Crisis In Nigeria’s Oil And Gas Sector: A Nation In Search Of Magicians


To state that the oil and gas sector in Nigeria has been in a crisis state for a very long time would be a gross understatement. Since the inception of commercial oil and gas exploration and production in Nigeria in 1956 after the first commercial find in Oloibiri in present day Bayelsa State, the industry has been bedeviled by inconsistent policies and programmes, leading to a knee jerk approach to the resolution of most issues arising in the sector. This approach has often led to short sighted and half baked solutions to problems in the industry, ranging from the management of community issues, to production, pipelines management, refining, transportation, pricing and marketing of products, to mention a few. It is obvious that the much touted profile of Nigeria as the largest oil and gas producer in Africa, and the 8th largest producer in the world has not translated to measurable benefits to the people all these years, due largely to monumental corruption in the sector, the opaqueness with which the business is run, and the short-term solutions which are always proffered whenever the crisis in the sector snowballs into lengthy queues at service stations, a phenomenon that Nigerians have had to live with virtually all these years.

So frustrating is the situation that in a recent snap interview by the Group Managing Director of NNPC and Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, he jocuously stated that he did not receive any training as a magician in his school days, and could not be expected to come up with a magic wand that would solve the current crisis in the sector. The emotions thrown up by the long suffering of Nigerians as a result of this crisis and the time it has taken to bring it under control, resulted in this statement, apparently made as a joke, being taken very seriously, with the National leader of the governing All Progressives Congress (APC), Asiwaju Ahmed Bola Tinubu, weighing in heavily on the side of the people with an uncharacteristically critical statement on the issue, virtually calling on Dr. Kachikwu to resign his appointment for toying with the emotions and suffering of Nigerians. It took deft management of the near crisis situation, a retraction of the statement and an apology from Dr. Kachikwu to calm frayed nerves and bring the situation under control.

As the crisis persists, this article examines the reasons for the perennial crisis in this all important sector of Nigeria's economy and what can be done to bring the situation under control on a permanent basis in order to restore the profitability of the oil and gas sector as a major revenue earner for Nigeria.

It is a major irony that Nigeria is the only oil and gas producing country in the world which runs the usually profitable oil and gas business at a loss. For years now, the Nigerian National Petroleum Corporation (NNPC) has been declaring losses, even when the prices of crude oil were at an all time high, at a time soaring above $130 per barrel. This loss situation is brought about by the fact of another major irony of Nigeria being the only oil and gas producing country in the world which relies heavily on expensively imported petroleum products to supply its service stations, due largely to the perennial comatose state of Nigeria's four refineries. It is a well known fact that refining petroleum products, using the catalytic cracking technology, is not rocket science, and it therefore beats the imagination why refineries, which function efficiently in other climes, are always at one stage of turnaround maintenance or the other in Nigeria, and this story has been with us for as long as many can remember, with no immediate end in sight.

From a jamboree era of subsidies, where brief case carrying importers of petroleum products made huge claims to payment of subsidies, mainly for products not supplied and holding the entire country to ransome if such payments were not made as a matter of national priority, some level of transparency was attempted under the current administration, and Nigerians were relieved to hear that, using the 'price modulation' model (whatever that means!), Nigerians would no longer bear the cost of subsidy of petroleum products, as a result of which no provision was made for this expense item in the 2016 budget estimates. Sadly however, it appears that the proponents of subsidy are back, with recent information indicating that subsidy has again crept back into the pricing template for petroleum products, and the profile of this wasteful payment is progressively on the increase, yet again! This is no surprise, as it would have been a miracle to expect that those who have been used to easy money all this while from subsidy payments will let go so easily. One wonders what became of all those high brow, headline screaming prosecutions of so called 'subsidy thieves' in the aftermath of the January 2012 national strike and the probes by the National Assembly which followed, which became enmeshed in corruption scandals as well.

There is no doubt that at current international prices of crude oil, there is no need for any subsidy cost in the pricing of petroleum products in Nigeria or anywhere in the world. Also, subsidy is a self inflicted cost, which the current faulty pricing template being used by the Petroleum Products Pricing and Regulatory Agency (PPPRA) has foisted on Nigerians and the struggling Nigerian economy. Why this has been allowed to go on for so long, in spite of the apparently brilliant and well experienced persons in charge of policy at the helm of affairs in NNPC and the other regulatory agencies in the oil and gas sector in Nigeria, beats the imagination of right thinking people. Without a doubt, using the right template and adopting the appropriate policies in Nigeria's oil and gas sector, all petroleum products – Petrol, Diesel, Kerosene and Aviation Fuel, can be sold at a maximum of N70 per litre, and the government will still make a profit of N10.00 per litre for every litre sold at the above prices, after taking care of marketers margins and all other associated handling costs. This model, which was developed by BBH Consulting in 2015, uses the most recent data from Wood McKenzie, the top modeling agency for the oil and gas industry in the world and has been available for deployment ever since, but no one seems to be interested in listening and implementing, in spite of all efforts made in this direction. Hopefully, as the crisis bites harder, with solutions and patience running out by the day, someone will be forced to listen, as knowledge is power.

Finally, the current State of the Nation requires more than superficial knowledge and experience to run its affairs. When an apparently exasperated GMD of NNPC and Minister of State for Petroleum Resources, Dr. Ibe Kachikwu made his recent comments about not being a magician, which almost cost him his plum job, he inadvertently stirred the hornet's nest, and threw up a vital question for National discourse, which is: What are the calibre of men and women required to run the affairs of this country at this time in order to get the Nation out of its current messy state? The answer, to my mind, is that such people must possess extraordinary capacity for results and thinking outside the box. Doing the same things over and over again and expecting different results is a recipe for disaster, and is often a psycho case, and that appears to be the current approach being adopted in the management of the affairs of the oil and gas industry in Nigeria, and indeed other critical sectors of the Nigerian economy, and this is clearly unsustainable.

Nations which have made monumental progress in its affairs have been run by persons who can lay claims to some sort of 'magical' powers, the magic being their ability to apply their God given intellect and talent to come up with extraordinary solutions to the problems bedeviling their people. In this era of positive change under a clearly determined President Muhammadu Buhari, Nigeria needs such persons to support the President's efforts, and such people abound in great numbers in this country, in virtually every sector. The challenge however is whether the political process which throws up appointees into political offices is designed to bring forth such people, the current failed process being heavily skewed in favour of political patronage rather than demonstrable ability. The Canadian model, which subjects all appointees to political offices and heads of government agencies to a rigorous Human Resources selection process, designed to throw up the very best always, lends itself to us at this critical time. Interestingly, one of the leading consulting firms in this area for the Government of Canada, Resourcefield Inc, is owned and run by a Nigerian in Diaspora, Dr. Chukwudi Okoro Owo. In the trying times we find ourselves, this appears to be the time for the Nigerian government to use its very best, wherever they can be found, in order to position the country in the direction of achieving our full potential.

***Chief Madaki Omadachi Ameh, a Chevening Scholar, holds an LL.M. in Energy Law and Policy, and is currently Managing Partner, BBH Consulting, Abuja, and formerly Managing Counsel, Legislative Development and Head, Security Planning & Strategy, Shell Petroleum Development Co. of Nigeria Limited.

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