s oil fortune become the people’s fortune. The media in particular must lead from the front in this effort.
To be in a position to accurately educate, the media must itself be knowledgeable about the issues. Apart from the obvious advantages of having specialists leading the reporting of certain industries, the media performs an immense service when it affords the public the resources to partake in informed debate. And the media must enhance its capacity for follow-up, to focus on an issue long enough to report its resolution. It must use the Freedom of Information Act maximally to ensure that wrong-doing and impropriety are not protected by official secrecy. If we successfully remake the oil industry, we would have significantly remade our country. And our poverty stricken majority will be the better for it. This, ladies and gentlemen, is the burden of responsibility placed on us as leaders in our various spheres of influence.
Thank you for listening. God bless the Federal Republic of Nigeria.
Nasir Ahmad El-Rufai OFR, Governor of Kaduna State delivered this lecture at Wole Soyinka Centre Annual Media Lecture In Abuja on Monday, July 13, 2015. [myad]
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