FGN: A confused investor in the oil industry

By Sunny Chuba Nwachukwu

“Where Nigeria’s economy ought to be”

Business ventures normally, do not or shouldn’t only count gains and benefits at the stage of any Business Plan because, in the course of real life situations naturally, eventualities are bound to set in (the vagaries or exigencies of nature) hence, the conditional term often used in economics; “all things being equal “. So, losses as well, can be expected to occur in business.

Economic pillars and enablers are usually enumerated whenever any economy is analyzed with all the relative contributions made (in monetary values, both in the commercial & economic activities that take place within the system) by various sectors cumulatively calculated, at a given period. This therefore, makes it obvious that no single economic sector alone would be indispensable for a nation’s economic development and growth. All other sectors are equally important and strategic in the economy.

However, zeroing down to this discourse on the Nigeria’s oil industry, as a test case; with specific reference to where it pinches this economy (the downstream sub-sector) where distribution of the finished products takes place. Nigeria very sincerely is supposed to optimize her opportunities in the industry, maximally. This is the only reason for this angle of argument for the nation’s economic growth because you exploit the comparative advantages available. As an oil rich nation, opportunities abound for great achievements if the naturally endowed resources were properly managed and prudently harnessed to added value products locally, and converted into cash for financial prosperity, that shall be experienced thereafter exponentially. Only this, in our case as presently a mono export economy from oil proceeds; supports this emphasis on fully developed downstream in the oil industry.

Under the current economic climate, the nation’s capital growth and every other aspects of macroeconomic policy and activities are definitely slowed down due to the drawbacks from the strength of the local currency, the Naira (when compared with other foreign exchange instruments). This again comes down to the low reserve value of the nation’s foreign account. We then imagine the exacerbated impact the forex suffers from the weekly expenditures on importation of refined petroleum products. “Had we known” is now our outcry publicly, if our downstream sector was fully equipped and fortified before now! That alone, COVID-19 pandemic or not, global economic recession or not, climate change impact or not, terrorism and banditry, food insecurity and poverty level ravaging lives in developing economies (especially in Nigeria); wouldn’t have been this severe in this country because, the impact of the daily savings gained from the presently wasted forex on imports of this finished petroleum products, would have been otherwise, conserved and saved in the foreign account, instead of this prodigal wastage being experienced now. This alone, ought to have added to the strengthening of the local currency. That, on the other aspect, would have put the economy out of unnecessary financial stress from foreign loans and borrowing; with the attendant cushioning effect to be gained. Capital projects as well, could have been increased and improved progressively by internal funding.

The major point this discourse avails everyone, is the merits of the impact of local refining on the common man in the streets of Nigeria. What do I mean? Pump prices for the products would have been stable or even going down progressively (depending on the package and the people centred initiatives the government might have wished to apply as palliative). How do I mean, or how would it have worked? Yes, by benchmarking the price of crude supplied for the locally refined products (as incentives to the local refineries, irrespective of the going oil prices at the international oil market); would steady pump price. Yet, the federal government, through her tax laws of the Federal Internal Revenue Service (the FIRS and its Value Added Tax) would still recoup commensurate value of fund which otherwise seemed to have been lost. This is a sure way of an expected responsive, people oriented governance that would put laughter on the faces of the poor masses being governed.

This national catastrophe ravaging people’s lives and the micro economies presently in the nation, can only be addressed by the Federal Government, if and only if the presently rising price of crude at the international oil market, is taken advantage of by the deployment of funds from the excess crude account (the difference from the current nation’s budget benchmark of $40/barrel) to aggressively pursue the present projects in the downstream (i.e. fixing all the government owned local refineries to full capacity utilization); at the same time sell them off immediately after completion to the big time players already operating in the industry, to run and manage them seriously as revenue generating business concerns within the economy. That differential presently (say $20+ from the current price of $60+/barrel) would be sufficiently large enough to fund the said revamping project which would include the vandalized pipelines, for an uninterruptible pumping of crude oil and products. This, the Federal Government must do without further delay because, it’s a very bankable Business Plan as things are, and demands urgency. No losses, if this opinion flies and is heeded to.