A conversation on the Nigerian experiment would be incomplete and void of intellectual substance were reference not made to the economy in some shape or form. No matter what path you tread – the optimistic anticipation of a booming Nigerian economy, the cautious pessimism of economic watchers as public policy diverges from the aspirations of the general populace, or downright desire for the downfall of a nation which investment bank Goldman Sachs labeled as part of the N-11, a group of eleven emerging economies with promising prospects; the economy remains the barometer by which Nigerians gauge themselves and not the “Most Happiest People” award which I am done using to stroke my personal ego. Furthermore, any conversation on the Nigerian economy without referencing the oil and gas industry is bound to miss more than a few salient points on what makes Nigeria tick from an economic and political standpoint.
So I was surprised when I read Austin ‘Dwiggs’ Mackenzie’s article “A Barrel of Crude for $100: In Defense of Nigeria”. Initially, the title suggested in my little prism of thought that the author was defending our growing foreign reserves owing to spikes in global energy prices, in the face of calls by major oil-consuming nations led by the United States for OPEC members to increase production to offset rising gas prices in the domestic market. However, it became apparent that the intent was to refute claims by oil majors that unrest in the Niger Delta (coupled with other crisis zones around the world) was a significant cause for jumps in global prices as oil supplies on the world stage were constrained by irregular supply from Iraq, volatility in the Nigerian market and of course, Venezuela playing hanky panky with America’s and increasingly Asia’s unbridled lust for cheap oil. Of course, volatility in the Niger Delta affects stability in energy markets.
Any economist or market watcher worth their salt would espouse how vital Nigeria has become to the global economic and geopolitical dynamics, solely on the basis of our oil reserves and production levels. Of course, oil traders would factor in speculative premiums while trading oil futures. Of course, oil majors aim to make money off volatility in the market and utilize every price-gouging technique in the book to maximize profits. Why? Ah….finally a reason: because they are the embodiment of capitalism. The idea that these capitalists should forgo their natural instincts of maximal wealth creation (Exxon Mobil’s record breaking $39.5 billion profit in 2007) at minimal cost (you know how cheap it is to get a lobbyist working Wall Street and Washington to generate the hype of ‘tensions’ in the Niger Delta to create the needed volatility that sends oil prices skyrocketing and aids oil traders make the short take profits that they make?) is naïve to a degree. The world is more than dynamic than imagined and to simplistically rise to Nigeria’s defense in the face of a more complex issue, is to do us intellectual injustice. The emotions that come with a fair sense of nationalism, albeit patriotism demand pointing fingers at times (and rightly so, sometimes) but the situation in Nigeria requires us to maintain a clear perspective on what not drives the capitalistic instinct (I believe Gordon Gekko answered that question in the movie Wall Street) but how that instinct can be curtailed to protect Nigeria’s interests from a psychological and economic standpoint. We cannot make a valid argument for the behaviors and practices of oil traders and companies when our country provides the many excuses with which so-called “analysts” can base their assessments on.
Let us get real people! The security situation in the Niger Delta is precarious to say the least, with scenarios of kidnapping and murder that I believed were once confined to the Colombian jungles, and not the beautiful city of Port Harcourt and environs. I am ashamed as a Nigerian that the Federal Government cannot protect citizens from this sort of mayhem. If Yar’Adua’s administration and the security agencies do not get this right, the people of the Niger Delta may become numb to violence and even worse, start to see militant groups such as MEND and allied factions as alternative governments and valid opposition groups fighting for their economic and political emancipation. What a sad day it would be when that sort of illegitimacy is legitimized. If one seeks to call me a prophet of doom, remember that Spain went this route with the Basque movement, Iraq with the Kurdish militants and so many other countries where disaffection and a noncommittal approach to the economic and physical security of a people where not guaranteed by their governments.
Even more criminal than the total lack of human security in the region is the stark level of poverty in the Niger Delta, compared to what goes on in other parts of Nigeria. I happened to do business in Port Harcourt a few years and was appalled by the contrasting pictures of glitzy oil service company buildings, posh cars and residences for oil staffers; and then subjected to grisly images of poverty in other areas where kids openly played in murky waters with the stench of sewage in the background to go. It was heartbreaking. In a country of such opportunity and immense wealth, we had people whose land gave us the wealth we all (the whole 140 million of us) living in despair and vulnerability that many can only imagine. Something has to be done and rapidly too.
From an operational standpoint, we should all be asking why we do not have refining independence in Nigeria. Yes, the Warri refinery is finally on stream and should ease domestic supplies but just recently the government announced that oil subsidies have increased from N70 billion in 2003 to an annual subsidy injection of N450 billion. How an economy can thrive on such a massive subsidy model, a decadent refining system and the levels of corruption involving oil-importing cartels is indeed a miracle! With the NNPC remaining a docile participant in a game at which it should have an undue advantage, while its colleagues such as GAZPROM in Russia and PETROBAS in Brazil thrive even in uncertain markets should be a call for a distinct approach to managing this oil business. Of course, the government has declared its intention to restructure the NNPC and give the Nigerian population a viable option that they would be proud of. I am looking forward to the day when the various committees (composed mainly of political appointees, few industry experts and with little input from the private sector) submit their recommendations. I am eager to see what plans they have to support the development of indigenous oil companies (started by hard knock Nigerian entrepreneurs who do not need to give in to nepotism or favoritism) seeking active participation in both the downstream and upstream markets, no longer ‘oil servicing’ contracts that are further contracted to foreign companies. I am eager to see how energy stakeholders and the ministries of Foreign Affairs, Information and Energy come together to forge a strong message that counters the message of Wall Street ‘analysts’ and media commentators whose knowledge of Nigeria is limited to National Geographic and no real study of Africa and its history. Come on Abuja, have you guys never heard what lobbying means? It makes little sense to whine about your image when you lack a proactive and hard-hitting means of demolishing the ignorant postulations of the Western media.
In deference to the reality of global markets, geopolitical strategy and the fact that no nation would remain relevant in the 21st century if it maintains a lackadaisical approach to information management, the development of its infrastructure, the protection of its people’s lives and liberty; the blame game is up when it comes to oil majors in Nigeria. Nigeria is not the only country where oil companies have sought to exacerbate the capitalistic fangs of profit maximization, neither would it be the last. The difference is that the governments of these nations have developed clear public policy regarding how these companies operate in the countries. If Exxon Mobil, Chevron or BP decided to flout the rules in Saudi Arabia or some other country, they would be out in a quick second. Unfortunately, the Nigerian legal system has thrived on the development and interpretation of Nigerian law but shied away from the full enforcement of the same. Thank God, things are changing gradually, so there is indeed hope.
As West Africa becomes a significant and strategic dot on the global map, Nigeria as a regional power should be working hard with other members of the Gulf of Guinea Commission to develop modalities that would guide how the oil industry is controlled in the coming years. The idea that oil pricing would be at the mercy of traders in New York or Frankfurt who have never seen a barrel of oil in their lives and that oil companies can gouge consumers worldwide, while disregarding local labor, tax and environmental laws is proof that the game has to change. ‘International bodies’ should not set the new rules with ‘global standards’ dictated by a few countries that superimpose their schemes on other nations. The rules should be mutually beneficial and distinct policies laid out to depress the concept of ‘risk premiums’ when it comes to such a sensitive commodity such as oil, reduce the speculative influence of oil traders and allow market forces to determine what real prices should be on, no matter what bourse they are traded on. When we get the basics right and iron out the finer details, only then can we raise our heads and condemn the outbursts of the market. Let’s get ready and do what has to be done. God bless Nigeria.