Now that the north has found oil… [OPINION]

By Simon Kolawole

In October 1973, Egypt and Syria launched a surprise attack on Israel over its occupation of the Golan Heights and Sinai Peninsula, two Arab territories. With the now-defunct Soviet Union (read Russia) backing Egypt and Syria, the US automatically queued behind Israel. Arab countries, in solidary with Egypt and Syria, retaliated by placing an oil embargo on the West. Crude oil prices skyrocketed. The Organisation of Petroleum Exporting Countries (OPEC) became awash with raw cash. Juan Pablo Perez Alfonzo, a Venezuelan politician and lawyer who co-founded the oil cartel in 1960, promptly nicknamed crude oil “the devil’s excreta” as petrodollars flooded OPEC members.

Nigeria began to swim in an ocean of petrodollars. Our problem was no longer money but how to spend it. From an average price of $3 in 1973, a barrel of oil was selling for $12 by December 1974. And from modest oil earnings of about $200 million in 1970, Nigeria netted $32 billion between 1973 and 1978, averaging over $6 billion per year. Imagine your monthly salary jumping from N1 million to N29 million. You will go crazy. Alfonzo was not impressed. He famously said: “We’re drowning in devil’s excrement… ten years from now, twenty years from now, you will see: oil will bring us ruin…” He added in 1976: “Look at us, we are having a crisis… we are dying of indigestion.”

With billions of dollars in the hands of the Nigerian government, we went on a spending spree, increasing civil servants’ salaries and benefits and backdating them (“Udoji Award”) and paying for laundry for undergraduates. The tsunami of dollars kept the naira at par with the dollar. That meant it was cheaper to import a bottle of water than to make it at home. We took to import binging and neglected the productive bases of the economy, only to start whinging decades later that the naira was losing value. We went on a spree of creating subsidies, thinking petrodollars would rain eternally. We became a den of rent-seekers feeding fat on oil. We still consider it our golden era.

What oil wealth did to us was to make the government awash with petrodollars while Nigeria and Nigerians were not better off commensurately. Government became the biggest centre of patronage. To be in government was an invitation to become rich with minimal work. Government started creating more ministries, departments and agencies where access to cash is unlimited and the levers of accountability are terribly low. Getting government appointments became more profitable than running businesses. Government contracts could give as much as 500 percent returns. That is what oil windfalls can do to a society without visionary and accountable leadership.

We built infrastructure, to be sure, so I am not suggesting the entire windfall was wasted on subsidies and whiskies. But nearly 50 years later, we still have thousands of kilometres of unpaved roads and thousands of communities without access to potable water and electricity, which should have been part of our priorities. If we are honest, petrodollar is easy money and the temptation to spend it anyhow is always there — except there is a strong public accountability system. Though Arab countries have absolute monarchs, they are visionary and place priority on infrastructural development. Norway had a well-established public accountability structure before the oil boom.

Despite all trouble oil has brought upon us, our reserves are about to get bigger with the flag-off of drilling in the Kolmani River field by President Muhammadu Buhari on Tuesday. In 2005, the New Nigeria Development Company (NNDC) — owned by the 19 northern states — had won OPLs for Blocks 809 and 810 in the bid round organised by President Olusegun Obasanjo. The previous year, Obasanjo had, as part of addressing issues in the Niger Delta, preferentially awarded marginal fields to Akwa Ibom (Universal Oil & Gas), Bayelsa (Bayelsa Oil & Gas), Delta (Midwestern Oil & Gas), and Ondo (Owena Oil & Gas). Imo and Rivers partnered Walter Smith and Sahara Energy respectively.

The Kolmani field in the Upper Benue Trough of the Gongola Basin is said to hold reserves of about one billion barrels. The bigger picture, however, is that if you can find oil around the Kolmani River, then there are prospects for more discoveries in the Benue Trough. There are also prospects for further discoveries in the frontier basins of Anambra, Bida, Chad, Dahomey and Sokoto. There are projections by the Nigerian National Petroleum Company Ltd (NNPC) that there may be up to 19 billion barrels in the bellies of those basins. For context, Nigeria currently has about 37 billion barrels in proven reserves, mostly in the Niger Delta. Nigeria can only get bigger as an oil producer.

How did Nigerians react to the Kolmani news? Up north, it was celebration galore. I can understand. At least, when production finally begins, northerners will no longer be described by southerners as “parasites on our oil”. No matter how a northerner tries to wave this tag away, it hurts deeply. Nobody likes to be called a parasite. Some northerners have tried over the years to counter the notion, asking questions about the role the Niger Delta played in putting hydrocarbons underneath their earth and theorising on how fossils from the north were transported by River Niger over millenniums to form the hydrocarbon wealth in the region. I therefore understand the excitement.

Kolmani excited the federal government as well. More oil means more revenue and more money to share. The trending sentiment across the developed world is the need to reduce the consumption of fossil fuels, such as petrol, in order to save the planet. There are projections that demand for oil will fall as electronic vehicles and alternative, sustainable energy sources gain ground. But demand for crude oil has refused to drop. The global population just hit eight billion, with more people living in low-income and poor countries. They tend to lag behind in alternative energy. There is, therefore, going to be a market for oil for much longer. Nigeria can hope to harvest more petrodollars.

While the mood up north and in the Presidential Villa was bright, I could sense some moodiness down south, at least judging by comments on social media. When you have made a career of disparaging northerners and slighting them with campaigns for “resource control” and “restructuring” — which is basically because of the oil — it is inevitable that your mood would be soured when your favourite punchbag is about to be “free”. It is like a husband whose wife depends on for everything, including the money to buy toothpaste. The day she begins to gain some financial independence, the husband’s weapon of negotiation and control will begin to lose potency.

Some southerners are in pains. All sorts of theories are trending on social media. One fellow said no oil was found in Kolmani, that it is just a gimmick to start giving “the north” 13 percent derivation from the resources of the Niger Delta. Another said secret pipelines have been laid from the Niger Delta to the north and the oil production attributed to Kolmani is actually stolen from the south. The detail that has been lost in the conspiracy theories, though, is that it will still take years for oil production to start in Kolmani, so the issue of derivation payment does not arise yet. Nonetheless, I very much understand that these theories are driven by “sifia” pains of losing bragging rights.

What is my take on the Kolmani drilling? I have my worries and fears. I recall the words of Alfonzo: “Ten years from now, twenty years from now, you will see: oil will bring us ruin.” If we are going to experience a different outcome, we must begin to plan and act differently. Our legendary mismanagement of oil wealth dampens my mood. Before the boom, we were running a competitive economy. Agriculture and industry generated jobs for the people and revenues for the government. We did not plan our lives around windfalls. The government invested in the prosperity of its citizens. Overall, our development indices compared favourably with those of our peers, mostly in Asia.

Although we still reminisce about “the good old days” of cocoa, palm produce, rubber and groundnuts, but it was the people, not the regional governments, that owned the plantations. Through the marketing boards, they bought the produce off the farmers and made money from selling locally and exports. They had to incentivise the farmers. The bigger the output, the bigger the revenue prospects. But we started reaping billions in petrodollars and government became less dependent on the citizens. The productive bases became marginal. Why waste time trying to raise $200 million from taxes and cash crop exports when oil alone could give you $5 billion? Why stress?

This is where I fear for the north in particular and Nigeria in general. I fear oil wealth may impact negatively on agriculture, which is still the biggest employer of labour in the north. All plans around the newfound oil wealth must factor in this pathology. The Niger Delta experience of government neglect and youth restiveness must also be factored into the political management plan. I fear for Nigeria because more oil revenue does not mean more sense. It may not translate to shared prosperity for Nigerians. That is why we just have to start doing things differently. To be clear: it is not bad to hit oil. We need to build our reserves and ramp up production while the crude party lasts.

In 1973, the year of the first oil boom, The O’Jays, the American R&B group, had a superhit: “Now that we’ve found love/What are we gonna do with it.” Now that the north has found oil, what next? Well, there is a tiny piece of good news: I can see a plan that looks good on paper. There will be a 120,000bpd refinery (so no need to worry about exports and pipelines), a gas processing plant of up to 500mscf per day, a power plant of up to 300mw capacity and a fertiliser plant of 2,500 tonnes per day. If this is faithfully implemented, along with good governance, that would mean we have finally learnt our lessons. Otherwise, the “devil’s excreta” will only turn the region into a sorry sight.

Culled from ThisDay