The recent rabble-rousing by the opposition Action Congress of Nigeria (ACN) over the state of the nation’s economy is, indeed, interesting. It has, once again, shown the knack of the party for puncturing whatever good the Federal Government has done
The recent rabble-rousing by the opposition Action Congress of Nigeria (ACN) over the state of the nation’s economy is, indeed, interesting.
While it shows, once again, the insincerity on the part of the opposition led by ACN, which has never seen anything good in the policies of President Goodluck Jonathan Administration and the Peoples Democratic Party (PDP), the Publicity Secretary of the party, Alhaji Lai Mohammed, who issued the statement, was not also doing anything extraordinary by raising the alarm.
He was only doing that which he knows how to do best; churning out press statements at will from the comfort of his Lagos home cum office just to satisfy his paymasters.
While exhibiting its knack for puncturing whatever good the government has achieved , the opposition party has once again put its economists to tasks by using some funny statistics to achieve its objectives.
It is, indeed, funny that this bizarre alarm was being raised, especially now that the government was moving ahead with reforms in every sector of the economy, and the attendance results justifying the efforts.
ACN economists and its never-see-good armchair analysts were however blindfolded by their insincerity as they were busy concocting some funny statistics to puncture the achievements scored so far.
In the statement which he released last week, Mohammed and his party had raised what they called an alarm on the state of the nation’s economy, warning that Nigeria’s economy was on the brink of collapse.
Calling on the Federal Government to cut the “astronomical cost of running a bloated government and takes urgent measures to diversify the economy and shore up the production of oil, which remains the mainstay of the country’s economy,” ACN warned that if the listed measures were not taken, “the government may not be able to pay its bills, including workers’ salaries, within the next few years.”
According to the party, ”Contrary to what the FG may say, this warning is not about crying wolf but is actually borne out of a patriotic fervour devoid of politicking, which is the usual refrain of this government when alerted to its shortcomings.”
And as if the party knew it was only crying wolf where none existed, the statement said ”We will like to be proven wrong, but this will depend on uncommon and monumental effort, rather than on the basis of the usual canned response from the government.”
The party had based its so-called “red alert” on four empirical evidence, namely “The cost of oil production which has skyrocketed from $4 per barrel in 2002 to $35 presently; the massive corruption in the oil sector, with oil theft and sabotage leading to lost production and costing Nigeria some $6 billion annually in crude theft; the sharp fall in the discovery of new oil and gas reserves due to the low investment in the sector, and the most serious of all, the challenge posed by alternative sources of global supply of oil and gas.”
ACN stated that “the cost of oil production rose from only $4 per barrel in 2002 to $7 per barrel in 2005 and, from the $12 per barrel at the onset of the Yar’Adua/Jonathan Administration in 2007 to $35 per barrel in 2012, according to the just-concluded Nigeria Oil and Gas Conference in Abuja, where the mind-boggling cost hike was attributed to the cost of security in the Niger Delta (put at $16 dollars per barrel).
”In other words, the gains recorded from ending militancy in the Niger Delta due to the Amnesty Programme have been wiped off by the cost of maintaining the ‘peace’. Here is how Shell Nigeria MD Mutiu Sunmonu described the situation: ‘Operating in the Nigerian oil and gas environment can be long and tortuous with costs at the high end of the global scale. There are a multitude of security-related issues that have to be dealt with on a daily basis.
”In the recent past, militancy has simply been replaced by INDUSTRIAL SCALE oil theft and sabotage (emphasis ours). We, and others, have had to shut-in significant production; spend huge amounts on replacing and repairing hardware and deploying massive resources to clean up spills.”
On the discovery of new oil and gas reserves, ACN said the disastrously-low level of exploration activity in Nigeria is supported by the statistics released by the U.S. Department of Energy for deep water discoveries from 2009 to 2011 in which Brazil alone contributed some 40 new discoveries or 20 percent of the global total, US and Australia contributed 10 percent each, countries like Ghana making nine new discoveries or five percent of the global total, while Nigeria had only four discoveries or two percent of the global total during this period.
According to the party, “This paltry discovery of new oil and gas reserves is due to the low investment in the sector, which needs to attract $15 billion annually in capital investment, up from the present $3 billion , in order to remain a significant global oil supplier and a respected player in OPEC.”
It said, however, that all those challenges pale into little significance when placed against the challenge posed by alternative sources of global supply of oil and gas seriously – that is Shale oil and Shale gas!
”Here are the facts: The U.S. has more than doubled its estimates of recoverable domestic Shale-gas resources to some 827 trillion cu. ft.(23 trillion cum), more than 34 times the amount of gas the US uses in a year. Together with supplies from conventional gas sources, the US may now have enough gas to last a century at current consumption rates.
”Last month, the agency released a similar announcement in respect of Shale oil to the effect that California’s valleys alone hold as much as 15.4 billion barrels of Shale oil, which companies were hitherto unable to reach because the oil exists in pockets of rock that were expensive to reach before the present advancements in fracking technology. Similar announcements are being made in Europe and parts of Asia.
”For the first time in nearly a decade, the U.S. has regained the position of being the world’s largest producer of natural gas and soon also oil. Thus, in less than five years, the U.S. has gone from seeking new sources of oil and gas overseas to being self-sufficient. Industry experts believe that Shale oil and Shale gas will revolutionise the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels and alter oil geopolitics.
”The announced objective of the U.S. Government is to drive down oil prices from the current $100 per barrel to $50 per barrel within two years. If this happens, which is very likely in view of the alternative sources, Nigeria, with a cost of production of $35 dollars per barrel, would immediately go out of business, with dire consequences for an economy that thrives largely (if not solely) on oil,” ACN said in the statement.
It said the signs of imminent trouble were already visible for those who are willing to see: According to the party, “The Brass LNG Project is unable to take Final Investment Decision (FID) because of the collapse in the US LNG market and rising costs; and a similar situation faces the Olokola LNG project.”
ACN therefore called on the Federal Government “to put on its thinking cap in order to rise to the challenges listed above and save Nigeria’s economy from collapse,” adding that any delay could mean that “those in charge of the country’s affairs would not have enough time to change course as the ship of state heads for the rocks.”
But the ACN got it wrong on all the ‘alarm’ raised. On the cost of production, what the party failed to realise is that the rise in the price of oil to an average of $100 per barrels is a direct result of the rising cost of production worldwide and Nigeria couldn’t have been an exception since the country is part of a global village and the quoted figure of $4 per barrel was last achieved in the early 80’s. ACN’s arm-chair and mercenary economists should have known this!
It is also interesting that that the opposition has finally begun to see the urgent need to address corruption in the country when, indeed, its top functionaries and leaders are known to be the embodiment of corruption and corruption personified.
ACN and its cohort in the opposition would also have done the country so much good and would have demonstrated their sincerity f purpose if they had supported attempts by this government to bring the issue to the table as in the subsidy scheme where efforts made were not supported by them. Fact remains that the subsidy scheme, in its present state, does not allow for investment in other sectors such as education, health e.t.c.
It is not also unlikely that the Jonathan Administration would be willing to probably welcome any cross-party collaboration to proffer solutions to all of these issues but since ACN prides itself in self-deceit, vainglory and holier-than-thou posture, the party would never make such a move.
It is amazing that the party would also take on the issue of oil theft, especially now that this is an issue that has been at the fore front of the government’s agenda. Though the party quoted statistics from the recent oil and gas summit in Abuja to back up its claims, it decided to turn its eyes against the fact also made known at the same summit that oil theft is on the decrease in the country.
While it is on record that this administration is pushing for the development and enforcement of the DNA fingerprinting of oil to stop oil theft, it is worth reiterating that the buyers of this stolen product are not based in the Gulf of Guinea and there is an obligation to police this on a global scale. With regards to security, the Federal Government has always said that it is working with all stakeholders to deal with this hydra-headed monster.
On investment in the sector and reserves, the government is fully aware of the issues around this. Part of the reason for the uncertainty of investor confidence is the initial failure to get the previous version of the Petroleum Industry Bill (PIB) passed as a result of entrenched vested interests.
The delay in passing the current version is adding to this uncertainty. It is an established fact that investors weigh risk before making a decision to enter into exploration and production. The entry cost are high and as a result they require confidence in the regulatory and fiscal regimes in their area of operations when making the decisions re investment. The fact remains that the major stumbling block is the failure to address the issue before the passage of this legislation.
The party also made an issue out of sources of energy. Though a lot has been written lately with regards to Shale gas e.t.c, interestingly, this has now become affordable because technology and the cost of production of traditional oil fields has risen to a point where it is now economical to produce. Yes, new discoveries are being made across the globe, however traditional trading partners like the U.S.A e.t.c are being replaced by the growing economies of China, India and other nations in the Far East. The government is developing new markets for our products and entering into bilateral trade agreements to counter these.
What ACN and its arm-chair analysts must know is that constructive criticism is always good. However, rather than the opposition attending a conference organised by the oil and gas sector and rehashing issues that are currently being addressed, it would be more productive if they came up with a set of suggestions and proffered solutions to the issue they raised.
There is no doubt that a lot has been done in the last 18 months to reform a system that has been in place for decades. Yes, there have been allegations of corruption and inefficiency, but a lot of these date back several years before the advent of this administration.
The ACN, as an opposition must criticize constructively and offer a better way out of the woods if it wants to be taken seriously as a party with an aspiration to lead Nigeria someday.
Written by Mohammed Aliyu Isiaka, an Abuja based media analyst and historian.
