Nigeria’s tainted petroleum legacy offers Kenya a lesson in resource management

Is there really a resource curse? If yes, why has it apparently afflicted African countries such as Nigeria and Angola that have mismanaged their petroleum wealth, while Norway, for instance, has escaped such national tragedy?

(Read: Oil: Let’s learn from others’ mistakes)
Nigeria’s first mistake was neglecting other foreign exchange earners, especially agriculture. Before Nigeria’s oil became a real gusher, the country depended on agriculture to fully fund development. Each of the four regions (east, west, north and mid-west) were locked in a healthy competition.

The east and mid-west depended on palm oil, timber and rubber; the west relied on cocoa and the north produced groundnuts, and cotton.

Then, Nigeria was self-sufficient in food production. But now, Nigeria no longer ranks in the positions of world’s top cocoa, ground nuts, cotton or palm oil producers.

Kenya, Uganda, Tanzania and other new African oil producing nations should take to heart a lesson that Nigeria was totally unaware of when it first struck oil in Oloibiri, in 1958; make the necessary enabling laws to safeguard against blighting the immediate environment of the oil-bearing localities.

Such laws should be tailor-made to suit each country. While Nigeria’s oil is in the harsh marshy terrain of the Niger Delta and the Atlantic offshore, Kenya struck oil in the arid Turkana district.

So, while Kenya’s oil spills may not destroy fish as in Nigeria’s case, such spills and the fire can blight the fields of Turkana if they are not guided against, destroying crops and livestock.

And if Ugandan or Tanzanian oil is found in proximity with natural gas, as is the case in the Niger Delta where the oil is actually a minor occurrence in a vast sea of gas, then efforts must be made to prohibit the flaring of gas; a crude way of taking care of the natural gas that Nigeria is unable to liquefy for the benefit of its nationals and a gas-hungry world market.

Yet, such flaring has banished the night and darkness from areas hosting oil wells, disoriented and scared away animals which were crucial in boosting tourist numbers while causing acid rainfall. Oil spills poison underground waters and surface streams and rivers.

The oil industry is notoriously import-oriented—whether in sourcing oil rigs, machines, vehicles, land, sea and air— or even skilled workers. It is time Africa comes up with its own home-grown strategies.

Most African countries can do nothing about machines or vehicle production as they have to import, but should strive to employ a wide pool of skilled workers from specialised engineers to mere artisans. This demands a well-articulated programme of training African engineers to tough enforcement of the agreed expatriate quota. Unfortunately, the oil industry is not labour intensive; Shell’s total staff list in Nigeria is less than 4,000—yet it is the largest oil producer in Nigeria, accounting for about 70 per cent of the nation’s oil.

Perhaps, this is where Ghana made its first mistake; it has announced that it will achieve a 90 per cent local content in its oil industry by 2020 — just eight years away.

Yet, its oil well in the Jubilee Fields was drilled by an Irish firm, Tullow Oil— the same company that drilled Kenya’s successful well, just as it did in Uganda and Sierra Leone.

It is unlikely that the company will employ only locals, as Ghana and just like Kenya lacks the man-power, forcing the firm to bring in expatriates.

But such expatriates should not be the highest paid globally as is the case in Nigeria, with managerial level staff earning around $500,000 annually, according this year’s study by the Curzon Partnership recruitment consultants.

The report added that this trumps packages for executives working in war-ravaged Libya or Iraq, who could expect a total salary of around $354,900, while in Indonesia, expatriates can expect a premium of 40 per cent, 35 per cent in Ghana and 30 per cent in Libya, Kurdistan or Egypt.

In Nigeria, the supplementary country premium is worth 45 per cent of base pay, taking the total salary to $454,400 a year —higher than even the salary in Britain despite its perilous North Sea oil location and higher standard and cost of living.
Also, emerging African oil producing nations must shun Nigeria’s example of lack of enabling laws. Nigeria has so far even failed to pass the laws since 1958.

As recently as January this year, Nigeria’s President Goodluck Ebele Jonathan was still promising to work with the international oil majors, the legislators and others to push the bill through the National Assembly. Such laws in East Africa should be passed ever before production begins.

The African countries that recently found oil should imitate Nigeria by setting apart a percentage of the oil-licence fees for the training of citizens for employment in the various sectors of the oil industry.

Nigeria did this through the Petroleum Technology Development Fund (PTDF) established in 1973. The trust fund was supposed to finance capacity building in the oil and gas sector by providing Nigerians with the technical and managerial expertise through provision of scholarships, making endowments to universities and providing suitable books and equipment in the relevant institutions, sponsoring visits to oil producing facilities and arranging internship programmes in petroleum firms, and financing oil seminars and conferences.

Its statutory income comes as a percentage of signature bonuses, bidding fees and charges from acreage allocations and the fund is in perpetuity as it is supposed to grow through prudent investment.

But this imitation should stop there and must not progress to how Nigeria failed to meet its goals.

First, Nigerian leaders totally neglected the PTDF and not only was it dormant until year 2000 when former President Olusegun Obasanjo revived it and constituted a management team to oversee the account, it never even had a management board.

So, it never trained any Nigerian by 1999 though it had over $150 million in fixed deposit accounts that year—accounts never audited for decades.

On its revival, the fund swelled by an additional $125 million. After that the attacks on the funds came as the Obasanjo government turned the PTDF into a slush fund supplying millions of dollars to meet the leader’s demands.

For instance, the president in 2006 approved the release of $25 million from the PTDF to establish the so-called African Institute of Science and Technology, Gulf of Guinea Affiliate, in Abuja.

About $1 million was approved for the State House press unit in 2006 for the production of progress reports and payment for photographs for the State House Library.

Even the PTDF officials joined in the spending frenzy— using Naira 36 million (exchange rate $1-N150) to refurbish their offices. Of this sum, N36 went into installing a lift in a two-storey office. The director general’s office got a jacuzzi. Little was done in meeting its real mandate. Such a trust fund for Kenya and others like Uganda should not stop at training of personnel; it must provide for the core needs of the immediate communities, and must not imitate Nigeria’s which pays 13 per cent of oil wealth to the oil-bearing states) but must be tailor-made for the needs of each individual country.

In Norway, the trust fund is not being spent at all, but is being saved for the future. In Canada, a given part of it cannot be spent without the approval of the given Eskimo community. Each country must identify its own needs and ensure oil communities are not angered spawning militancy like in the Niger Delta or the unrest in Angola’s Cabinda region.

Then, a strong Parliament must be ready to do its duty by checking over-bearing presidents. In Nigeria, the petroleum industry and the monies from it has been managed almost like the leaders’ personal funds, especially by the military heads of state.

For instance, Nigeria has been searching for $12 million taken from a special fund created under Gen. Ibrahim Badamosi Babangida to warehouse excess oil revenue.

In 1994, the Pius Okigbo Panel Babangida’s successor, late Gen. Sani Abacha tasked to look into the Central Bank papers called attention to the unaccounted for sum. Since then, nobody has told Nigerians where the money went. A High Court will rule this April whether Nigerians can go to court to seek an explanation for the $12 million riddle.

In 2004, Obasanjo released a paper titled “Social Charter and Implementation Strategy” on his new economic reforms. From page 142 of the paper comes this task earmarked for May/June 2004: “Prepare an Aggregate Annual Statement of all revenues received by government, Develope Templates for –Reporting on Quarterly/Monthly reports on oil and gas revenues. But in January 2012, almost a decade later, the National Assembly held a public hearing where figures from the Nigerian National Petroleum Corporation and the Ministry of Petroleum Resources, Ministry of Finance and the Central Bank of Nigeria, did not agree on any single point.

Worst of all, the same National Assembly had organised such a public hearing in year 2000 over the same issues: that nobody knows how many oil barrels Nigeria sold on any given month, the accruals from such and any expenditure made.

Shield locals

Most startling of all the revelations from the January public hearing was that Nigeria did not know how much it spends on importing refined petrol; while the oil and finance ministers claimed N800 billion, the Central Bank of Nigeria governor announced that it was N1.7 trillion. And only N240 billion was budgeted for that item. So, who authorised the unbudgeted for expenditure?

All local petrol needs must be met by local refineries. Nigeria’s refineries have functioned minimally since the early 1980s, resulting in Nigeria’s petrol importation.

To shield the citizens from paying international prices, companies import petrol which the Nigerian National Petroleum Corporation buys at the same international prices but sells to end users at subsidised rates.