Brunt of quivering oil price
By Odimegwu Onwumere
The decreasing oil revenues in the international market at a time of mounting government expenditure have become a hitch to the developmental aspiration of the present government.
Over dependence on oil, Major General Muhammadu Buhari was with high hope to rejuvenate Nigeria when he mounted the saddle as president on May 29, 2015, but little did he know that the heralded dwindling oil price in the past administration will misdirect his views and posit his government as one without a direction.
Crude oil price is today, no longer doing over $50 per barrel in the international market, whereas oil, fees for almost 15% of Nigeria’s GDP but creates up a-propos of 80% of government income.
There is triple re-establishing of the 2015 budget from 78USD/barrel to 52USD/barrel. The economy has been terrified into a condition of deficits; other sectors of the economy are affected.
Nigeria nearly quitted the world market due to the current economic circumstances, but Buhari on February 15 2016, at the Aso Rock Presidential Villa, when he received the Director-General of the World Trade Organisation (WTO), Ambassador Roberto Azevedo, reassured Nigerians that the country remained fully committed to free international trade.
There is apprehension that the low oil prices, which started in the second half of 2014, will likely continue up until 2019. However, the president seemingly made things to constrict when by September 2015 his government did not make appointments of people into key positions of the energy sector or reveal his plan for the sector.
The country is freshly in dire need to meet its financial obligations and many oil and gas projects have stopped. About 500, 000 workers have been sacked and investors are remaining on the side line since the oil decline hit the country. Whereas, countries like Saudi Arabia, Kuwait and the United Arab Emirates can boast of over $2 trillion in Sovereign Wealth Fund, SWF, accounts with which they have been protecting their economies not to down-spiral in the face of the oil catastrophe.
There are cases where Federal Government’s inability or refusal to fund the Joint Venture budgets and expenditure stalled other oil and gas projects and operations, and delay in the passage of the Petroleum Industry Bill, PIB. Nigeria which apparently has refused to save saw in March 2016 her many road projects stopped. For example, the Yenagoa-Obogoro-Oporoma Road in Bayealsa State was stopped, as a result of dwindling economy which is as a result of low oil price.
Until the road project was stopped, it was noted that this road had been on the federal government’s project since the sixties without any people-oriented result seen on it till Governor Seriake Dickson of the state took the bull by the horn and awarded the job to a Chinese firm, China Civil Engineering Construction Corporation, CCECC, at the cost of N31 billion.
There is also an indictment by March 2016 that from 2011 till date, the successive governments’ lackadaisical approach to things has resulted to the deadlock in achieving anything meaningful in multibillion dollar Bonga South-west oil and gas development, since there is no Final Investment Decision (FID) on the project.
The later is estimated at $15b with flattering investment between $2b and $3b by suppliers and subcontractors. The Bonga SWA project when ready, was expected to garner some $50 billion net revenue to the Federal Government over the 2016-2021 construction stage of the project, and extra $3.5 billion revenue through contractor taxes.
The expected 3,500 direct jobs and 15,000 indirect jobs it was intended to create through Significant Nigerian content and employment creation during construction, may be hitting the dustbin. In November 2015, the immediate past National Industrial Relations Officer, Petroleum and Natural Gas Senior Staff Association of Nigeria, Hyginus Onuegbu made it known that 120,000 direct and indirect jobs have been cut.
It has become worse with the economy because the country has not given much attention to how industries are run in the country. A case-in-point is where industry budget is killed by 40 percent, thereby dampening the spirited plans of industrialists.
A topmost bureaucrat with the National Petroleum and Investment Management Services Company, NAPIMS, would say that due to low oil prices, multinational oil companies in Nigeria that include Shell, Mobil, Chevron, Total and Agip have been showing their workers the exit door. The same is the fate with engineering, fabrication, and construction companies.
In the recent past, the Royal Dutch Shell said that it was headed to cutting 6,500 jobs in Nigeria and reduces its capital spending by 20 per cent pending when things improve. There is 72 percent fall in quarterly profit, after the $54b acquisition of BG Group by Royal Dutch Shell "showing how much strain it faces after the bumper deal."
There was a prediction that Shell’s production in Nigeria (being the world’s largest LNG trader that boosted LNG sales volumes by 52 percent to 14.25 million tonnes in the second quarter) will fall by around 35,000 barrels per day in the following semi of the year.
Many oil companies thought that there would be a boom in the oil price and they spent much in corporate expenses. The resultant of this today was that by November 2015, Schlumberger SLB had also sacked more than 20,000 oilfield service workers, with Halliburton cutting 18,000 jobs, including Weatherford International, 14,000, and Baker Hughes BHI, 13,000
These woes may be hinged on the government’s dearth of clear cut direction, hence signaling that hard times have come to stay in the country.
But the president and his cabinet believe that whatever situation that the country is facing is an offshoot of alleged corruption that wrecked in the Dr. Goodluck Jonathan-led government that he succeeded, with the Nigerian National Petroleum Corporation, NNPC, at the height of it all.
Apart from the low oil price in the international market, the energy sector also faces challenges in the areas of pipeline vandalism, illegal crude oil diversion; insecurity and kidnapping in the seas.
The four refineries in country situated in Warri, Kaduna and Port Harcourt have not lived to the expectation of refining crude oil leading to the country importing oil from overseas for years. The successive governments have done everything to bring to an end the importation of petroleum products because of the billions of dollars paid as subsidies from the country’s annual budget that benefit a few fuel importers and petroleum marketing companies, yet the masses are suffering the brunt.
The once booming offshore services have become a caricature of a sought with drastically drop in rig count, sending local oil service firms whose jobs revolve around drilling and packing, mostly.
There are inactive rigs everywhere with the crews not in work; they are incurring colossal losses in the areas of “well services, logging, air shuttle drilling fluids and chemicals, drill bits, casing services, marine vessels and others.”
The irony is that Nigeria is among the oil producing countries in Africa that have not listened to the head of the United Nations that sent advice to them in a Report on Economic Development in Africa, the UN Conference on Trade and Development (UNCTAD), to energetically take up economic diversification policies because of declining oil prices on their economies, due to the reality of economic consequences that have befallen the country today.
In what may be seen as playing politics with the diversification policies, the Minister of Agriculture and Rural Development, Chief Audu Ogbeh has shown concern that nothing can be achieved in the country with the current shambled oil price by the year 2050, when experts have said that Nigeria’s population was expected to reach the periphery of 500 million.
Ogbeh said this when he paid a courtesy call on Governor Abdullahi Umar Ganduje at Kano Government House, recently. On his part, the Minister of Science and Technology Dr. Ogbonnaya Onu on July 14 2016, while declaring open a Two-Day National Technical Validation Workshop on Sustainable Energy for All action Agenda in Abuja, said that Nigeria must as a matter of urgency begin to vary the source of energy needs in order to accomplish significant industrialization.
Onu believed that all the developed and emerging countries including the United States of America, China, Germany and Russia, rely profoundly on coal for electricity generation.
Odimegwu Onwumere is a Rivers State based poet, writer and consultant. He won in the digital category, Nordica Media Merit Awards 2016, Lagos; and the International Award for Excellence in Journalism 2016, Geneva.