• Saturday, March 02, 2024
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‘Nigeria needs to review its policy on fuel subsidy’

What do you think about the current state of the Nigerian oil and gas industry?

First of all, we are producing, I can’t even say precisely how much we are producing. Now you find Shell telling us that about 200,000 to 300,000 barrels of oil is being stolen in Nigeria, which is almost the total production that Egypt now will be having and which Ghana will not have in the next five to ten years. Now that is being stolen from Nigeria. How do you look at it?

Number two, when you look at it from the point of view of the total reserves that we have, from the point of view of the production that we have and to find that we have four refineries, and yet today we import almost total petroleum products from abroad. And so you begin to wonder what is happening here.Page_1

And let us look at it from the point of view that government one time said they wanted to encourage private sectors to participate in our refining. They gave about 18 licences, none of them has been able to be on ground simply because they always politicise things. For instance, if you give 18 licences to Nigerians where they have to go out for the technology, the finance, and so you create a situation where people will think you have not organised yourself properly. That is, you don’t need to have 18 companies going to the same capital market at the same time. These are the type of things we feel is really wrong in Nigeria.

Now look at it from the point of view of even NNPC. In the last couple of years now, we have been sending out group managing directors upon group managing directors that really sometimes they don’t even last for more than two years. How do you find continuity? And those are the things that really disturb us.

Also in terms of subsidy, when I first joined the ministry in 1972, the first report of the World Bank that I read was in 1973 where the World Bank was trying to let us know that really we should try to run away from granting subsidy in the industry because it will eventually lead to the private sector not participating and now we have come to the point where government cannot do it alone. But again they have entered into it through giving you what they call products not at the market price, therefore no one as a private investor will put his money there.

And so we have come to a point where we believe government should now review its policy and begin to look at it from the point of view of what they cannot do alone and they need to have private participation. Then they must again have a market-oriented type of policy. Most Nigerians like government to continue to be Father Christmas, but then the truth of the matter is – is it sustainable? These are the type of things we tried to look at in the book.

Talking about the present state of the industry, it is in a pitiable state. From the point of view of our present reserves, ten years ago, we were at 40 billion barrels reserves. Today, we are talking about 35 billion barrels. What it means is that we have been moving backward and so we tried to look at what went wrong. In the book you will see the way in which policies were crafted to improve on the level of investment that eventually generated the reserves that we attained, and what then happened thereafter will become evident as to why we are having depleting reserves and if care is not taken, if it goes that way, in no time, Nigeria will probably become a net importer of crude oil, already we are net importer of products.

What informed the writing of the book?

The purpose of the book is to address the issues of our historical policy formulation, implementation and to also correct some misunderstanding in the past issues about the performance of the public sector of the oil industry and it also traces the historical development of the public sector of the oil industry from pre-colonial days to the present time and the efforts of the various governments at participating in the activities of the industry in accordance with the economic trends and events.

When did you start the process of writing the book and what brought about the collaboration among the three experts to write the book?

What actually happened is that any time we viewed Nigeria and for some of us that really have had the privilege of working outside Nigeria, we normally try to compare and see why we are still like this and so we looked at it from the perspectives of the policies that we have in Nigeria and we compared to what other countries also have and we tried to examine where we got it wrong, and that was really the idea.

I remember my first time in OPEC and I saw countries like Qatar, Kuwait and Iraq and it was not funny and really we were far ahead of them in terms of our personnel and understanding of the industry. But today if you go to Qatar, they have almost the largest liquefied natural gas, and we started to ask that where did we get it wrong with all the resources and manpower that we have. And so we tried to now look at it to see what happened and we went to examine all the policies that government has always had. When you look at these policies, they look very nice and you think really they will deliver the goods. But unfortunately in the midst of implementation, we found that it does not always happen. And that was why we said really let’s get together and look at this thing in a very good perspective and then bring it out as people who were there. We were insiders and not a question of somebody writing something from outside. And that is why we said let us spend our retirement productively and we meet here every Wednesday and that is what we have been doing for the past six years.

We have seen books written about the Nigerian oil industry, what makes this one different?

Some of the books I knew about the industry people were talking about themselves, but this book is not talking about us. It is talking about our experience and what we have seen in the industry. And so the idea really is probably to start a public debate because this is fundamentally what is wrong in Nigeria. For a strategic resource like this is not publicly discussed and a few people just gather somewhere and take decisions and that is why we decided to write this book to initiate a discussion. We have written it the way that we see it, if you see it differently, you come out and respond. We did not concern ourselves with what other people have written. What we just did was to look at all government policies. Take for instance, the good idea of marginal fields programme. Of course it is good to have indigenous producers, but indigenous producers that really today all they can do is to produce from the existing reserves. They are not adding new reserves, and those are the questions we think we need to address.

Take for instance right now, the United States is no more importing from us because of shale oil that they have. Now we are looking to India and to others where our crude may not have a premium market. I am not saying that we can bring back America, but the point I am making is that we ought to have made use of this money properly in terms of how we have been able to diversify and that is exactly what really has not been done. Because you will normally come to a point like this when those people you are sending crude to will no longer need it and therefore you have to look for new markets. But at the same time you have to ask yourself that is this oil what you should see as income to be spent or as a form of wealth that should be transformed to other income-generating wealth. That is precisely really what we have not been doing. So that is exactly why we are asking the question is it a mixed blessing? What really would have helped us to diversify if we are not doing that? And so we said let’s make it an open debate so that people will begin to see how do we go forward with the kind of policies that we are having and above all whether those policies are sustainable. And so we will begin to now ask questions that when you put up a policy there is a purpose for the policy, but the solutions that we are getting from it is it sustainable or not.

The book talked about OPEC, policies and how Nigeria joined as a member or as an observer. It talks about how OPEC is affecting how policies in the world. You asked how it is different from others. It includes that the experiences of the three authors spanning almost 100 years and the experiences of each one of us in working in OPEC, learning and putting all these policies to the benefit of Nigerians. What went wrong if all these policies have been there? And today we are still looking for policy development, what change had occurred since the beginning when government entered into oil industry. These are the kind of things treated in the book, and also a bit on it is what OPEC has highlighted for global oil policies.

Is there any mention of the Petroleum Industry Bill (PIB) in the book and what are your thoughts on the bill?

There are some references to the PIB to the extent that it addresses the defects in the process of putting together the PIB, and why it got caught in the controversy that has dragged on for ten years. That was addressed in the book. It also reflects what was generally addressed in the book about process of policy formulation in Nigeria, where wide consultation was not always taking place and by the time policies come out they become defective.

The PIB for now there is not much one can say about it because one is not even sure what is the form of it that is in the National Assembly because it has undergone a lot of modifications by the legislators too. So until it comes out as a law, one would not be able to assess the extent to which it has addressed the requirements of the industry, the objectives of the law and what needs to be done.

The only aspect that the book specifically addressed is the fact that the basics of putting together the PIB itself where there are all the areas covered by the PIB have enabling law that could have easily been amended to achieve the same objective and at a shorter time.