Oil Gas As Critical Areas To Nigeria’s Economic, Social Performance

Oil alone accounts for 40 pre- cent of the country’s GDP, 70 per cent of budget revenue, and 90 per cent of foreign exchange earnings.
With 18 operating pipe
lines and an average daily production of some 1.8 million barrels in 2020, Nigeria is the eleventh largest oil producer worldwide. The petroleum industry accounts for about nine percent of Nigeria’s GDP and for almost 90 percent of all export value.
Nigeria’s dependence on petroleum is much greater than that of many other major producing countries.
Players in the oil and gas environment have said that the industry in Nigeria in the last eight years remains the worst.
They say  nearly every measure of industry performance has run against the sector in the last decade.
According to them the level of insecurity, subsidy issues, employment, revenue access, have headed for the worst.
A private sector player in the oil and gas environment, Mr. Emeka Nwaneri, noted that some positives have been recorded in the last eight years, especially the passing of the Petroleum Industries Bill (PIB) in to law.
He regrets, however, that since the bill was eventually passed, it has not translated into the realities of increasing the activities in the oil and gas sector.
He noted that the most recent one is the removal of fuel subsidy, which he stated, was greatly impacting on the economy and oil and gas sector that operates in the economy.
According to him, “organisations like ours run generators 24 hours in our various locations and with the removal of the subsidy, it’s going to increase our realising the fact that the cost of diesel has gone up tremendously in the last two years.
“Between 2018 and 2010 deisel was being sold for N150 per litre, for today, the cost of diesel is over N800 per litre. The impacts of petrol is that some of our operations that we use petrol will also be impacted.
“Now we are getting fuel at not less than N520 if it is not in the NNPC stations. So, invariably, the cost of our services will jump up and our clients do not know how much they are able and willing to accommodate, so it is invariably going to impact on our profit line as it increases our cost of production, which would invariably lead to job loss”.
Nwaneri explained that when cots of production becomes too high, the business owners look for windows to reduce cost and one of the ways is reducing labour costs.
He said, “it might affect employment in the sense that the employer might see the cost of labour as a quick substitute to cushion the effects of the cost of petrol. So, when workers are affected in terms of laying off workers, then generally it will impact on the economy and the workforce”.
Another positive for the oil and gas sector is the convertion of some flared gas into domestic use. However, this has also not translated to low prices of gas, he noted.
He stated that this has a challenge of leadership in Nigeria, “there has always been the issue of transparency and accountability. Of a truth, the fuel subsidy happens to be a huge cost to government.
“However, we have also seen situations where money is borrowed from various bodies and this monies instead of improving on infrastructure are diverted into private pockets.
“Just recently, I read about the case of the Central Bank of Nigeria (CBN) Governor spending well over N5.2 billion to produce N2.1 billion. It doesn’t make any economic sense.
“So, it means that when you are undertaking a project like the currency swap, it was meant to be undertaken at a minimal value. It is expected that it shouldn’t have cost more than the value of the currency we are exchanging.
“So, if we’re going to get a new currency at N2.4 or N2.1 billion as the case maybe, the total cost of getting that should not even get to N1 billion.
“I’m not relating this to oil subsidy, but government has said that there’s going to be a lot of savings that is going to cushion the effect of governance, but because of past antecedents and real analysis that has been done, the public is not convinced that the subsidy removal will translate into the economic well-being”.
He explained that there were ways the government could do it such that it does not adversely affect the people if the government was sincere.
“If the government is sincere, there are ways they can do it in such a manner that the common man on the street will begin to see the positive impact of the subsidy removal.
“First, is providing an employment support for those that are not employed. Secondly, ensuring that there is steady power in the country, where you don’t need to use generator to generate private power.
“If there is adequate power supply, you don’t need to buy fuel to run your own private power generating set,  then you’ll be saving so much cost and also the government needs to look at the common masses that are not even employed with either the government or private sector.
“They are self-engaged, they have their own small private companies so they need to survive and the government needs to look into how to translate the benefits to them”, he added.
For Mr. Patrice Onogu, CEO, Fracserve Africa Ltd. “the past eight years in Nigeria, the oil and gas industry, has been suffering and smiling, even as you have got the PIB  Act signed.
“Yeah, it’s a good thing it has been there for many years, but unfortunately it was together only a few months back and it was signed into law, it’s a good thing but unfortunately again, the International Oil Companies (IOCs), those are the international investors, seem not to be very receptive about that, so in one hand it has affected the industry.
“Secondly, instability in terms of foreign exchange made a lot of oil companies, that is the IOCs, not to invest in the sector and that has really cost so much in terms of job loss and economywise. So, all those put together have not really made the sector to fare very well”.
Additionally, he said the removal of Fuel Subsidy means different things to different people, “the oil subsidy removal  is different strokes for different people: you know, some people are happy, some people said no it is bad, while some people argue that we do not really have oil subsidy”.
Onogu stated that the Managing Director, NNPC, Mele Kyari, claims that within a few weeks of subsidy removal, the nation made trillions of naira, wondering who is who?.
He corroborated the previous respondent that, “employees are going to suffer because now officially things will skyrocket, prices will go up, landlords will hike their rents, the average food seller in the market will increase their prices and it’s not going to go well for an average employer or employee”.
He emphazised that there would certainly be job loss, noting  the economy had not picked up “before this bang happened”.
He observed that there were countries, including Dubai, which produces more crude than Nigeria, where petroleum products are not cheaper, “but the thing is because of the fraud that is involved in our own scenario, it makes it a lot different, but people are arguing, which is also a very valid point that if we had had the palliative in place, the rail system working, the bus system working, power sector working, and you increase it there’s no problem.
“An average hairdresser now will hike the price from 500 to 1000 because of petrol, they don’t have power regularly. So, definitely the multiplier effect is going to be huge. There’s no doubt about that”.
He also complained about the poor condition of the roads, saying, “the condition of the roads have always been an issue. You know the tanker drivers, today they are on strike, tomorrow they have called off, because either the police is harassing them on the road or their  trunks are falling off the road plus cost of maintenance and replacement of tires. So, if the Federal Government would fix the roads that will be great”.
He suggested the use of rails and flow stations to get petroleum products to other parts of the country for ease of transportation and product security and safety of the populace.
Miss Jessica Uzonwanne, a dealer in fabric in Port Harcourt, complained about the hike in transportation, saying that prices have more than doubled, which has affected the price of commodities.
She said, “everything has gone really high it is surely going to affect everything. For us in the fabric markets we just have to sell off our goods because it’s not something you would keep, fashion keeps changing and so we must sell with very little profit margin.
“If you add too much, your customers will just complain that the price is too high and you find yourself losing customers and losing business, which will likely lead to you closing shop.
Uzonwanne also said the cost of running generator has also doubled as the price of fuel has gone up from N87 to N 520 in the last eight years.
According to her, “cost of running generator now is very high as against previously when we can just buy one or two liters with little money, but now we have to budget seriously for private power generation and it’s not funny.
Another respondent, Cheif Executive Officer, Tinafac limited, an Oil and Gas logistics company, Mr. Timikeyi Bubagha, simply said “in the last eight years, everything has been crazy: cost of doing business has increased tremendously, especially for the past 2 weeks, everything has skyrocketed.
“Formally, for a truck to enter into Port Harcourt from Onne Port, it would cost N230, 000, but today it is N350,000.
Bubagha noted that the incessant increases in price of petroleum products in the last eight years have made nonsense of the ease of doing business policy in the country: “the hike in the fuel prices have terribly affected our businesses, because currently, so many companies are now thinking of buying their own trucks and doing their trucking themselves so you can imagine how many jobs and businesses that will be lost in the industry”.
He observed that with the high cost in transportation business, the workers in the industry would be asking for a raise, noting that they also pay transport to work.
“However, Bubagha pointed out that if the employer is not able to accommodate such raise in salaries, they would downsise”, which he stated, would lead to increase in unemployment.
He called on the authorities concerned to quickly do something, especially in multiple taxation, “because you pay for a lot of things so many taxes, so many things that we pay for.
“For instance, we pay heavily for private power generation. If we stay 10 hours in the office per day, we use diesel throughout and we all know the impact of that on business owners.
“You buy fuel for logistics vehicle, for your personal car, for generator both at home and work place. This is utterly crazy if you ask me. If they can give us light for 15 hours per day, it will help us in our business.
“Oh, and the roads are so bad that they affect us in so many ways. The other day an  importer was coming into Port Harcourt with a trailer load of bathroom wares and because of the poor condition of road, the trailer tipped and fell over and all the bathroom wares fell out that were shattered. That importer has lost millions of Dollars.
“So, two most important things the government must do is to fix our  electricity supply and fix our roads”, he suggested.

By: Soibi Max-Alalibo &Tonye Nria-Dappa