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Oil Price Fall And Nigeria’s Economy

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At the 7th All Nigeria
Guild of Editors conference held in Benin, the Edo State capital on Thursday, September 22, 2011, the former minister of the Federal Capital Territory, Mallam Nasir el-Rufai, raised alarm that should oil  price drop below $80 per barrel in the international market, some state governments in Nigeria would not be able to pay salaries to their workers.
El-Rufai, who was speaking on the topic, “Perspectives on the Cost of Governance in Nigeria”, had strongly noted that pegging of oil price as high as $75 then in the national budget was unrealistic and not good for Nigeria’s economy.
The minister was being as prophetic as many individuals and organizations who believed that the nation’s economy which is oil dominated would be in a quagmire, should any unforeseen surprises affect the oil price in the global market.
Various experts had also, for too long been consistent in expressing strong need for drastic reduction in the high cost of Nigerian governance which gulps as high as 25% of the annual budget and one of the highest in the world.
They had equally suggested diversification of the economy from oil to other sectors particularly agriculture which hold high promises for food on the table of the average Nigerian, mass employment, raw material for industrialization and foreign exchange earning.
While most nations of the world had strategized to contain such possible economic fears, most African governments also took bold steps in preparations for the economic uncertainties, but some deaf-and-dumb governments had preferred what goes directly into the individual pockets of the leaders than the general good of the citizens. Billions of Dollars meant for constituency funds, furniture extravagant travelling allowances, amongst others find their ways to the law makers and their crowd of primal aides.
Today, the reality is not only knocking at our doors but is quite here with us. The present systematic drop in the oil price which experts predict could slide far below $50 per barrel benchmark before the end of 2015 has become Nigeria’s undoing.
Many state governments in Nigeria today are owing months of salaries arrears to their workers while contractors have abandoned projects execution because the oil price then predicted had fallen below budgetary calculations and states lack the funds to pay.
Some private schools in Port Harcourt have already given notice of increase in school fees, landlords are also threatening to raise rent, labour unions are ironically agitating for pay rise in view of recent devaluation of Naira occasioned by dramatic drop of oil price in global market even as state governments insist they would not review the $65 per barrel benchmark on which they proposed their 2015 budgets. Where would these excoriations take the nation to in the present economic situation determined by global economic reality?
An economist, George Clement, is of the view that time has come for Nigeria to elect leaders who have the capacity to proffer solutions to the socio-economic challenges confronting the nation as against empty promises for which most Nigerian political leaders are known.
“The era of touts aspiring for public offices should be over. It is time to look beyond sweet talks and empty promises now that campaign period in Nigeria is around the corner”, said Clement.
He said, “our leaders had since the oil boom of the 70s refused to do the right thing. Billions of Naira had consistently been swallowed up by the pockets of fraudulent leaders”, he remarked noting that the future generations may have nothing to be proud of about their nation if the real change is not effected.
Another respondent, Mrs Mary Jonathan, in her own reaction is challenging the Economic and Financial Crimes Commission (EFCC) to trace the loots of the nation wherever they might have been hidden.
“Yes, it  appears late but not too late. We cannot continue to wallow in poverty in a rich country while few persons in the name of politics continue to cart away our resources”, she stressed.
Jonathan appealed to the Federal Government to review the pump price downward to reflect the price of oil in the global market. “We cannot afford to pay more when actually the price has fallen. The N97 per litre of fuel is no longer realistic”, she maintained.
A civil servant, Makel Ndah, in his own reaction called for upward review of workers salary. “Since the Naira has been devalued, its exchange power has become weak, it is important that the government reviews workers salary upward to meet with the current market reality”.
A landlord in Port Harcourt Chief Clifford Nweke, said,” it is obvious that house rent would be reviewed since government has started to have a second look at the Naira.”
We are all Nigeirans, operating in the same market, so what affects one should equally affect the other. Yes some people will say landlords are wicked shylocks, but that is mere sentiment”, he maintained.
A private school proprietor who pleaded anonymity said, “we had our first Parent Teachers Meeting last week and the issue of increase of salaries was raised by the teachers and I told the parents to pray and watch because for me to pay higher workers salary means that the fees charged students would also be reviewed upward.
“Please don’t get me wrong, we have not increased school fees yet. What I am saying is that we in my school are studying the socio-economic variables. If workers salary goes up and other schools readjust to meet with the reality, we here would also adjust because we are part of the society”, he explained.
A Port Harcourt- based public analyst, Christian Nnamdi, said the issue calls for caution. “There is no need to panic yet. It is not a Nigerian thing but a global phenomenon. It does not affect only Nigeria but other nations of the world. Nigeria has many antidotes to the problem. So all we need to do is study the situation to know the dynamic nature of the change.
According to Nnamdi, the nation should not leave everything in the hands of politicians. “We need to protect the economy from the excesses of selfish Nigerian politicians and one way of doing that is to gather together some technocrats and experts in various fields especially economists. Let the think- tank develop an economic plan that should guide the policies and programmes.
Call it 25 years economic development plan. So that whichever political group that takes the mantle of leadership, will have to build whatever programme from the economic blue print.
Nnamdi blamed the woe of the nation on inconsistency of leadership, stressing that government should be seen as a continuation from where the former ends. “But you see, in Nigeria, any new administration is in the habit of abandoning the programmes of the previous administration at the detriment of so much fund sunk into such projects because they want to take credit.
“But with a long term economic development plan, new government can no longer abandon projects started by the former government. It has to inherit it and complete it for the people. This idea will make nonsense of the penchant for second term which is common in Nigeria,” he maintained.
It would be recalled that discovery of shale oil which increase supply in American oil market, a major importer of Nigeria’s oil has affected the oil supply in the global market. This high supply has reduced oil price in the global market and Nigeria, whose economy remains oil-driven is directly affected.
Nigeria whose budget depends on oil has been forced to review its oil benchmark resulting in austerity measures to contain the economic downturn.
Medium Term Expenditure framework which the Finance Minister, Dr. Ngozi Okonjo-Iweala, submitted to the National Assembly, scaled down the nation’s budgetary estimate for 2015 to N4.661 trillion as against an initial N4.817 trillion.

 

Chris Oluoh

Some Transformers donated by the lawmaker representing Oyigbo in the RSHA Hon. Okechukwu .A. Nwuogu

Some Transformers donated by the lawmaker representing Oyigbo in the RSHA Hon. Okechukwu .A. Nwuogu

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Oil & Energy

TotalEnergies, Conoil Sign Deal To Boost Oil Production

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TotalEnergies has signed agreements with Conoil Producing Limited under which to acquire from Conoil a 50 per cent interest in Oil Processing Licence (OPL) 257, a deep-water offshore oil block in Nigeria.
The deal entails Conoil also acquiring a 40 per cent participating interest held by TotalEnergies in Oil Minining Lease (OML) 136, both located offshore Nigeria.
Upon completion of this transaction, TotalEnergies’ interest in OPL257 would be increased from 40 per cent to 90 per cent, while Conoil will retain a 10% interest in this block.
Covering an area of around 370 square kilometres, OPL 257 is located 150 kilometers offshore from the coast of Nigeria. “This block is adjacent to PPL 261, where TotalEnergies (24%) and its partners discovered in 2005 the Egina South field, which extends into OPL257.
Senior Vice-President Africa, Exploration & Production at TotalEnergies, Mike Sangster, said “An appraisal well of Egina South is planned to be drilled in 2026 on OPL257 side, and the field is expected to be developed as a tie-back to the Egina FPSO, located approximately 30 km away.
“This transaction, built on our longstanding partnership with Conoil, will enable TotalEnergies to proceed with the appraisal of the Egina South discovery, an attractive tie-back opportunity for Egina FPSO.
“This fits perfectly with our strategy to leverage existing production facilities to profitably develop additional resources and to focus on our operated gas and offshore oil assets in Nigeria”.
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“COP30: FG, Brazil Partner On Carbon Emissions Reduction

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The Federal Government and Brazil have deepened collaboration on climate action, focusing on sustainable agriculture, renewable energy, and the reduction of black carbon emissions.
The partnership is anchored in South-South cooperation through the Brazil-Nigeria Strategic Dialogue Mechanism, which facilitates the exchange of ideas, technology, and policy alignment within the global climate framework, particularly the Paris Agreement.
The Executive Secretary, Amazon Interstates Consortium, Marcello Brito, made the disclosure during an interview with newsmen, in Abuja, on the sidelines of the 2025 COP30 United Nations Climate Change Conference, held in Belem, Brazil.
Brito emphasized that both nations are committed to global efforts aimed at curbing black carbon emissions, a critical component of climate mitigation strategies.
“Nigeria and Brazil are collaborating on climate change remedies primarily through the Green Imperative Project (GIP) for sustainable agriculture, and by working together on renewable energy transition and climate finance mobilisation,” Brito said.
“These efforts are part of a broader strategic partnership aimed at fostering sustainable development and inclusive growth between the two Global South nations,” Brito added.
TheTide gathered that President Bola Ahmed Tinubu announced an ambitious plan to mobilize up to $3 billion annually in climate finance, through its National Carbon Market Framework and Climate Change Fund, positioning itself as a leader in nature-positive investment across the Global South.
Represented by the Vice President, Senator Kashim Shettima, Tinubu made the announcement during a high-level thematic session of the conference titled ‘Climate and Nature: Forests and Oceans’
Tinubu stressed that Nigeria’s climate strategy is rooted in restoring balance between nature, development, and economic resilience.
Hosted in the heart of the Amazon, on November 10—21, the 30th COP30 conference brought together the international community to discuss key climate issues, focusing on implementing the Paris Agreement, reviewing nationally determined contributions (NDCs), and advancing goals for energy transition, climate finance, forest conservation, and adaptation.
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DisCo Debts, Major Barrier To New Grid Projects In Nigeria ……. Stakeholders 

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Energy industry leaders and lenders have raised concerns that the high-risk legacy debts of Distribution Companies (DisCos) and unclear regulatory frameworks are significant barriers to the financing and development of new grid-connected power projects in Nigeria.
The consensus among financiers and power sector executives is that addressing legacy DisCo debt, improving contractual transparency, and streamlining regulatory frameworks are critical to unlocking private investment in Nigeria’s power infrastructure.
Speaking in the context of new grid-connected power plants, during panel sessions at the just concluded Lagos Chamber of Commerce and Industry (LCCI) Power Conference, Senior Vice President at Stanbic IBTC Infrastructure Fund, Jumoke Ayo-Famisa, explained the cautious approach lenders take when evaluating embedded or grid-scale power projects.
Ayo-Famisa who emphasized the critical importance of clarity around off-takers and contract structures said “If someone approaches us today with an embedded power project, the first question is always: Who is the off-taker? Who are you signing the contract with?” . “In Lagos State, for example, there is Eko Electricity and Excel Distribution Company Limited. Knowing this is important,” she said.
She highlighted the nuances in contract types, whether the developer is responsible just for generation or for the full chain, including distribution and collection.
“Collection is very important because you would be wondering, ‘is the cash going to be commingled with whatever is happening at the major DISCO level, is it ring-fenced, what is the cash flow waterfall,” she stated.
Ayo-Famisa pointed out that the major stumbling block remains the “high leverage in the books of the legacy DisCos.” Incoming project financiers want to be confident that their cash flows won’t be exposed to the financial risks of these indebted entities. This makes clarity on contractual relationships and cash flow mechanisms a top priority.
Noting that tariff clarity also remains a challenge, Ayo-Famisa said “Some states have come out to clearly say that there is no subsidy; some are saying they are exploring solutions for the lower income segments. So, the clarity would be on who is responsible for the tariff, is this sponsored?, Can they change tariffs?, In terms of if their cost rises, they can pass it on, or they have to wait for the regulator.
“Unlike, what you find in the willing seller-willing buyer, where they negotiate and agree on their prices. Now they are going into grid, there is Band A, Band B, if my power goes into, say, Ikeja Electric, or I have a contract with them, “am I commingled with whatever is happening across their multiple bands?”
Also speaking, Group Managing Director and CEO of West Power & Gas Limited, Wola Joseph Condotti, stressed the dual-edged nature of decentralization in the power sector.
“Of course, decentralization brings us closer to the people as the jurisdiction is now clear. You also know that your tariff would be reflective of the type of people living in that environment. You cannot take the Lagos tariff to Zamfara, and this is what has been happening before now in the power sector. So, decentralization brings about a more customized solution to issues you find on the ground.
“Some of the issues I see are those that bother on capacity. It was a centrally run system that had 11 DISCOs. Of the 11 DISCOs, I think there are 3 or 4 of us today that are surviving or alive, if I may put it that way. If you go to electricity generation companies, they are doing much better,” she said.
Condotti highlighted regulatory overlaps as another complication, especially when power generation or distribution crosses state lines.
She said, “Investors would definitely have a problem. Say if you have a plant in Ogun State supplying power to another state, say Lagos State; you are automatically regulated by NERC. But the truth is that the state regulator of Ogun State and Lagos State wants you to comply with certain regulatory standards.”
With the growing demand for reliable electricity and an urgent need for infrastructure expansion, the ability to navigate these complex financial and regulatory landscapes would determine the pace at which new grid-connected power projects can be developed.
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