BusinessDay

Nigeria, oil and Yamani (2)

This particular piece is a build-up on an earlier one which was published in this space last Monday. At that point in time, we started out with the career and times of the legendary, Zaki Yamani of Saudi Arabia.

The reader may wish to recall here that, vast oil revenues began to flow into the coffers of the OPEC member-states and Nigeria was one of these countries. In view of these revenues, our policy makers initially became giddy. So giddy that we lost it. And we started to import virtually everything including refined oil which incidentally is a derivative from our own crude oil.

As we have demonstrated in much of what follows, in the bid to contain this contradiction; rather than put in place domestic refineries, the expediency of importation was embarked upon. This in turn gave birth to the bogey and scourge of oil subsidy. Incidentally and sadly enough, this has turned out to be an albatross on the necks of successive policy makers in Nigeria.

In much of what follows, we have analysed this situation and we have dared to offer realistic and people- centred solutions which will get Nigeria and the Nigerian State out of this self-imposed quagmire. Over time, subsidy as a policy spawned astronomical revenues which do not tally with reality. In the process, a lot of abuse continues to take place, and therefore the government’s current position is that, subsidy must be scrapped.

The promise has been made and solemnly too several times that prior to the removal of subsidies, the refineries will be built and the moribund ones will be made functional

But in attempting to do this, and unwittingly perhaps, other forces on the domestic scene have been evoked. Perhaps the most obvious one is organized labour which is bent on ensuring that, the government does not have its way as regards this bankrupt policy.

The government meanwhile is caught in a web of broken promises and barren policy. The promise has been made and solemnly too several times that prior to the removal of subsidies, the refineries will be built and the moribund ones will be made functional. Till date, this has not taken place. Still, in order to stabilize its revenue profile, the subsidy must be done away with, even in the absence of refineries. Of course, labour is not the only interest here. You have also the governors of the various states. Many of these sub-units of government have in the course of time lost the capacity to generate their own resources. So they necessarily have to depend on the revenues at the centre for survival.

Meanwhile, the body that is responsible for doling out this largesse to the governors is crying foul that the money is no longer available. So one can therefore see a contradiction in which a sub-political unit like the state cannot be regarded as an economic unit. Which is why if the reports in the newspapers are anything to go by, the governors seek to engage labour on this issue. Their survival or if you like, sustenance is at stake. Whereas labour’s position is clear. The removal of the subsidy will deepen the poverty in the land, and according to its leaders, many Nigerians will be sent to their early graves. The situation is that dismal.

Meanwhile, the cash strapped state governors are also whining. However, and it must be remarked here that even a status–quo individual like the former head of state, Abubakar Abdul Salaam has warned that the removal of subsidy will lead to social unrest and as such the government should watch it. The words of our elders are indeed words of wisdom. Through it all, it is also possible to appreciate that, oil or better still oil revenues have also succeeded in distorting our federal structure. Or how do we begin to explain the overt and unusual concerns of the governors with what is flowing into the federal coffers.

Which is why as an aside, any agitation for state creation in the future, must be accompanied with this significant question to the agitators: Are you ready to fund it? However, what is very germane for the moment is that, on the surface, these are so to say, rosy times for Nigeria again. The oil price in view of several factors is heading for the 100 dollar a barrel benchmark.

Ideally, an oil producing country like ours should be rejoicing. That more revenue will flow in. but not quite. This is because our capacity to produce has been compromised. So we are not in a position to maximize and benefit from this 100 dollar price. One main reason for this is that the oil companies are not as willing by way of investments since they have safer places to work in. Indeed, the continuing unrest in the Niger Delta, though currently mute can be very deterring. But it must be appreciated that a rise in oil price also translates into a rise in subsidy, since our oil policy is such that an oil producing country like ours lack the capacity to refine its own crude, and as such it must necessarily have to import. This means labour and transport costs as well as other variables will be passed on to us.

Read also: Nigeria, oil and Yamani (1)

Thus, Nigeria and Nigerians are really caught between the rock and a hard place. This is owed to the fact that, when the oil price is low, we are in trouble. when it is high, as it is being envisaged we are also in trouble! At this point in time, we may as well invite Zaki Yamani back into the discussion. Remember, that he was of the view that oil has the capacity to inflict pain on its owner. This is precisely what is happening at the moment.

A rise in oil price, does not mean a reprieve for a country like ours since as pointed out earlier, we continue to lack refineries. But all is not lost, and at the risk of sounding too optimistic, our present situation can be eased if we put in place functional refineries. Incidentally, there are some noises out there to that effect. The Dangote refinery is supposed to be on stream very soon. Some licenses have also been given out for the modular refineries. If these should obtain, this is the crucial point at which a form of subsidy can kick in. And as a commentator has stated, in every process, subsidy will rear its head.

Under the envisaged circumstances, if the refineries are fed with crude that is divorced from OPEC-driven prices, then the pump price will be affordable to Nigerians and subsidy in its present form will become unnecessary. This scenario was indeed the dream of OPEC’s founding fathers. Our specific reference here is to the creation of an oil policy which will take on board oil and social justice, such that the peoples of the oil producing countries like Nigeria will have a better life. As it is, that better life remains elusive in this country.

This is in view of the myopia which has hall-marked oil policies in previous years. One can only hope here that those refineries will come on stream in the context of the conditions stated above. This is a debt which the Nigerian ruling class owes to individuals like: Perez Alfonso, Ali Tariki, Zaki Yamani, and our own Meshach Feyide. At various points in time, these were the prime movers and founders of OPEC. The least that we can do is to ensure that we do not turn their cherished dreams into nightmares.

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