Time to rethink Nigeria’s oil and gas governance model – Agbakoba

…Says ‘N100trn marshal plan for Nigeria could be catalyst for transformative change’

Olisa Agbakoba, senior advocate of Nigeria (SAN) and maritime lawyer, has faulted the existing governance model in the Nigerian oil and gas sector. He called for a rethink, saying only that can make the sector profitable for all citizens.

In a policy paper prepared by his Law Chamber, Olisa Agbakoba Legal (OAL), a copy of which was made available to BusinessDaySunday, the former Nigerian Bar Association (NBA) president, contended that the oil and gas sector needed to be urgently overhauled because “it is not working.”

According to him, despite the huge oil and gas endowment, the Nigerian government has always gone a borrowing and the people wallow in abject poverty.

He proposed a major paradigm shift from a model focused on mere resource extraction and revenue sharing by contracts, to a scheme of comprehensive economic development.

According to him, “Nigeria must adopt a ‘development oil’ approach,” expressing the optimism that “Nigeria can transform its massive natural resources into an engine of sustainable growth, infrastructural development, and improved living standard for its citizens.”

He noted that “Nigeria stands at a critical juncture in its economic history. Despite blessed with vast oil and gas resources, the country continues to grapple with the paradox of plenty, manifested in high poverty rates, inadequate infrastructure, and uneven economic development. This policy paper proposes a paradigm shift in Nigeria’s oil and gas sector governance, advocating for a ‘Development Oil’ approach.

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“The proposed approach reimagines the role of oil and gas resources in National Development, moving beyond mere extraction and revenue sharing to leveraging assets as catalysts for comprehensive economic development. By adopting this model, Nigeria will transform its natural wealth into a powerful engine for sustainable development, improved infrastructure, and enhanced living standards for its citizens.”

He also noted that “Nigeria, with proven reserves of 37 billion barrels of oil and 188 trillion cubic feet of gas, stands as the largest oil and gas producer in sub-Saharan Africa. The petroleum industry forms the backbone of the Nigerian economy, contributing approximately 90percent of the country’s foreign exchange earnings and about 60percent of total income.

“However, this abundance of natural resources has not translated into broad-based economic development and improved living standards for majority of Nigerians.

“The country continues to grapple with what economists call the ‘resource curse’ or the ‘paradox of plenty.’ This phenomenon is characterised by countries rich in natural resources, particularly non-renewable resources like minerals and fuels, experiencing less economic growth, less democracy, and worse development outcomes compared to countries with fewer natural resources. In Nigeria, this is manifested by high poverty rates, inadequate infrastructure, and uneven economic development.”

Although he commended the recent initiatives by President Bola Ahmed Tinubu, such as the Accelerated Stabilisation and Advancement Plan aimed at injecting N2 trillion into the economy over six months, saying it was positive, with the plan to mitigate impact of two significant market corrections: removal of fuel subsidies and the liberalisation of the foreign exchange market, he however, pointed out that these measures fall short of the comprehensive reform needed to resolve Nigeria’s deep-seated economic challenges.

“Nigeria needs a bold, visionary approach comparable to the New Deal of Franklin D. Roosevelt during the Great Depression and Marshall Plan for Europe’s post-World War II reconstruction. A N100 trillion marshal plan for Nigeria could be the catalyst for transformative change, but its success hinges on a fundamental shift in governance priorities. Currently, political governance overshadows economic governance, distracting from the crucial task of economic revitalisation.

“The oil and gas sector, as the most lucrative of Nigeria’s 44 major natural resources, must be at the forefront of this transformation. It is crucial to remember that Section 44(3) of the Nigerian Constitution states that, the Federation of Nigeria owns all natural resources and is mandated to use those resources for the welfare and security of Nigerians. The current reality, reflected in the 133 million multidimensionally poor Nigerians, starkly contrasts with this constitutional obligation,” he said.

Agbakoba also faulted the controlling role of the International Oil Companies (IOCs) in the nation’s oil and gas sector, saying such dominance has consistently caused Nigeria huge revenue losses.

“What the Federal Government is doing in oil and gas field is unconstitutional,” he said, pointing out that the Constitution of Nigeria does not recognise Joint Venture (JV) in the way that the Federal Government is going about it.

“The Constitution does not allow the FG to invite Joint Ventures. There is a reason the Constitution vested the ownership of oil and gas in the country. In Saudi Arabia, there is no co-ownership between Saudi Arabian government and JVs. The involvement of the International Oil Companies (IOCs) is only servicing. The joint venture partnership is not helping Nigeria. The reason why this is not working must be interrogated and addressed. I call on the President to embark on the review of what is going on in the sector. We want a situation where the government will be more active in the entire value chain of the oil industry,” he said.

Explaining the concept of “development oil”, which he is proposing, he said: “The concept can be traced back to visionary leaders who saw oil not just as a revenue source, but as a tool for national advancement: Muammar Gaddafi’s vision: In creating OPEC, Gaddafi aimed to leverage oil resources for the development of member nations, and Saudi Arabia’s model: The Kingdom has successfully used its oil wealth to drive economic diversification and national development through strategic investments and long-term planning.

“Other examples: Countries like Malaysia and Norway have effectively used their oil resources to fund education, healthcare, and infrastructure development.”

He warned that continuing with contract oil model would ruin the country, explaining that “Contract oil refers to the current model of oil and gas governance in Nigeria, primarily implemented by Joint Ventures (JVs) and Production Sharing Contracts (PSCs). This approach has been the dominant legal scheme in Nigeria’s oil industry for decades.

On the benefits of a development oil approach, the SAN listed economic diversification and growth, which results in “Reduced dependence on oil exports: By focusing on value addition, Nigeria can reduce its vulnerability to oil price fluctuations. Job creation: The development of associated industries and emphasis on local content will create numerous job opportunities across various skill levels. Increased GDP: A more efficient and diversified oil and gas sector will contribute to overall economic growth.”

He further said that it would lead to improved infrastructure, enhanced human capital development, environmental sustainability, improved governance and transparency, social development, international relations and investment, and long-term economic sustainability.

He believes that “The current exit of IOCs presents both a challenge and an opportunity for new Nigerian actors in the oil and gas sector. In collaboration with the federal government, these actors must rise to the occasion and build a new strategy for oil and gas exploration based on development oil principles.

“By aligning the oil and gas sector with broader national interests and constitutional obligations, Nigeria can create a more diversified, resilient, and prosperous economy that truly benefits all its citizens. This approach not only promises economic growth but also reaffirms Nigeria’s sovereignty over its natural resources, ensuring that they are managed for the welfare and security of all Nigerians, as mandated by the constitution.”