Greed, lack of vision, corruption, and incompetent political leadership coupled with nepotism are some of the reasons why Nigeria is not able to benefit from high oil prices.

Government officials are quick to blame crude oil theft, lack of investment in the oil and gas sector,  Nigeria’s inability to meet its OPEC quota, pipeline vandalism, and high prices of petrol as factors responsible for it not benefitting from high oil prices. They even blame Covid 19. While these could be part of the factors, the greatest culprit in this issue is the deaf and dumb government Nigeria has.

It turned deaf ear to persistent agitations for the removal of subsidy on petrol is largely responsible for the danger Nigeria is now facing in the economic front.

Fuel Importation

The value of Nigeria’s petroleum imports far outweighs the value of its petroleum exports—to the tune of $43 billion

The landing cost of premium motor spirits popularly known as fuel has risen to N470 per litre, the Independent Petroleum Marketers Association of Nigeria has said.

IPMAN Chairman in Rivers State, Dr Joseph Obele, said the government was currently paying a subsidy of at least N305 per litre of fuel consumed in the country.

Crude Oil Theft

If the truth must be told, crude oil theft did not start today, the military hierarchy in the past was the worse culprit in this act, they do it with impunity and any Ministry of Petroleum official that dares them would be made to pay for his audacity.

Late Femi Oke, a former deputy director at the defunct Department of Petroleum Resources had a raw deal in the hands of Military hierarchy when his subordinates at the agency seized a vessel that was used for stealing crude oil. There was an order from the presidency that directed the agency to hand off the vessel if he was still interested in his job.

While no one is saying that officials of the presidency, and military personnel are the only ones involved in this act, the government should stop deceiving Nigerians over the matter because it has failed to take necessary actions to arrest the situation. It actions on the matter are cosmetic. During the tenure of President Goodluck Jonathan, there was a summit in Lagos in which the then Minister of Petroleum Resources, Allison Madueke and the military hierarchy took positions on how to address the issue of crude oil theft but nothing happened. Since then it has been business as usual.

 Is this administration just knowing that there is crude oil theft or that the international oil companies have ceased to invest in the country since the introduction of the Petroleum Industry Bill (PIB) over 15 years ago?

Investment

 You want their investment yet you took them to court for alleged corruption in respect of Zabazaba, Oil Prospecting License OPL 245, and all the suits the government has initiated, it has lost. The oil well has been producing by now the government has had at least over 100, 000 barrels per day of crude in addition to what it is exporting and even royalties and taxes.

The danger ahead is that the hopelessness that has pervaded the country in the last seven years on the economic front is now being aggravated by  lack of economic wisdom.

World Bank/IMF

Despite warning from the World  Bank and the International Monetary Fund  (IMF) that dangers lie ahead if the government failed to remove subsidies,  our “all-knowing president, the messiah of the masses” responded that even in developed countries there are subsidies.

 The fact of the matter is that the subsidy is not to the benefit of the masses.

The vexatious issue of the lingering fuel subsidy on petroleum products was raised at the recent presentation of the International Monetary Fund (IMF) Sub-Saharan Africa Regional Economic Outlook in Abuja recently

The presentation by the IMF’s Resident Representative for Nigeria, Mr. Ari Aisen disclosed that fuel subsidy payouts presently average N500 billion monthly and could hit a record N6 trillion mark by the end of 2022

This has put so much pressure on the need for government to borrow in order to finance the subsidy.

As at March 2022, according to the Debt Management Office (DMO), total government borrowing stands at a whopping N41.6 trillion. The worrying part of the report is that the debt service to revenue ratio which currently stands at over 80 % presently is estimated to become 100 % by year 2026, implying that all government revenues by then would be used just to service its debts.

The predictions of the institution that by 2026 Nigeria’s debt repayment would surpass revenue earning is already happening in 2022

Now the chicken has come home to roost, the country is now experiencing economic quack mire which no one knows we would get out it.

Debt

Nigeria’s debt has exceeded its revenue in the first four months of the year despite high oil prices, Nigeria’s Budget Office has revealed on its website.

Oil-rich Nigeria, unlike other crude oil producers, has found it impossible to reap the benefits of today’s high oil prices, with oil revenues coming in 61% below target during the period. That’s despite crude oil trading at highs not seen in years.

Nigeria’s crude oil production was relatively steady at 1.376 million bpd in the first quarter of this year compared to the previous quarter, according to OPEC’s Monthly Oil Market Report, and 34,000 bpd below the same quarter last year. While Nigeria’s production slipped further in June 2022 to 1.238 million bpd, Nigeria’s oil revenue problem didn’t stem from a drop in production.

Instead, Nigeria continues to battle oil theft, pipeline vandalism, and most critically, high gasoline prices, which the country subsidizes.

The severe revenue shortfall does not allow Nigeria to service its debt.

The cost of Nigeria’s gasoline subsidy will be about 10 times what it had originally budgeted, Nigeria’s President Muhammadu Buhari revealed in an April letter to lawmakers. The cost of that subsidy is expected to be just south of $10 billion.

Unlike other major oil producers that have benefited handsomely from higher crude oil prices, Nigeria has negligible refining capacity, forcing it to import nearly all of the gasoline it consumes. And Nigeria must pay today’s high costs for that gasoline while continuing to sell it to the consumer for much less in order to keep prices at 39 cents.

.Nigeria has toyed with the idea of ending the gasoline subsidies, but the specter of fuel protests caused the President to scrap those plans. 

Olusola Bello