By Adedayo Ojo
By recalculating the way it reports Gross Domestic Product (GDP) using 2013 as base year, Nigeria found its economy had leaped by 89% to $510Billion from the 1990 figures. The change occasioned by a simple mathematical/statistical calculation is the good news.
In real terms, nothing may have changed for the “man in the street” and the overall economy.
But for the oil and gas sector, a lot has changed since the country calculated its GDP 24 years ago.
The rebased GDP figures have shown that Nigeria’s economy is much more diversified than earlier assumed. After the exercise, the revised GDP for 2013 grew by 89%, agriculture’s previous share of the GDP reduced from about 33% to 21.97%; the contribution of oil and gas sector to the GDP had shrunk by more than half to about 15.9% while the services sector, covering information and communications, entertainment and arts, real estate, financial services, education and health services etc, grew significantly from 26% of the GDP to over 51% percent. In the opinion of The Economist, this reveals “that Nigeria is much more than just an oil enclave”.
The reduction in oil and non-oil tax revenue-to-GDP ratios from 20% and 7% to 12% and 4% respectively is perhaps a clear hint of possible economic leakage. The detailed statistical analysis is now readily available and will hopefully aid the government in its policy formulation and execution with a view to attaining Nigeria’s tall dream of becoming one of the 20 biggest economies in the world by 2020.
The realisation of this dream has also been validated by United Nations’ endorsement of the rebased GDP figures while showing that the size and role of the African continent in the global economy might have been seriously underestimated for years, as evidenced with the significant leap that placed Nigeria on the global watch list of big economies.
A key concern is not the drop in overall contribution of the petroleum industry to the economy but the near comatose status and the lethargy that has gripped the sector in the last several years. This situation is succinctly illustrated by the intractable delay by the legislature and the subtle politics being played around the passage of the industry regulatory lifeline – the Petroleum Industry Bill (PIB).
It is instructive that most of the initiatives and projects which propelled Nigeria daily oil production output to and beyond 2MBPD were conceptualised and negotiated around the early 90’s. That was the period that most of Production Sharing Contracts which govern the deepwater projects were finalised. ExxonMobil’s Oso Project and similar game changing projects by Shell, Chevron and Total were also finalised in that time frame. Shortly after, both the government and the national oil company literally went to sleep.
The Obasanjo administration sought to deal with the issues of the industry when it inaugurated the Oil and Gas Sector Reform Implementation Committee (OGIC) on April 24, 2000. The essence of the National Oil and Gas Policy (NOGP) that emerged from the OGIC efforts is anchored on the need to separate the commercial institutions in the oil and gas sector in Nigeria from the regulatory and policy-making institutions. Unfortunately, Obasanjo’s administration did not implement OGIC recommendations because of political distractions.
In September 2007, President Umaru Musa Yar’Adua reconstituted OGIC with a mandate to transform the broad provisions in the NOGP into functional institutional structures that are legal and practical for the effective management of the oil and gas sector in Nigeria. The mandate basically called for a restructuring of the petroleum industry in Nigeria that would propel the economy to a GDP level comparable to the top 20 largest worldwide economies by 2020.
The report of the reconstituted OGIC gave birth to the PIB which is currently cooling in the National Assembly chambers. Over the years, different versions of the PIB have been the subject of intense debate among various interest groups without any concrete progress.
The ‘conspiracy’ against the oil sector has been accentuated by the rising security problems related to oil theft, pipeline sabotage, and piracy in the Gulf of Guinea which has significantly reduced oil exploration/project development, thereby negating the earlier gains recorded in the mid 90’s. Although Nigeria currently enjoys the status of being the second largest holder of conventional crude oil reserves in Africa and among the top 10 global oil reserves with significant heavy oil yet to be tapped in the Benin basin, its potential is held down by government-aided lethargy.
In spite of the enviable resource holding position of Nigeria, exploration activities are currently at their lowest in a decade with only three exploratory wells drilled in 2011, compared to over 20 in 2005, according to the Energy Information Administration (EIA) – the statistics arm of US Energy Department.
In a recent interview, Johnson Chukwu, chief executive officer of Cowry Asset Management, noted that the structure of the economy is the reason why the obviously well represented growth of Nigeria’s economy was not reflecting on the populace such that there are still millions of Nigerians living in poverty. Chukwu noted that Nigeria has kept producing more millionaires in recent years, indicating that there is indeed some growth, but the wealth is not trickling down the socio-economic ladder.
While acknowledging the positive impact of growth in some of the sectors, it is instructive that several of the key firms that contributed to the celebrated growth are not indigenous companies. The telecommunications sector is a case in point! Overall, a comparative analysis of the economic indices of South Africa and Nigeria in terms of economic indices will reveal that South Africa remains ahead of Nigeria in terms of the quality of impact of its economy on the living standard of the people.
There are a few “low hanging fruits” which can truly rebase the Nigerian oil and gas sector. First, government should adopt a policy that encourages acceleration of the divestment of IOC’s from marginal and undeveloped fields. This will improve and increase the participation of Nigerians and Nigerian-owned companies in the sector. Companies that have not commenced the divestment process must be compelled to do so either by persuasion or evocation of appropriate clauses in the Joint Operating Agreement (JOA). The IOC’s won’t leave now despite what may look like a threat to do that.
Secondly, the government – the executive and legislature, should stop the nauseating and routine bickering in the public space over issues in the Ministry of Petroleum or the performance and activity/inactivity of the Minister. No serious government is run on the pages of newspapers! If an individual is corrupt or non-performing a non-partisan coalition of the lawmakers will be enough to force the hands of the government to do what is right. Too much lip service has been paid to passing the PIB either as is or in some modified form. The musical circle of debate must give way to action in regulatory matters that are critical to nudging the industry ahead. The passage of the PIB is expected to deepen indigenous participation in the oil and gas sector, with possibility of improved FDI which by 2024 when another rebasing exercise will be conducted the sector will have returned to its enviable position pre 2014 rebasing exercise.
Similarly, the Nigerian Content Monitoring & Development Board (NCMDB) should get more proactive. There is more that can be done to ice the cake of its commendable achievements in the last four years. In cases, where there are issues between foreign and Nigerian contractors on local content compliance, the NCMDB should play the umpire and mediate. Where contract execution is delayed, Nigeria is the prime loser because of associated costs.
In another vein, the gains of the economy will be improved if the initiative of the Nigerian Stock Exchange (NSE) and the Securities & Exchange Commission (SEC) to attract oil & gas companies to list is supported and encouraged. The NSE is capable of accommodating ten more Seplats and ten more Calvertons!
Adedayo Ojo is Lead Consultant/CEO of Caritas Communications Limited, a specialist reputation strategy and corporate communication consultancy based in Lagos. Caritas is the West Africa affiliate of Regester Larkin, a pioneer reputation strategy and management consultancy with offices in London, Washington and United Arab Emirates.