Resource Management in the Nigerian Petroleum Sector

Whatever may be the resource a country is endowed by nature, management of revenue accrued from its tapping decides the rate of growth and development of that nation or otherwise. This was the emphasis of a recently organised capacity building workshop on the Utilization of the Natural Resource Charter Framework, by the Nigeria Natural Resource Charter (NNRC). The workshop with the title: Utilization of framework for policy formulation capacity building workshop for Nigeria Institute of Legislative and Democratic Studies (NILDS), and members of the National Assembly, had participants deliberating on the needs for proper policy that will help Nigerians benefit maximally from its oil and gas resources.

According to Israel Aye, founding partner and current managing partner of Primera Africa Legal, who was one of the resource persons, the degree of prudency applied to the management of resources and revenues that accrue from it will determine whether it will be a blessing or a curse to the people. To him, countries that just mine and sale their natural resource tend towards poverty because its economy will lose the benefits of the value-chain in processing of such commodity, while those who process the commodity before it is exported and also incorporate its use within the economy of that country tend towards prosperity as it enjoy the benefits of the value-chain.

Participants at the workshop

From historical perspective, Nigeria joined the ranks of “Oil Producing Nations” in 1956 when its oil was first discovered at Oloibiri in Niger Delta after half a century of exploration. Since then, the Nigerian Petroleum industry (over sixty (60) years old) has grown steadily into becoming the crux of the economy.

According to Aye, the oil and gas resources in Nigeria have in the past 6 decades been poorly managed which has deprived the country of its full potentials and benefits. Among several issues that needed to be address for Nigeria to gain maximum potential in the petroleum industry according to a paper presented by Aye are: legislatives obsolescence and uncertainty; unclear terms for domestic refining; cost assessment control;  lack of fiscal neutrality; high barriers to entry; zero royalty in deep offshore, non-value adding incentives, windfall from price increase multiple taxation; insufficient clarity around PSC; declining competitiveness; AGA; etc.

Aye said that Nigeria needs to learn from countries like Norway, the state of Texas in the USA, Aberdeen in Scotland, the Gulf States, who seem to have gotten it right in terms of management of its petroleum resources. Why the above mentioned states and sub-regions are able to build infrastructure and diversify its economy using revenue from petroleum, the narrative is different with Nigeria.

To fix what is broken in the management of the Nigerian petroleum resource for efficient benefits to the people of Nigeria, Aye suggested that:  domestic utilization of the resource should be promoted; there should be incentivize local participation by segmenting the industry for fiscal and regulatory purposes; institutional framework should be refocus and strengthen; there should be investment in world class human capital development capacity; compulsory government savings and investments from the proceeds of petroleum revenue should be build into law; bidding in the industry should be open and competitive; at the minimum, an integrated management approach to the petroleum resource in Nigeria should be adopted;

By Pita Ochai

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