Nigeria’s economic fundamentals are strong

Nigeria’s economic fundamentals are strong as evidenced by the rebased GDP that puts Nigeria as the largest economy in Africa and the 26th in the world.  Such is the enormous promise that Nigeria holds.

In spite of the abundant potential and enormous promise that Nigeria holds, there have been fundamental challenges preventing us from maximising this potentials and rise like the giant phoenix.

The 2014 “Doing Business” Survey Report of the World Bank ranked Nigeria 147th out of 189 countries assessed on its ease of doing business index. This reflects the realities and certain boundaries that businesses would need to push through to be successful in Nigeria.

Despite our huge potentials and being ranked the biggest economy in Africa, our citizens are not getting the best that they deserve.   

Key among these challenges includes poor power supply, poor transport infrastructures as well as overlapping legislations, aggressive regulators seemingly more focused towards rent collection,

Shortage of electricity is one of the biggest challenges for business in Nigeria; our power stations generate just 4GW of electricity, which is quite meagre compared to a national need of over 40GW. Transport bottlenecks make supply chain unstable and erratic. Above all, the rules of the game for business can change quickly and thus have grave uncertainties in creating an enabling environment to attract investments, technology and people.

Nigeria can take a cue from Nigeria LNG Limited (NLNG) in achieving its potential. For instance NLNG was incorporated in 1989 to help end gas flaring and also monetize Nigeria’s vast natural gas resources. It is owned by 4 shareholders, the Federal Government of Nigeria, through NNPC (49 percent); Shell (25.6 percent); Total (15 percent) and Eni (10.4 percent). The company has two wholly–owned subsidiaries: Bonny Gas Transport (BGT) Limited and NLNG Ship Management Limited (NSML).

It is estimated that the amount flared initially was 2.5 bcf/d, i.e. 75% of produced gas and the rest were re-injected into the wells.

NLNG has since then  converted over 4.2 Tcf (trillion cubic feet) of Associated Gas (AG) that would have been flared to LNG and NGL exports, thus helping to reduce gas flaring by Upstream Companies to less than 25% and generating over $30billion that would have been flared, a real outstanding achievement.

Nigeria has reaped significant benefit from NLNG in terms of its 49% dividend, 30% CIT, Feedgas Purchases, etc. To give you a perspective, the Company’s income tax payment this year represented about 5% of the total revenue projections of the government for 2014.

Nigeria LNG Limited has de-mystified the various malignant myths about doing business in Nigeria as it has delivered world class sterling performance within its 15 years of operation.

Today, Nigeria LNG Limited operates its six-train plant at a best-in-class reliability of 97 percent quite above a world-class top quartile reliability of 95 percent.

We have also grown from an annual cargo count of 5 per annum in 1999 to over 300 cargoes per annum, pushing the boundaries of internal capacities year on year.

As complex as the operations of the LNG plant is, and through a competence and stringent hearts and mind programme, we recently completed over 20 million man-hours of work without any lost time injuries, a record only very few companies in the world can boast about.

We have also grown from a 4 billion dollar per annum company to one of over 10 billion dollar company in fifteen years favourably comparing with the turnover of many companies in the 2013 FSTE 100 list.

An investment of $7.5 billion dollar has now yielded revenue of 85 billion dollars to date and we now have a $13billion asset base, the 4th largest LNG plant in the world. In addition, we are the single largest ship owner in Nigeria with 24 LNG carrier ships.

NLNG’s contribution to the GDP  consistently increased to 4 percent in 2008. In addition, we currently supply over 80 percent of cooking gas (LPG) in Nigeria and recently increased our dedicated volumes by 67 percent and are prepared to increase by 1000 percent to get more Nigerians to switch to cooking gas rather than continue to use fire wood and Kerosene, alternatives that have environmental and health disadvantages.

We are analysing the global trends including Shale Gas competition, new Mega LNG Plants in Australia and East Africa. For example the technological improvements to Shale gas extraction has doubled the world reserves in LNG and in the US has led them from changing from an importer to a likely exporter and Henry Hub gas price has fallen by more than 85 percent from $15/mmbtu in 2005 to less than $4.50/mmbtu today.

These global challenges are not made easy by the local challenges from the uncertainties of policy changes, delayed passage of the Petroleum Industry Bill (PIB), gas developments for domestic use, sustaining feed gas supply, ageing plants and ships, and continued tension between  Nigerian culture and a World-Class culture.

Train 7 will allow us add eight million metric tonnes or 40% to our current production capacity. It will enable us attract over $12billion investments, create over 18,000 construction jobs and yield additional $2.5 billion revenues. The reality is that having come to the end of our tax holiday period, about 70 percent of value generated in NLNG today goes to the Government and people of Nigeria. So a Train 7 is a big value to Nigeria and together with shareholders we are continuing to work on this.

BABS OMOTOWA