President Muhammadu Buhari is indulging his obsession with exploiting oil in the Lake Chad Basin at Nigerians’ expense. At a time of falling commodity prices and sharply declining revenues, this is a strange way to solve our pressing economic problems. The government should stop this misadventure and take the more urgent and required measures to rejuvenate the economy.
To call a spade by its proper name, this is simply a sectional agenda, propelled by the long-held burning desire of the northern elite to make the region an oil producing area. This move will only further deepen a growing perception that Buhari often favours his political base.
News of the renewed vigour in extracting oil in the basin came from the newly-appointed Group Managing Director of the Nigerian National Petroleum Corporation, Maikanti Baru, who said the President “has directed me to go into the area to improve and further explore the magnitude and ‘prospectivity’ of those finds.” He said the NNPC would now reinvigorate its Frontier Exploration Services and Renewable Energy Division to execute the presidential order.
For those unfamiliar with the nuances of Nigeria’s public policy space, where politics not only interferes with economic decisions, but often dictates them, the renewed urgency to exploit oil in the Chad Basin may pass as necessary expansion of the country’s oil production base. For one, over 80 per cent of the country’s current production comes from the Niger Delta region, with Abia, Anambra, Ondo and Imo states making up the rest. With militants in the Niger Delta region holding the country to ransom for over 15 years by bombing, cutting and vandalising oil and gas facilities in wanton acts of criminality that they deceitfully clothe in the toga of self-determination, there is a seductive argument for alternative sources of the black gold.
Enthusiasts of Lake Chad oil also cite the discovery of crude in other parts of the Chad basin in Niger Republic and Chad as a motivation for the sustained search. The immediate past NNPC GMD, Ibe Kachikwu, who is the Minister of State for Petroleum, has indicated that drilling will start in the last quarter of this year.
Looking closer, however, disturbing partisan signs are visible. The search for oil in the Lake Chad area started almost 40 years ago, initiated when Buhari was Commissioner (Minister) for Petroleum under a military regime. Returning a few years later as head of the military junta that toppled the civilian government in 1984, he again gave full backing to the exploration by the state oil company. Now, in his “third coming,” this time as elected President, he has returned to the unfinished business.
Though the NNPC has been opaque about its expenditure, it was Jerry Gana, who in 2013, as chairman of the Northern Nigeria Economic Summit, put a figure of N27 billion spent as of that time on oil and gas exploration in the Lake Chad Basin, in addition to a fresh $340 million.
But there are compelling reasons why Buhari should not commit or cause the NNPC, which only turned in a modest profit of N273.74 million in May for the first time in 15 years, to waste scarce resources on a venture best suited for private investors. Things have changed in the oil and gas industry. The most obvious are the crash in prices; the entrance of new players; over-production and new (fracking) technology, and conscious efforts by oil producing countries to cut their dependence on oil, reduce state control and give way to the private sector. Benchmark Brent crude settled at $44 per barrel on Thursday, compared to over $100 pb mid-2014 and analysts predict prices will not rise beyond $50pb in the foreseeable future. Moreover, global oil production levels have risen from about 56 million barrels per day in 1986 to reach 97 million bpd in December 2015, while global demand has declined slightly from the 96 million bpd it reached in 2015, according to the International Energy Agency. Nigeria still has 37.2 billion barrels of oil reserves – the world’s 10th largest – and some experts continue to question the commercial viability of oil finds in the North-East.
After decades of using taxpayers’ money to prospect for oil with marginal results, previous administrations balked, prompting the 19 northern states, through the Northern Nigeria Development Company, to acquire oil blocks. That attempt at regional entrepreneurship got little mileage. While the Yinka Folawiyo Petroleum Company is achieving 7,000 to 8,000 bpd this month in Lagos after committing $400 million investment, Buhari and the northern elite want the NNPC to continue to fund the Lake Chad Basin oil search, even in the face of revenue falls from drastic cuts in production that went as low as 1.4 million bpd in July due to sabotage.
We strongly oppose this statist option. Having done its bit these past 40 years, the government should leave the Chad basin enterprise primarily to the private sector. The northern states should continue to commit their own resources to realising their ambition of producing oil and attracting willing technical and financial partners.
We insist that the natural advantages of the northern states, which are agriculture and mining, along with vast potential in irrigation, ranching and alternative energy (solar and wind), should be the priority areas of investment for any forward-looking federal and state governments. Buhari should not fritter away the opportunity to uplift agriculture and mining in the region like his predecessors. The 19 northern state governors should consider what impact the humongous sums they have spent this year on religious activities would have made if invested in rural infrastructure, agriculture and solid minerals in which area they are much more endowed than the southern states.
We urge the government to rather give incentives to the NNDC and other interested private operators to drill in the Lake Chad Basin. Going forward, the NNPC should be restructured to limit its direct involvement in operations in favour of private enterprise and to eliminate political interference, freeing it to run as a holding company on purely profit-making principles.
