Nigeria's leading finance and market intelligence news report.

Nigeria’s fifty years in OPEC

To use a tired phrase – time flies. So Nigeria’s membership of the Organization of Petroleum Exporting Countries (OPEC) is 50 years old. This is because, Nigeria joined this inter-governmental body way back in 1971. Incidentally, some of the prime-movers of this historic move are still alive. The references here are to individuals like the then Head of State, General Yakubu Gowon and Philip Asiodu who was something of an oil Czar in his heydays as a Super-Permanent Secretary.

OPEC itself was established in 1960, on the platform of an inter-hemispheric consensus between Saudi Arabia on one hand and Venezuela on the other. In its early years, the inter-governmental body was not a force in the twin-worlds of Energy Politics and Oil Diplomacy. As the records show, the body met with unremitting hostility from the status quo forces in the international system. The hostility was such that when OPEC attempted to insert itself into Geneva – a major centre for International Organizations; she was blocked. This explains why Vienna, Austria, eventually became the Headquarters of OPEC. As pointed out earlier, in its early years the body was more of an observer in oil politics, since the oil companies and their parent governments continued to call the shots in the international oil industry. But somewhere along the line, there was a turning point. Specifically in 1969, something interesting happened in the oil world. Gaddaffi, shot his was into power by deposing the pleasure–loving monarch, King Idris. Immediately after he assumed power, Gaddafi called in the oil companies for negotiations. The companies thought that it was business as usual and as such, in view of this persistent folly, they refused to cave in. But Gaddafi was smarter. He ignored them and picked on the smaller oil companies, the so-called Independents.

Read Also: OPEC Plus agrees to boost oil supply after production spat

These smaller entities caved in, and all of a sudden, the oil price went up by as much as 300 per cent. It was an unprecedented move which had a contagious effect on, all the oil producing countries. Suddenly, and courtesy of Gaddafi’s militancy they were all awash with Petro-Dollars. But the matter did not stop there. The other Arab oil producing countries, latched on to this Libyan initiative by linking this precious commodity to the volatile politics of the Middle East. The situation was such that, by the early seventies, there was another round of oil price increases. Naturally, Nigeria was a beneficiary of this bonanza. Meanwhile, as the situation unfolded, the then policy makers, kept an eye on this relatively new body in Vienna. It is instructive to appreciate that as far back as 1964, Nigeria sent observers to an OPEC meeting with Messers Feyide and Okuboyejo as our representatives.

In technical terms and within OPEC, Nigeria can be identified as a high-absorber i.e a country with a high population and low oil reserves

Initially, and in consonance with the statutory provisions of OPEC, we were offered Associate Membership of the organization. But trust the grandiloquent mentality of Nigerians and Nigeria, we rejected this subordinate status. Ultimately, we were admitted as a full member of the organization in 1971. From that point in time, we started to play, what can be regarded as the politics of oil and OPEC. This had two dimensions-external and internal. As regards the former OPEC was ranged against powerful interests in the international system, the oil companies and their parent government.

Meanwhile, the rise of OPEC was seen as something of an affront. And as such matters go, various schemes, overt and covert were put in place to destabilize the organization. Perhaps the most famous was the 1974 Trade Act which was enacted by the United States in the area of trade. Similarly, the western world established the International Energy Agency, with a view to counteracting OPEC through the twin measures of diversification and conservation.

There was also a softer side to the antics of the status-quo forces. In this context, Nigerian leaders were courted by world leaders from energy hungry countries and treated as if they were the best things in existence, through summits and state visits. For those who can remember, that was the time, when an individual like Jimmy Carter came calling.

Meanwhile, since OPEC is not a monolithic bloc, efforts were also made to court some of its members on a bilateral basis. There is/was for instance, the rather special relationship between, the United States on one hand and Saudi Arabia on the other. Indeed, the entire defence system of Riyadh is virtually beholden to Washington. The situation is such that huge arms purchases and consequent monetary flows underpin this bilateral relationship. Moreover, much of Saudi Arabia’s assets are stored in the United States’ vaults & other western banks. In the process, Riyadh in her diplomatic thrust has had to maintain a janus faced posture. While she panders to Washington for obvious reasons as demonstrated above, she also makes efforts to cosy up to other fellow OPEC members.

As for Nigeria, the country found itself in the midst of other oil producers, some of whom were in contrasting situation to her status. In technical terms and within OPEC, Nigeria can be identified as a high-absorber i.e a country with a high population and low oil reserves. This profile is a sharp contrast to other oil producers like Saudi Arabia and Kuwait – who possess vast oil reserves and low populations. This contrasting situation makes for tension and conflict between and among OPEC member-states. In the context of these respective and contrasting situations, some will be pushing for low prices, while other members like Nigeria and Venezuela, will be staking out for the antithesis-high oil prices. In a sense however, Nigeria has benefited a lot from her membership of the organization. She has been able to avail herself of higher oil prices, and thus became richer at least at a cosmetic level. But this kind of sudden money may well be the origin of the Nigerian tragedy. Such monies, which came into her coffers, can be regarded as mere rent. Indeed, and in technical terms Nigeria can be described as a Rentier State.

Unfortunately, the inescapable fact is that rent, by its very nature, cannot develop a country. For chances are that the money will be frittered away as the country has done on a consistent basis over the years. On this note, I remember here a memorable editorial in the Guardian newspapers several years ago. The title was: A fool and your Money. The more expansive rendition of this editorial is that, a fool and your money are soon parted. And this is precisely what has happened to Nigeria.

At this point in time, there is the temptation to question the continued retention of Nigeria’s membership in OPEC. Incidentally, such an issue has been raised before and we have continued to retain our membership, very much unlike countries like Gabon and Equador, which at various times left the organization, much to the delight of its enemies.

My position is that we should not leave. Rather, we should take stock and see how we can derive more benefits from the organization. A close look reveals that OPEC is not just about tapping into more oil revenues. Rather, for Nigeria, we should be interested in how we can tap into best practices which exist among the other OPEC members. A particular instance, here is Algeria, whose oil industry is much more sophisticated than ours. Moreover, the country has been in the Gas business for a long time and we are also an emergent gas producer at the moment. So what can we learn from SONATRACH, the Algerian oil company?

This and other critical issues should engage the attention of our policy makers as Nigeria enters into its 51st year of existence in this important commodity grouping.

Whatsapp mobile

Get real time updates directly on you device, subscribe now.