• Sunday, December 10, 2023
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Denial in the ‘land-of-no-tomorrow’


Denial is a well known defence mechanism – an outright refusal to admit reality, to recognise an event that has happened or is happening. It is common to addicts.

Nigeria’s addiction to oil is as old as the day we discovered oil in commercial quantities in 1956 at Oloibiri, a backwater in Ogbia, a local government in Bayelsa State. Since then, Nigeria has got high on the supply of crude oil – oil exports account for 80 percent of government revenue and 95 percent of foreign exchange earnings. Utter neglect of other viable sectors of the economy perennially leaves the country vulnerable to external shocks.

Alas, for as long as petro-dollars flow and gas is, sadly, flared, Abuja is numb to anxiety or pain. Government officials invest substantial amount of energy to maintain that all is well. Timely submission of the 2013 budget and the proposed oil benchmark of $75 per barrel were a brief display of sanity. However, pride and delusion won the day when the president signed the budget last week – a clear sign that lawmakers are oblivious of the seismic change

that is happening in the global oil and gas industry, despite their argument that a $79 per barrel benchmark will reduce the deficit.

Commentators assert that the real deficit is one of vision. Others say Nigeria is suffering from a sort of national psychosis: engrossed, blinded, obsessed with today. Both the executive and legislative arms of government are in denial.

Being in denial, for a short while, is considered healthy. It offers a window of opportunity to sort out, to adjust to stress. If it’s not deferred for so long, it can be the beginning of a marked change. Yet there is a dark side to being in denial. To refuse to be realistic about a situation for too long, say, in the face of a chronic financial difficulty, can become a roadblock. It can prevent effectively dealing with the problem.

Banking on a higher oil benchmark to reduce fiscal deficit smacks of foolhardiness. Nigeria is a thoroughgoing spendthrift of its oil income and has been governed by serial wastrels. This makes moving past denial difficult. Refusing to consider the consequences – negative and unintended – of a lower oil price and little or no production is imprudent. We contend that government’s refusal of to accept that the nation is faced with a fiscal crisis, masked by high oil prices, throws caution into a vicious circle.

We caution that a fiscal crisis, confected by tenure-blinkered politicians, looms. Increased oil production, not rising prices, is the real source of GDP growth. Oil production in Nigeria has been underwhelming. For the past six years, projected oil production has consistently trailed actual production such that $150 billion has been lost from unproduced oil – each Nigerian has been denied N141,916.

Meanwhile, industrial scale oil theft, by extralegal parasites and lawful spongers, continues unabated. Oil thieves that could have found jobs as a result of the local content bill are aided and abetted by “principalities and powers in high places”. Illegal refineries, barges and tankers roam the Niger Delta.

Elsewhere, refining activity is building up in Russia, India and China. Refiners make more money from diesel. Crude grades from Libya and Australia are what Asian refiners prefer. Refineries in the northeast of the US, where Nigeria’s light sweet grade oil is exported, are being shut down. In 2011, the combined capacity of these refineries was 1.3 million barrels a day; 26 percent of that capacity has been mothballed. In the US, domestic production of light sweet crude, transported by trains and pipelines, has so increased that waterborne light sweet crude from Nigeria, Algeria and Angola is reducing.

Crude economics shows that delaying the passage of the Petroleum Industry Bill (PIB) is driving away investments; that without an increase in oil production, high oil prices will shield us for a while; that the shale revolution in the US has caused crude oil exports to decrease faster than Nigeria can pass PIB and diversify the economy, let alone ramping exploration and production.

We don’t except Nigeria’s political class to wake up from “la-la land” and smell the gas – Nigeria’s future lies in gas. Gas can serve as feedstock for a variety of job-generating industries, e.g., electricity, methanol, gas to liquids (GTL), ammonia, and nitrogen fertiliser plants that will improve crop yields on 80 million hectares of fallow arable land and fix food security.