BusinessDay

Nigeria, oil and Yamani (1)

Very few people are likely to remember Sheikh Zaki Yamani. He was the former Saudi Arabia Oil Minister. Such was his influence and panache on the world scene that he virtually eclipsed everyone else. And if you were not sufficiently in the know, chances are that you will think that Yamani was the kernel of the Saudi state. But not quite.

He was just a mere favourite of the Saudi Monarchy. And as such matters go, sooner or later, he was going to be caught in the web of palace politics. This is precisely what happened. He was fired from his position. End of story. But again, not quite. For while he lasted on the global scene of oil politics and energy diplomacy, he made a deposition, which continues to ring true for all times, and for Nigeria in particular. This deposition was to the effect that, if the oil weapon is not used properly, one can ultimately be at the receiving end of the bullet.

Of course, Yamani’s main reference was really to the volatile politics of the Middle East in the seventies. At that point in time, the Arabs had discovered a new weapon; oil, which they could use to turn things around in their favour. In the longer term, however, they discovered that the situation was not so simple. In the immediate sense, embargos and rising oil prices hurt the western world. And the hurt was such that some of them began to shift positions on the Arab-Israeli conflict.

In the longer term, however, the situation was more nuanced. Rising oil prices for instance also meant that the US economy would go into over-drive a feature that will hurt the Saudi economy since their reserves were locked up in American vaults. Moreover, oil was being priced in dollars, and to that extent, a rising oil price meant something negative for the dollar. So the kingpin of oil politics, Saudi Arabia needed to slow down and reflect.

Since we lack refineries, we have had to over time fall back on the expediency of importation. And with importation has come a huge price in the area of oil subsidy

The Nigerian component of the story is well known. With rising oil revenues, Nigeria was in a good park-a park full of roses. We were made or so we thought. Readers may want to remember here that, this was the time when a Nigerian head of state came forth with the notion that our problem was not really money rather it was how to spend it. The instinctive tendency is to blame that key government functionary.

But no. this was the reality that was presented to him then. Whereas the situation is much more complex and nuanced. So complex that in the course of time, we found that in that park of roses there was also to be found a thicket of thorns. The thorns came in various forms. There was, for instance, the euphoria generated by an excited media, and hey presto-a new phrase was wired into existence: the oil Boom.

On the platform of this hysteria, we virtually lost it. Still and in fairness, it must be said here that, there were one or two intellectual prophets who warned of the looming disaster which awaited the then oil-rich Nigeria. For instance, there was an ominous tone in a piece by Chinweizu. It was titled: Oil and The Peonage of the Third World. His submission was that disaster awaited us since no country can hope to develop on the basis of a mono-cultural product.

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But we did not care. His was a mere and lone voice in the Nation. Remember here that, at this point in time, money was no object.

Everything that we needed could be imported.

Significantly, one crucial item on that import list was refined oil. In the process and unthinkingly, virtually all of our refineries closed down. But not quite. This is because they were still being run with huge resources. And since the pump price had to be kept low in the face of rising imports, the famed subsidy had to come into play.

In the course of time, subsidy assumed monstrous and phantom proportions. And the Government had to begin to cry out. But to use an Achebean phrase, we must pose this question: where did the rain begin to beat us? By way of answer, it is possible to say that we lost it from the onset of the so-called oil boom. This is because, the euphoria at that point in time was such that, we lacked a basic understanding of the oil industry.

Our ignorance was worsened by the fact that we did not even want to learn. And as the Bible says: My people perish for lack of knowledge. Possibly and unknown to us, there are in fact three phases in the oil industry. The upstream, midstream, and the downstream. As it is, Nigeria can only be located in the upstream phase. Even then, such a presence is heavily mediated by the oil companies and the oil service companies. This indeed is the crux of the problem, whose face is now known as the oil subsidy. Since we lack refineries, we have had to overtime fall back on the expediency of importation. And with importation has come a huge price in the area of oil subsidy. In the process, a lot of abuse continues to take place. Therefore, the government’s position is that subsidy must be scrapped.

To be continued next Monday