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Nigeria: As Oil Revenue Shrinks, Experts Warn Of Economic Chaos

As Nigeria continues to experience shrinking revenue due to low oil prices, petroleum industry experts have warned that the country is headed for an economic chaos if no adequate measures are taken.

More worrisome, according to the experts, is the inability of the country to harness its abundant gas resources which has the potential to accelerate economic growth, amid falling crude oil prices.

They posited that Nigeria’s non-oil sector which is perceived to have grown substantially, was simply the contraction of the oil sector giving the illusion that non-oil contribution to GDP has grown comparatively.

According to the latest Quarterly Review by the Nigeria Extractive Industries Transparency Initiative (NEITI), analysing FAAC revenue disbursements for Q1 2019, disbursement in Q1 2019 were 0.45percent lower than in Q1 2018. The review showed that the total amount disbursed in the first quarter of 2019 ended three consecutive quarters of disbursements exceeding N2 trillion.

Illegal refinery in Nigeria

The NEITI quarterly review also showed that the combined total revenues (FAAC + IGR) to states in 2017 and 2018 cannot fund the 2019 budgets of 28 states.

Arising from a recent Development Dialogue Series (DDS) tagged: The petroleum sector reforms: The path forward,’ organized by Nigeria Natural Resource Charter (NNRC) and OrderPaper Advocacy Initiative (OAI), in Lagos, the experts observed that Nigeria’s current oil revenue is not keeping up with national population growth thereby running a deficit economy.

“If this downward slide is not halted, there is a significant risk that Nigeria could be thrown into economic chaos of scary proportions,” a communique issued at the end of the series, and signed by NNRC National Coordinator, Tengi George-Ikoli and OAI Executive Director, Oke Epia, stated.

The event which had papers presented by industry gurus including Prof. Wunmi Iledare, Dr. Adeoye Adefulu and Mr. Israel Aye, before a panel session convened to discuss the issues outlined by the presenters, indicated that a trend analysis of Nigeria’s petroleum resource management and investment potential point to a sector in crisis and on the decline, and requiring urgent measures to reverse.

The forum which comprised of panellists such as Hon. Henry Nwawuba, member of the PIB adhoc committee of the House of Representatives and Mr. Sam Daibo, member of NNRC’s EAP, expressed serious concern over the fact that while Nigeria has seven confirmed oil basins, the country remains a crude exporting country with outdated laws on regulation of the oil sector that allows for more than 80percent of oil revenue to be spent on governance without a proportionate investment or saving for the future.

The dialogue acknowledged that the plethora of laws and regulations (including those that are outdated) as well as other extant administrative policies like the National Petroleum Policy (NPP) and the Economic Recovery and Growth Plan (ERGP) which poses a challenge of coordination and best practices reinforces the urgency of holistic reforms promised in the totality of the Petroleum Industry Bills (PIBs).

Unfortunately, although the National Assembly made amends to the declined PIGB, and retransmitted it to the president for assent, President Muhammadu Buhari’s first term in office came to an end on May 29, still, with no assent to the all-important oil sector reform bill.

When the 8th Assembly ends in June without assent to the Bill, the journey to passing the PIBs would then be restarted by the 9th Assembly. This has been the trend for the last 16 years. However, stakeholders at the forum were assured of the inclination of the incoming 9th assembly to continue on the reform path of the PIBs given that about 90percent of the membership of the adhoc committee made it back to parliament.

Furthermore, participants at the event worried that weak regulatory gaps continue to escalate uncertainty in the sector, a situation further compounded by conflict of interests in which the Nigeria National Petroleum Corporation (NNPC) as currently structured as both regulator and operator is inimical to competitive growth.

On the NNPC’s inability to fund its investment obligations, the experts posited that the reform of its unincorporated joint ventures into incorporated joint ventures will improve its capacity to do so.

Advancing further possible resolutions in order to address the plethora of concerns plaguing the industry, the dialogue resolved that passage and assent to the PIGB is imperative and urgent and should be concluded within the life span of the current 8th assembly. “Stakeholders should support the passage of the PIGB into law before the 8th Assembly ends but also continue to advocate for fiscal and administrative reforms when the next assembly is inaugurated,” the communique read in part.

Empowering Department of Petroleum Resources (DPR) to regulate the petroleum sector effectively, without interference from the private and public sector, by establishing it in law and providing independent funding for it, the experts also said, would go a long way in sanitising the sector. They further advocated stronger governance of the sector particularly, in the areas of value-for-money delivery, host community inclusiveness as well as transparency and accountability as critical areas which needs to be addressed to strengthen the petroleum sector in Nigeria.

Also, they noted that there was the need to put in place an independent monitoring and evaluation template through which citizens can play stronger roles in demanding and ensuring transparency and accountability of petroleum wealth. The dialogue summed that citizens have a personal duty to play by mounting the right amount of pressure on appropriate quarters to help give impetus to the political class to be more willing to act on industry reforms, as citizens are the end beneficiaries of a properly managed oil sector.

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