• Thursday, February 29, 2024
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Sanusi, heralding OPEC’s demise


When the Stone Age ended it wasn’t for the lack of stones ditto will be for the oil era. Whether or not our refineries will be handed over to private or pseudo private owners, Sanusi’s revelation will go down as the most chilling and probably the last scandal we will hear from an insider in the oil-money-receipt-chain. Back then former chairman of RMAFC Mr. Hamman Tukur in October 2009 was the last insider who exhibited little courage when he criticized oil savings withdrawals but that went unnoticed. And you should know these insiders aren’t the types that blow whistles – they are too busy for the frivolities of mouthing over a few billion dollars. So hate him or love him, Sanusi Lamido is one Nigerian you can’t dismiss with the wave of the hand. Late president Yar’Adua – a progressive he was – saw this antiestablishment fierceness in him (than him being too much of a monetarist) and brought him onboard.

For those that have followed Sanusi well, he’s remarks and speeches don’t cut as your regular Central Bank boss. Interestingly, his recent actions go on to prove that he’s been much ‘wahala’ and the establishment can’t wait for him to embark on his compulsory exit leave. Regrettably, Sanusi’s unrepentant inflation targeting modus operandi to the detriment of manufacturing with the alibi to enable the paying of foreign school fees and health bills don’t hold up to sound reasoning for the domestic economy. One wonders if the backroom people at CBN cannot give us a factual ‘oil paper trail’ and the government agency culpable, we should be very worried about the rudiments and analysis that goes into their discretionary monetary policy without smacks of gross ineptitude.

On the other hand, I strongly harbored the feeling Sanusi had intimated the President likewise on the huge withdrawals from CBN before the fuel subsidy bubble busted. But who knows if there was any reply? Critics of Sanusi’s letter argue that it should never have been made public but how else then will posterity judge him as head of the CBN? I reckon Sanusi is almost done penning his memoir. Indeed that will be something to read! For the controversy whether its 49 billion dollars or 10 billion dollars, the humongous money these people claim to keep reconciling till thy-kingdom-come, even if its 1 billion dollars should make any Nigerian quiver.

2014 will see some major elections which will be a pointer to the 2015 battle royale and as you know politicians won’t blatantly earmark monies in 2014 budget with a subhead ‘campaign’, however the election money must sure come from somewhere. Probably this was what got to Mr Lamido. Nigeria’s production figure has been a speculation since oil discovery, now the barrels claimed to have been sold isn’t balancing and trust Nigerians as usual they have better things to worry about. It baffles me how Nigerians think elections are being financed. Do we think incumbents save their salaries – which is barely enough for their inordinate desires – to prosecute elections? Nonetheless, that is a subject for another day.

Those busy criticizing Sanusi for his ground shaking revelation should know the bottom line is soon there will be no oil money to share no matter if accounts will be reconciled at all. I say this with a couple of facts. Firstly, OPEC in the very near future will be laid to rest in pieces. As it happened to the potash cartel in the first week of August 2013, it sure can happen to oil.

Oblivious to many, August 2013 marked the collapse of one of the last remaining cartels in the world economy — the potash cartel. Potash is a critical ingredient in the production of the fertilizers that help grow our food. For decades, the global potash industry has been dominated by Belarusian Potash Company (BPC), a joint venture between the Belarusian (Belaruskali) and the Russian (Uralkali), together producing about a third of the world’s potash supply. On July 30th Uralkali broke away from BPC and directed its exports to China – consumer of one fifth of the world’s supply – via its own distribution channels. As the announcement rocked the potash industry, potash miners worldwide lost a third of their share value and the commodity’s price is projected to further slump by 30%.

OPEC has been dictating global petroleum for nearly half a century, owning 70% of the world’s conventional oil reserves but constraining its supply to just 40% of global oil use. In this, OPEC’s strategy has seen collective production reduced to the level it was at forty years ago — 30.2 million barrels per day. Just like the potash cartel did until August 2013, OPEC sticks to a price-over-volume strategy — meaning producers prefer to sell less product at a higher price per barrel — and all of its members depend on high oil prices for their national budgets and in most cases political survival.

From Saudi Arabia to Venezuela to Nigeria, OPEC’s nations fiscal break-even price per barrel — the price needed by the government to meet its fiscal obligations to her citizens — stands today at nothing less than $100. This means that double digit oil prices are no longer acceptable to the cartel’s members but triple digits. Forget about our annual low oil benchmark the executive proposes which stirs wrangling. The balance which ends up in the excess crude savings account (whatever they mean by that) still finds its way into executive ‘expenditure’ – which can only be investments in the long-term when it brings in return. Pray, when will you ever hear of its returns (on investments)?

Lest I digress, you should know that the wheels of capitalism is oiled by ‘creative destruction’ and OPEC’s ability to manipulate oil prices would be greatly reduced in the face of competition from renewable and efficient energy technologies. Firstly, North America’s shale oil, tar sands and now fracking have already displaced Russia’s and Iran’s grip on natural gas buyers. After all, before advent of oil in the late nineteenth century, we first had whale oil as source of fuel for lighting.

Secondly, since Angola last joined OPEC in 2007 a lot of other nations have gone on to discover and exploit their Wells like Brazil and even neighboring Ghana but have declined invitation to join the cartel. Moreover, while Indonesia suspended her membership in 2009 and Gabon terminated hers long ago in 1995, small size decampment isn’t where the problem lies for the current 12 member nations. The key swing producer Saudi Arabia is the largest producer in the OPEC bunch, if cuts are needed to keep the oil price North the Saudis do it. But the second largest producer is Iran, who some say is the arch-enemy of Saudi Arabia; this makes OPEC a kind of Saudi vs. Iran smackdown. With a resurgent Iran; close to finalizing a nuclear peace deal with the US and the new oil/gas investments that will pour in, what does it portend to the existence of OPEC? Therefore, OPEC quotas and decisions will seem to matter less and less.

By: Enobong Udoh