29 September 2013, Lagos – Chief Martins Onovo is not only a former presidential candidate of Action Alliance in the 2011 polls, he is also a petroleum engineer. Widely travelled, he obtained his first degree in petroleum engineering from University of Ibadan and second degree at University of Houston, Texas, United States. In this interview, Onovo faults the Federal Government on fuel subsidy claims, maintaining petrol can sell at N38.50k per litre.
As an oil expert, can you say the country’s petroleum sector is on the right track following the partial removal of the subsidy on petrol by government?
It is intellectually contradictory to have a government policy that does not have significant benefit and creates challenges that you also have to use other policies to address. The matter of fuel subsidy is very unfortunate because in the entire OPEC, it is only Nigeria that has accepted the importation of petroleum products. All over OPEC, there is refining for domestic use while they export crude oil and, if you look at the economic value chain, you find that the downstream sector accounts for over 50 percent of the value of that chain..
So, if you are not refining, which alone accounts for about 50 percent of the value chain, you are losing so much and then you are going to suffer the consequences. For a country like Nigeria, we are suffering the consequences in terms of inflation because fuel is critical to the cost of energy, transportation and industrial production. So, once you have an increment in the price of fuel, it would necessarily cause general inflation and that would undermine the value of salaries because it undermines the purchasing power of the currency.
So, that results in devaluation, macro-economic instability, unemployment, industrial crisis and ultimately a reduction of GDP. Government has been banding about 7 percent GDP increase; the so-called 7 percent has nothing to do with effective government policy as it is dictated by international oil price. So, it is not that government has managed any sector of the economy effectively to engender growth in productivity.
What they had is international oil price giving increased revenue to Nigeria and that ultimately subverted the GDP and ,consequent upon that, it is an appropriate policy and, even if we do not understand the economy, then we should learn from our fellow members of OPEC. We would find out that no one else is doing this. However, if you create enough refining for the capacity of our production, we would refine all our crude locally, give more people employment and sell refined products instead of selling raw crude.
The effect on the economy would be astronomical. Unfortunately, because of the quality of the political leadership which we cannot avoid, we are in this situation where we waste so much, we pay for transportation, marketing and overhead cost, insurance, port taxes, brokerage charges exporting crude and pay all that again bringing in refined product. So, it is a wasteful and unreasonable government policy.
What do you think would have been the alternative?
The cost of domestic product is about N38.50 according to our study. If you look at the study of Prof . Tam David West, a former Petroleum Minister, it is about N31.50 and the study of Prof. Agba, a former Head of Department of Petroleum Engineering, University of Ibadan, says it is N33.50. So, everybody is within the thirty-something Naira window.
Imagine that government refines domestically and sells at N38.50, that would have a very positive impact on the economy, increase the value of the Naira, generate employment and reduce social tensions such as crimes and irritability issues that are associated with unemployment and poverty. So, the benefits are countless when you do what is right and the demerits are also countless when you do what is wrong because what happens is that each action triggers several consequences and this is the direction we expect the country to have gone. But, unfortunately corruption and ineffective leadership have put us in this situation.
We also have the consideration that even though that it has been confirmed by the National Assembly, the EFCC, and Aig-Imokhuede Commission that there was a huge scam of over N2-3 trillion on subsidy in 2011, we have seen that the same government that has confirmed the scam has not pursued the suspects to the full extent of the law and what that suggests is political collaboration. This has actually been publicly alleged by people like General Ishola Williams, a key member of Transparency International.
It was publicly alleged that the money was used for election and that the political leaders are the principal beneficiaries of the fraud. So, you see the institutionalized dis-functionality of a rogue cop where the political leadership that is supposed to lead the fight against corruption is the one that promotes and benefits from it. That is the sorry story of subsidy in Nigeria.
Where do we go from here?
Very simple, but I do not see our current leadership as having the capacity to develop, pursue and deliver the right policies. Therefore we must get a leadership that is patriotic and confident to pursue these patriotic goals because a good tree bears good fruit. We have installed refining capacity of 445,000 barrels per day. The first step is to try to restore that and the second step is to try to increase that.
To achieve these, you expand some of the refineries, remove bottlenecks and build more refineries. If you restore the entire 445,000 barrel per day refining capacity, you would get over 40 million litres of PMS per day and our consumption is less than 40 million litres. So, with the existing capacity, you can stop importation, but those in government do not know that because they are not interested in productive work. Government is only interested in politics to the point that national security has been politicized and that is why we are having the problem of insecurity in Nigeria. So, constitutionally, we know what to do; politically, the direction needs to be set and the current political leadership is incapable of setting that direction.
Experts have predicted that the country might run out of oil in 40 years time. Is it not time to look at the issue of gas flare?
We have been looking at that for the past 40 years, but it is the same competence we are talking about. We keep shifting plans to end gas flaring in the country. How can you achieve the target when the political leadership is deceitful and professional leadership incompetent because they are politically appointed and corruption prevails where regularity officers are easily compromised? Well, thank goodness it is not zero, but we have not done so well for the next season. However, what we are still flaring is very significant and I have a greater fear.
In 2012, President Obama of the United States said that oil is the fuel of the past; that is a major statement and if you had a competent leadership, national policy would have taken note of it, fully understood it and adjusted. Right now, the quantity of Nigerian crude purchased by America has been on the decline which is a physical confirmation of the Obama statement .
This is a country that gets over 80 percent of its internal revenue from oil and, therefore, the collapse of oil is the collapse of the Nigerian economy. Therefore, an oil glut would be a major economic tragedy for Nigeria because our economy is not diversified . Many have said the discovery of oil is a curse to Nigeria, but it is not so, rather poor leadership is a great curse that has befallen Nigeria. It is very clear from Achebe’s statement.
There is nothing called oil curse. All the members of OPEC have a relatively high standard of living. So, the curse in Nigeria is leadership corruption. How can you say that a respectable and highly paid employment is a curse to you? Why should oil be a curse to the country when it is the source of high revenue? My idea is that if the Obama statement means what we think it means, our oil could become valueless because what the statement suggests is commercial viability of alternative energy.
Don’t forget that there are many alternative sources of energy, but it is the commercial competitiveness of oil that gives it the advantage. So, if tomorrow Americans find a commercially superior alternative, it is natural the demand for oil would decline . If the demand declines, the cost would go down. In 1984, an average crude oil price was $14.95k and Nigeria and the entire OPEC quota was 1.2 million barrel.
Today, the international production is over 2.7 million and is is over $100. per barrels. We are making about twenty times more revenue yet our economy is worse off. The only way we can explain it is uncontrolled corruption. How can you make 20 times more revenue and become poorer; that is the tragedy of the Nigerian situation. We had so much revenue and we are thinking poor. What if we had so little?
Crude oil theft has also led to the loss of huge revenue to the country. How can this be checked?
Figures from the Federal Ministry of Finance on what the country loses to crude oil theft show it is 350,000 barrels per day. If you translate that to Dollars at $100 per barrel, you are going to have a billion dollars per month, that is N160 billion every month. Nigeria under President Jonathan recently borrowed a billion dollar from China.
That is the money the country can earn in one month if it had checked crude oil theft, but that is what we have gone to borrow shamelessly and national debt has been rising since this government came into power . Right now, the total national debt, both domestic and external, is about $50 billion dollars. So, this generation and the yet unborn would pay for that. Therefore, crude oil theft is a reflection of the collapse of national security and it has been predicted that Nigeria would end up where it is today.
Today we are battling insecurity, corruption, uneducated people who are poor and hopeless and in our prediction we knew that, naturally, this is going to be the outcome. We didn’t know this is going to be Boko Haram, but let me tell you, the strongest instinct in a man is survival and, when the political leadership loses moral authority it has lost all authority and the political leadership in Nigeria has no moral authority.
It is easy to say Boko Haram is the problem; it is misleading and Nigerians are deliberately misleading themselves because, in the South-east, kidnapping, robbery, stealing and assault are very prevalent. So, crimes are very prevalent all over the country and not only in the North -east and these are the natural consequences of the socio-political depravity of the current political leadership as you cannot do the wrong thing and get the right answer.
Why would there be crude oil theft if law enforcement and value system have not collapsed . So, when the political leadership has destroyed public morality by deliberately corrupting the people and making them lose their values, then they would either participate in the crime or not report it. That is what is happening today because armed robbers, political thugs, oil bunkers and kidnappers in our midst are known, but there are cases where you would find out that these crimes are organised and that the law enforcement community is involved .
If you know the modus operandi of crude oil theft, you would know that it is impossible to conduct oil theft without law enforcement collaboration. The cost of pollution is even more than the money we are losing and nobody is talking about it because of our materialistic perspective. The Niger- Delta ecosystem is being destroyed. These oil thieves are polluting perpetually because they are not professionals and are not using any professional standard.
They are using artisan plumbing techniques to compromise the lines and the line is now linking into the wet land, water, farmlands and polluting the entire environment. We are yet to explain how the MT. African Pride which, when it was arrested was put in the custody of Nigerian Navy and later disappeared from the custody of Nigerian Navy, an elite navy by any standard.
How do we explain that? This is comical and that is to show you the high level of the law enforcement agents in this illicit trade. Go and look at the officers serving at the Joint Task Force, they are richer than their superiors. Their wives have become jewelry traders in Dubai and it is unfortunate that government appears incapable of doing anything productive in any sector of the economy There is crises in all the sectors to the extent that one of the four lawmakers that wanted to impeach the Rivers State Speaker was flown abroad for medical treatment apparently with public money and these are the people who tell you that they have improved the health sector.
If that is true, Patient Jonathan should go to the National Hospital instead of Germany. Mandela received treatment in a South-African hospital . Atta Mills, the Ghanian president, died in a Ghanian hospital. So, the deceit of the government has become obvious and we can’t get it right until we get the leadership right.
*Chinweoke Akoma, Vanguard