Oil Glut: The Hen Has Come Home To Roost By Onuoha Chisom Franklin

During the 50th ‘Golden’ year anniversary of Nigeria, Philip Emeagwali, one of the world’s best scientists, a Nigerian for that matter, posed a question to our leaders in faraway Paris. He was very clear that a time will come when Nigeria’s oil will either run out or it will become very irrelevant in the scheme of things. Though he ‘prophesied’ that it may happen by 2060, it seems his prophesy has come to pass earlier than he predicted. As usual, to our leaders, it is another academic exercise. The lesson inherent therein was lost, and the paper must have gathered ten years of dust in one office.

Nigeria has never learnt from history. Before oil was discovered, the regions that made up Nigeria were doing well in agriculture. Most companies set up then were all agro-allied industries. The groundnut pyramid in the north, the cocoa house in the southwest and the booming palm oil business in the Southeast were all products of hard work and non-reliance on oil. The leaders back then were very visionary. Therefore, it was expected that with the discovery of oil at Oloibiri in the early 50s, it would have complimented the giant strides made in the agro-allied sector, and in fact use the enormous resources to consolidate and diversify the economy. Alas! Oil became the bane of our development. The gains and lessons Nigeria made was thrown out of the window because a new bride has been discovered.

Today, Nigeria’s economy is classified strong or weak depending on the price of oil in the international market. International oil companies invaded Nigeria like vultures that have discovered carcass; started exploring and drilling oil with little or no regard for the environment. Host communities are treated like people with leprosy while the expatriates are treated with much respect and dignity.

Ken Saro Wiwa, a great old boy of my alma mater, the prestigious Government College Umuahia, was killed because he advocated for these oil companies to respect the environment and the sources of livelihood of the poor residents of Ogoni. Funnily enough, in a well-advertised fanfare, including the pomp and pageantry of which our government is known for, Ogoni Clean Up was launched by the Vice President Prof Yemi Osibajo in 2016. What has happened to the so-called Clean up? Your guess is as good as mine. That is a story for another day.

Today, oil prices fluctuate below the production price. The glut in oil production around the world has again made it clear how vulnerable the Nigerian economy is. The President has sent a bill to the National Assembly asking that as much as 1.5 Trillion Naira be reduced from the ambitious budget of about Ten Trillion Naira for the present fiscal year. Even at that, it will be a miracle akin to ‘feeding the five thousand with five loaves of bread and two fishes’, for the budget to achieve up to 50% performance considering the current oil price in the international market.

Nigeria as a nation squandered its massive oil profits through corruption, white elephant projects and incompetence. Countries in the United Arab Emirate (UAE) invested their oil windfall in massive infrastructure, world class health care, education, technology and tourism. Here, our oil windfall went into the hands of a few; produced emergency billionaires and left the rest of the citizens poorer. State governors who are sitting on solid goldmines have jettisoned creativity and innovation because they go to Abuja every month to receive allocations.

Oil is not the only resources underneath our soil. We have gold in abundance, silver, tantalite, titanium, copper, iron, tin, zinc, aluminum, lead. The list is endless. Even with the Covid-19 pandemic lock down directive from the government prompting companies to restructure and close down around the world, as at the 3rd day of May, 2020, the prices of these precious metals in the international market is amazing. Aluminum sells at $1,610.89 per metric ton. Copper sells at $5,182.63 per metric ton. Iron as at today sells for $88.66 per metric ton. Gold, the king of metals (my opinion) sells at$1,722.40 per troy oz. Tin, zinc and lead are selling at an international market price of $15,290.91, $1,903.63 and $1,637.00 respectively . This is from a layman’s understanding of how the market works. Stakeholders in the industry will be more familiar with many of these minerals in Nigeria and the enormous returns Nigeria could make if the non-oil resources are properly harnessed. According to a report published by Nigeria Extractive Industry Transparency Initiative (NEITI), the solid mineral sector contributed well over Four Hundred Billion Naira to the GDP in 12 years. The highest so far was in 2018 where the sector contributed over Sixty Nine Billion to the GDP. This is a far cry from the revenue which should be accruable to the Federal Government if certain measures are put in place. This sector can compete favourably with the oil and gas sector if government gives some priority to this sector.

The government needs to create an enabling environment for and boost investor confidence in this sector. One of the major ways government can do this is by creating data on the reserve estimate. Currently, investors spend a whole lot of money exploring or prospecting for possible sites were these minerals are deposited. It runs into millions of Naira to keep on exploring for sites with commercial deposit of these solid minerals. This is unlike what obtains in the oil and gas sector. There is adequate data for any would-be investor in that sector to know where to channel investment or resources because government has taken the pains of exploration and harnessing the data. Currently, NNPC is exploring for oil in the lake chad basin. This should be replicated in the mining sector. If such data is provided it will make it easier for financial institutions to provide financing for potential investors. As stated earlier, it is very capital intensive to scout for sites with mineral deposits in commercial quantity. Banks are not interested in such wild goose chase. The financial institutions have no serious appetite to invest in the mining sector. In fact, commercial banks in Nigeria have no mining desk at all.

However, the Central Bank of Nigeria through the Bank of Industry and the Ministry of Mines and Steel Development have provided an intervention fund of Five Billion Naira under the Artisanal and Small Scale Miners Financing Support Fund. Even though this is a grossly inadequate, it is a step in the right direction. However, government cannot provide all the funds needed to adequately unlock this sector and make it profitable. This is where the financial institutions come in.

There should be a platform where these minerals are traded. This trading platform will have information of potential buyers or end users, those in possession of these minerals in commercial quantity and are willing to trade and the quality of the metal. This common trading platform will provide a common marketing platform for all investors to advertise, and ensure that the finest of these solid minerals are traded because of competition. This platform will provide some sort of employment because it will provide speculators and middlemen.

Government must criminalize and punish all illegal miners for two reasons. First of all, apart from serving as a deterrent to other illegal miners, these illegal miners deprive the Federal Government of a veritable means of income, which is a financial crime. Secondly, it will boost investor confidence in that there will be no proliferation of these solid minerals illegally in the market. In 2018, EFCC arrested a Lebanese National travelling out the country and who was in possession of about Two Million Dollars ($2,000,000.00) worth of gold at the Nnamdi Azikiwe International Airport. This was well over Six Hundred Million Naira (N600, 000,000.00) being illegally taken out of our country.

Finally, the Federal Government will have to liberalize its grip on solid minerals found deposited in states. The Nigerian Minerals and Mining Act, 2007 must be taken a second look at. The Act repealed the Minerals and Mining Act of 1999. The Act vests all control of every property and minerals in Nigeria in the State (Federal Government) and out rightly prohibits illegal exploration and exploitation of minerals. According to the Act, all lands were minerals have been found in commercial quantity shall from the commencement of this Act be acquired by the Federal Government in accordance with the Land Use Act. Furthermore, the Act provides that the use of land for mining operations have superiority over other uses of land and shall be considered as constituting an overriding public interest in accordance with the Land Use Act. Thus, it is my considered opinion that states wherein these minerals are deposited should allowed to harness, supervise, explore and have total control of these resources and pays certain amount to the centre and royalties. This will boost the internally generated revenue (IGR) of such state. State governments should be transparent enough to go into private-public partnership (PPP) with investors and not to allow politicians to hijack it. It must be seen from a pure business transaction.

Though my opinion is not all encompassing, I believe that with the right economic policies, industry guidelines, practice directions and legislations backed with adequate political will for implementation, the advantages inherent in adequate investment in this non- oil sector is better experienced than imagined.

“How many oil wells will Nigeria have left in 50 years”?

Onuoha Chisom Franklin, Senior Partner, Georgetown Solicitors