Nigeria should not be struggling to sell crude oil if …(2)

Sunny Chuba Nwachukwu

IN THIS CONTINUATION OF OUR take on why Nigeria should not be struggling to sell its crude oil, it is important to examine the ‘how?’ question – that is “how” we got it wrong; in our present state of dilemma of Nigeria struggling to sell crude oil today.

The Shell BP/Shell Petroleum Development Company (SPDC), from when they started in 1936 as Shell D’Arcy, and in 1956, when they successfully drilled crude oil at Oloibiri in Bayelsa State, and did their first crude export from Nigeria in1958, they ought to have ‘morally guided’ Nigeria rightly to key fully into ALL stages of the oil and gas value chain.

This would not have affected or tampered with their crude export operations, as they went along commissioning their terminals in Bonny (in 1961) and Forcados (in 1971).

All the while, the Nigerian government was entering into participation agreements in 1973, 1974 and 1979 (lastly through NNPC with 80% shareholding). It never crossed their minds, to have a plan for full sectorial long-term development of downstream value chain operations. Though the 125,000 barrels daily capacity Warri Refinery came on stream in1978, the mental captivity on their colony to rely on imports of finished products was still in full practice/operation, as long as they kept lifting our crude/raw material to Western nations.

As for the “why” we got it wrong question, this bothers on our own character. The high level of corruption in our social system blindfolded those put in positions to serve the nation. Rather than patriotically going about the national assignments with love for the nation and dedication to duty, which would have paid off and sustained our national growth and development, we got neck deep in high level unwholesome practices (issues of official bribery and other fraudulent activities) that undermined the progressive growth of our establishments and the existing four refining facilities in the economy.

This was so, even after the Kaduna Refinery (110,000 barrels daily capacity in 1980) and the Eleme Refinery (150,000 barrels daily capacity in 1989) came on stream. All the four local refineries with a total daily capacity production of 445,000 barrels are now as good as moribund, because of corrupt practices (a topic for another day).

The, “when” we got it wrong involves the duration of more than the last two decades. We perpetrated a high level of corruption in the oil industry, through all sorts of corrupt practices, without having a break or a second thought on how to remedy the damages done, both to upstream and the downstream operations.

Until now that we have been caught in the web of the outbreak of COVID-19 Pandemic. And in terms of the “where” did we get it wrong question, it is in the absolute lack of infrastructural, refining facilities (its non-availability).

We now need to do a little analysis, using the Dangote Refinery that is under construction as a test case.
When we look at Nigeria’s 2012 and 2013 crude oil exports to the United States of America we find that the total figure was 148,148,000 barrels in 2012. But in 2013, the US drastically reduced its imports from Nigeria to about 87,400,000 barrels.

Reason was that they started to drill their own crude oil. This created terrible fear and panic in Nigeria! Why? Because, we did not cover our backside properly, by developing our own facilities locally, that would
have even increased our GDP from that sector, improved our productivity and also created wealth through value addition, plus job creation for our teeming jobless youths/young graduates.

Most importantly, that ‘seemingly large figure’ of sales and the foreign exchange earnings that kept us comfortable from the US imports, i.e. the148,480,000 barrels of US crude imports from Nigeria in 2012 is just what Dangote Refinery at Lekki Lagos (650,000 barrels daily capacity) will conveniently
and comfortably process annually.

This alone tells us WHERE we got it wrong. Otherwise, we have no reason whatsoever in this wide world to STRUGGLE TO SELL OUR CRUDE OIL TODAY, IF WE HAD PROPERLY PUT REFINING FACILITIES IN PLACE LOCALLY, at a rainy day like now following the COVID-19 pandemic and its attendant lockdown that brought about oil glut and crashed crude prices at the international oil market. That alone would also fetch fatter forex earnings, if Dangote decides to export to our neighbors within the sub-region.

If he decides to service our local daily needs, we are already self-sufficient. The aspect of “what” actually
went wrong centers on our prodigal and wasteful spending through mindless regulatory policies of the petroleum subsidy regime, among others. This activity effectively dried up our treasury; the hard earned
forex generated from export operations, being spent with the least thought of scrapping the subsidy regime early and plough the huge spending to fix and build enough local refineries.

I gave an illustration recently (Business A. M. of 4/5/2020; page 14), using the figures spent at the end of 2011 – $11 billion (N1.73 trillion equivalent) and that of 2012 – $8.4 billion; totalling $19.4 billion that Nigeria spent on subsidy claims in two years. Just about $18 billion out of it would fetch our economy 2 units of 600,000 barrels daily, ultramodern, state of the arts refining facilities! You now see how we mindlessly burnt our hard earned forex in the nation’s treasury? This is what went wrong with our economy that brought stagnancy in our economic growth and national development.

I still maintain that, it’s not yet late with our crude oil reserves and the nation’s economic future, if we repent now, forsake our wicked ways and change today. The Igbos of Nigeria say, “Taa bu gboo”. “Mgbe
onye ji teta ura, o buru ututu ya”; meaning: “It’s still early today”. “Your morning starts whenever you wake
up from sleep”.

I must say that my advocacy in presenting the attractiveness and the bright economic future in the business of our rich crude oil reserves, could be seen as controversial by many who now see a bleak future in that sector. I say NO because, there is a lot to be gained from its downstream operations.

I see very far around oil and gas! I quite acknowledge the fact, also, of the modern technological innovations in the power and energy sectors; especially with all the ALTERNATIVE ENERGY discoveries, hybrid cars, and so on. I am equally, not ignorant of the economic strategies on divestment to other sectors like agriculture (for instance), for non-oil exports policies, needed to grow a very robust economy.

At the same time, a time like now, I also argue that, Nigeria should not be struggling to sell crude oil because, we would have been internally able to contain the global oil glut by utilising all our daily crude oil productions/outputs; processed by our local facilities. I still want to throw a big question: Have we ever been mindful of the fact that, we have not scratched our PETROCHEMICALS POTENTIALS, in the light of
our enormous deposits of our rich reserves in OIL & GAS sector; for productions of diverse kinds of petrochemicals that range from resins, solvents, numerous derivatives that are classified either as primary or secondary raw materials needed in every known sub-sector of the manufacturing sector?

Having x-rayed the ills in the oil sector that is leading Nigeria to another recession, Nigeria ought to go back to the drawing board and restrategise; especially now that COVID-19 Pandemic has divinely reset the global economy. But coronavirus would disappear eventually; and I believe that it’s now “ON YOUR MARKS, GO” for all economies to restart. For the US, Chinese, Russian, Canadian, British, Japanese economies; and so it is for Nigeria’s!

With determination, we can excel above measure because, we have the potentials. Sure, we can!

Nwachukwu, a graduate of pure and applied chemistry with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce. Sunny Chuba Nwachukwu (FICCON, LS) Onitsha, +2348033182105