It is relieving to know that the Federal Government has resolved to tackle the myriads of problems beclouding the Nigerian Oil and Gas sector, which otherwise is the bedrock of the Nigerian economy. Recently, the media was awash with the news that the
Federal Government had resolved to restructure both the operational and regulatory framework in the industry. Quite a number of industry experts had at several times called for the quick passage of the Petroleum Industry Bill presently before the National Assembly. The PIB is an enduring syllabus as to what the industry should begin to look like.
There is no doubt the industry is in dire need for an overhaul, especially in its regulatory framework. The question often is how we got to where we are today, especially when we reflect on the enormous opportunities that abound in this country. It is very painful to refer to the words of Xavier Xala, who described Nigeria as a "metaphor par excellence of a failed development experience." How did we get here?
It is almost impossible to argue with the point that Nigeria has performed very poorly over the past four decades in the midst of oil wealth. Between 1958 and 1983, the NNPC placed earnings from oil at over $101billion. The World Bank quotes a figure closer to $300billion, highlighting waste and monopoly as reasons for the drawbacks. Before the advent of the "Oil era" Nigeria's economy was principally driven by agriculture, she was one of the three largest exporters of cocoa and one of the world's leading palm oil, palm kernel as well as groundnut producers. Legend has it that the Malaysians came to Nigeria to learn how to produce palm oil during this period. Malaysia is now the largest producer and exporter of palm oil in the world. Palm oil provides about 10 percent of the Malaysian gross domestic product. Sadly, today, Nigeria imports most of her food and ironically, also purchases palm oil from Malaysia!
The Malaysian experience is an instructive one. On the first day after the independence, Malaysia- (Malaya at that time) vowed to get out of the third world country status that was August 31, 1957. During the administration of Datuk Seri Doktor Mahathir, Malaysia has seen the most rapid growth till now. He looked beyond time and drafted the "Multimedia super corridor" with the aim of modernising the nation to become fully integrated community under the MSC draft which is the vision 2020. This is a point whereby the nation will be declared a developed nation with GDP at the same level as other developed nations, such as the USA, and Japan and with a population of 70million, which will be a technology literate community. These, they have largely attained, but it took the political will of a visionary leader. Today, Nigeria has another opportunity to move or like the Malaysians, journey to the top of the world.
As a standpoint to the realisation of a new Nigeria, the Federal Government came up with the policy of total deregulation of the downstream sub-sector of the petroleum industry in October 2003. Before then, NNPC was getting a daily allocation of crude from the FG at concessionary rates, first at $9 per barrel and later $18 per barrel regardless of international prices; and petroleum products are bye products of crude oil, rising crude oil prices have been impacting on them, rather negatively. After spending about $800million on the nation's four refineries, the facilities were still working at less than 70 percent capacity; they could only refine about 18 million litres of petrol while the daily national petrol demand is about 40million litres (moderate estimate).
The fact that the refineries have not been working at full capacity has made it compulsory for the nation to import the difference and because of high petroleum products prices in the international market, Nigerians have had to pay more locally because the industry has been deregulated. But before the deregulation policy (i.e. the pre-1999 era, the industry was under siege, the pre-1999 Nigeria was an ideal commercial hunting ground for bourgeoisie), it was an industry full of lands of opportunity and government contractors were the ultimate opportunists. Business was conducted in an uncluttered, unregulated market where fraud and corruption reigned.
The players of that inglorious era found it difficult to work in a structured environment. Nowhere was the materialistic, money-obsessed ethos more clearly exemplified than the oil and gas industry.
That era marked the worst in the history of our nation, Nigerians became unsafe in their own country; hundreds of people were displaced and disfigured due to kerosene explosion owing to adulteration of products by contractors and the release of off-specification kerosene caused a major disaster in the country because of non-adherence to quality and safety standards. Those Nigerians - about 120 - cannot live their normal lives again.
For several years, the down-stream sector was characterised by product scarcity, resulting in long queues at fuel stations arising from low refinery capacity utilisation, poor state of supply and distribution infrastructure, very low level of stocks at depots. The industry was at its lowest ebb, the experience left our once- budding economy bare and susceptible all these were the result of unwholesome monopolistic structure. But we were not always there, in the 1970's for instance, Nigeria's GNP per capita income approached $500, a figure that peaked at nearly $2000 at the height of the "Oil boom," between 1978 and 1982.