By Chris Paul Otaigbe
Is Nigeria truly prepared for a life after oil? Do we really need to watch alternative energy run out our oil into extinction? These are the questions that have continued to dance around the minds of all the players in and managers of the Nigerian economy.
So, how prepared is Nigeria’s economy, largely dependent on revenue from crude oil sales, after the black gold? This is dominant national issue that for so many years, has been on the front burner in the country.
It is the question the Aret Adams Foundation (ADF) attempted to answer through theme of the 17th Annual Aret Adams Memorial Lecture, which incidentally asked the same question: Nigeria’s Economy After Oil: how prepared are we?
At a point in Nigeria’s history, when crude oil, the soul of its mono economic base, is experiencing a downturn, threatened with possible extinction, the ADF decided to intervene to address the drift; through the 2020 edition of its annual memorial Lecture instituted in memory of a one time Group Managing Director of the Nigerian National Oil Corporation (NNPC), Aret Adams.
Held on February 25, 2020, inside the Agip hall of the Muson Centre, the Lecture had in attendance the crème de la crème of the Nigerian Oil and Gas industry.
They included the Matriarch of the Adams’ family Izarene Adams, Egbert Imomoh, who represented Charles Osezua, Chairman, ADF Board of Trustees, Chief Don Obot Etiebet, former Minister of Petroleum, Guest Lecturer, Olabode Augusto, Dr. Lai Fatona, who graced the high table with Chief Goodie Ibru, Mac Ofurie, Chief Chamberlain Oyibo and Greg Ogbeifun among others
The event commenced with opening remark by High Chief Imomoh who informed the audience that late Aret Adams would have turned 83 years two days after the lecture, if he was alive.
Enlightening the audience on the Foundation’s operations and the choice of the theme for the 2020 edition of the lecture, High Chief Imomoh said Aret had always told him about his passion to break new frontiers defying odds to conquer challenges and lead Nigeria to new horizons. Consequently, Aret’s dreams and passion have continued to drive the scholarly direction of the Foundation’s work.
In his Chairman’s opening remark, Chief Don Etiebet appreciated the ADF Board for keeping the Aret flag flying.
Equipped with a Master’s Degree and a PhD from a University in Canada, Don met Aret two years after he returned to Nigeria in 1974.
They had been friends ever since and never parted ways until Aret’s passing in 2000. But one secret existed between the two great friends concerning Nigeria’s Oil and Gas industry, which the former Petroleum Minister let out of the bag. Aret was the secret, unseen, adviser throughout his tenure as Petroleum minister. “Aret told me to stay out of trouble and keep my name in the troubled petroleum industry…” he said.
That advise proved valuable for Chief Etiebet as it helped him stay out of trouble in the troubled industry.
Don affirmed that Aret was a builder of men who love his nation above himself, adding that most of the major players in the Oil and Gas industry are Aret’s proteges.
He went further to elucidate on the character and conduct of Aret at home and at work as a husband and as an Administrator of the nation’s highest revenue earning parastatal.
He wondered how Nigeria can survive with oil in an e-world powered by the internet of things among others.
Having had both remarks, it was time to get to the business of the day. The Lecture to tell how prepared Nigeria should be in the event that Oil dries up literally or in terms of patronage. The Lecturer, Bode Agusto, had to tweak the theme to properly put the issue in proper perspective. First, he defines the role crude oil plays in the life of the people as an essential commodity. “So, rather than ask how prepared are we, I decided to tweak it to read: how should we prepare for a life after oil?’ he said.
Sixty nine percent of the total of the over 80% US consumption of oil, Bode said, was spent on transportation. Twenty five percent to power factories, three percent to heat homes and the remaining for other uses.
These three groups, CONSISTING OF US, UK and Asia represent about two third of the wealth of the entire world. Looking at the consumption of fuel, one would discover that there is no material difference between the principal product and its derivative.
The result, Bode said, is a significant decline in the demand for oil. According to OPEC, the demand for oil grew from 77 million barrels per day in 2000 to over 100 million barrels in 2019 which comes to an estimated 30% growth. But Bode quickly said that may not capture the reality of the dynamics of the global demand and supply for oil.
The demand for oil peaked around 2005. Actually, the developed world consumed about 48 million barrels per day, which incidentally was the same amount they consumed last year, 2019.
OPEC’s pursuit of price optimization can be said to have created this paradigm. So, what does this mean?
Non-OPEC production increased from 36 million barrels per day in 2000 to 64 million barrels per day in 2019. This represents a growth of 18 million barrels per day and the question then is, where has this growth come from?
Currently, the US is on the way to attaining the energy independence and security it had been talking about in her pre-shale oil years, because in 2019, she consumed 20 million barrels of oil per day, while she produced 18 million barrels per day with a net import of just two million barrels per day.
This may have informed OPEC’s enlistment of the support of Russia in what is now known as OPEC plus. Unfortunately, that alliance is still unable to exercise significant control over the price of oil. He said, for non-oil observers, the days of over $100 per barrel may not be so for a long time to come.
This means that the cartel and its consumers may have to live with a price that would continue to hover around $60 per barrel. Clearly, the outlook for the price of oil and its pricing is not exactly pleasant for the oil producing countries.
In his own view, Bode said the long-term outlook for the demand of oil is weak because the world’s continued concern for the environment is making it to embrace electric and hybrid cars.
What this sentiment amounts to is that global demand for the commodity would be on a downward slope and this would result in consistent pressure on oil.
At this rate, even if OPEC comes at the end of the day to say it wants to bring down its prices to accommodate its impending predicament, Oil prices and the overall revenue from crude oil would still slope southward.
So, what does this grim horizon holds for Nigeria?
To properly appreciate the value and impact of the answer to that question, it is important to understand what crude oil does and is still doing to the Nigerian economy.
“On the external side, it has provided the country a sizable amount of dollar revenues. Given us lots of dollars to have in our pockets, which we have used to trade with rest of the world.” Said Bode.
The total dollar inflow from Trade in the last 20 years, according the Central Bank of Nigeria (CBN), was $1.5 trillion. Of this, over $1.1 trillion, about 79%, came from selling crude oil and natural gas to the rest of the world. $300 million came in from remittances from workers. “Those are the moneys Nigerians in the diaspora sent to us in Nigeria. A sizable chunk as well. Businesses in Nigeria have used these dollars to equip their factories, buy raw materials, while some have imported finished products, such as cars, with it. How about our households, what have they done with dollars from oil?” he asked.
He said they have used it to buy cars and houses in the United Kingdom (UK) and the United States (US). “We have used it to educate our children in the UK and in the US and other countries. Some have used it to buy healthcare from abroad, fly up and down key capitals in the world. In short, what crude oil has done for us, is that it has helped Nigerians finance a lifestyle that is significantly above our productive capacity.” He said.
Even with crude oil, 200 million Nigerians produce Goods and Services that are only worth about $400 billion a year. US with a population of 320 million produces an output of about $20.5 trillion annually. The point five percent at the end of their output figure is bigger than point four trillion-naira annual productivity yield of over 200 million Nigerians put together.
From the fiscal side i.e. the revenue and spending of government, “Crude Oil has provided the government with a large amount of revenue which comes principally from Oil taxes, Petroleum profit tax, royalties, rents oil companies pay to government of Nigeria. The second source of oil money is the sale of government Equity crude, because government has equity stake in the industry and so, they lift oil and sell.” Said Agusto.
In the last twenty tears, the federation account has received over N87 trillion in oil revenues while non-oil has raked in N29 trillion. The money, according to Bode, was shared across the tiers of government: N53 trillion for the federal government, N40 trillion to State and N23 trillion to Local Governments.
Out of the N53 trillion that is federal government’s share, N15 trillion went for paying interests on Loans. N26 trillion was used to pay salaries and Pensions and N15 trillion on infrastructure. “You would notice that the amount spent on infrastructure is small particularly when we relate it to other economies in sub Saharan Africa.” He said
Nigeria spends about two percent of her national income on infrastructure yearly. Ghana spends between four and five percent, Kenya spends six percent, Angola spends seven percent. “So, my view is that we are under investing in infrastructure and it is important when we look forward.” Said Bode.
In the area of banking and finance, the rate of inflation in the last twenty years has hovered around 15%. What this means is that the purchasing power of the naira loses value at an average of 12% per year. Even where one looks at it from a five, ten, fifteen or so years average, Bode said it would remain the same at 12% or 14%.
It also means that knowledgeable Investors would always want to do better than the country’s inflation. “So, if we are going to lend money to Nigeria for any considerable length of time, we would have to have an interest that is higher than 12%.
Otherwise, we are going to lose purchasing power and the federal government of Nigeria is the safest bulwark in naira. Why? Because, they can print naira legitimately to repay their loans. Looking at yields on a ten, five- year bonds at 15%, if somebody who can print to repay his loans is borrowing money at 12%, at what rate will you and I borrow money?” he asked.
In other words, the risk-free rate plus the risk premium that drive the cost of capital to over 20% is reflected across financial capital environment in the country including mortgage. “So, how do you create Home-Owners in that environment, when you place 20% interest on an Excel spreadsheet on a ten-year mortgage? My Ghanaian friends would tell you it won’t ‘werk’(work)!” He joked.
He said Mortgages do not work in high inflation environments such as Nigeria’s. The long-term inflation on the dollar is two percent. In other words, the dollar loses purchasing power at an inflation rate of two percent per year, while the naira loses purchasing power at 12% annually “and somebody stands in front of you and promises you a stable exchange rate. There is no way he can deliver unless he fixes the difference.
That is the reason why inflation in Nigeria moves in steps because when revenues from oil are high, we use it to support the exchange rate. When revenues drop, what happens… we allow a depreciation or devaluation of the currency.
So, what should be the way out of this imminent economic doom? The objectives for the solution should be in three-fold” he said.
The first, is that Nigeria must grow the output of the economy significantly. The second one is that the country must better manage her population because the way the wealth of a nation is measured, is to take the enumerator, which is her output. “For instance, the number of yams you have produced divided by the denominator which is the number of people who want to eat the yam. If you produce a large quantity of yams, there will be enough yams to go round. If you slow the rate at which you grow your population, there will be even more yams to go round.” Bode illustrated.
The third leg of the three-pronged goals is the income distribution part of the tripod.
One of the paths towards diversification and solving the economic challenge of the country is infrastructure rejig. He said government does not need to build new roads but to repair the existing ones.
Agusto’s presentation was followed by a question and answer session. The program wounded to its closing with a plaque presented to Bode Agusto by Mrs. Izarene Adams for his highly enlightening talk.
At the end of the Program, Kaftan Post conducted post event interviews with some of the participants and guests on issues raised during the lecture.
The first was High Chief Egbert Imomoh who is a major player in the Nigerian Oil and Gas industry and a member of the Aret Adams foundation. He explained how the concern for a dwindling oil revenue and hope for a non-oil economic solution brought about the theme for the Lecture.
According to him, if the decline persists and consumers do not come knocking nation’s door, what really is going to happen?
Against the backdrop of the ideas the lecture and the contributions generated during the question and answer session of the program, does he believe the nation’s economy is going in the right direction? He believes the economy is already exploring some ideas that may benefit Nigerians at the end of the day. But he is of the view that it can get better.
Solid Minerals, according to him is an area of the economy that has not been touched because, like Agriculture, it is a large employer of labour.
“It is an area that can drive this economy quite very quickly. So, those are the areas I would want us to go into and then the whole ICT world is significant. I hear there are bright Nigerians in that field doing great things and you could be here, in Nigeria designing software and so forth for the entire world. There are other areas we haven’t touched upon, which I believe with time, particularly when the Oil start to reduce in revenue and patronage that can be focused on.”
Next was the Guest Lecturer, Bode Agusto whose thoughts for Nigeria and how she moves forward fired up his position on ways for the country to prepare for a life after oil.
Agusto is convinced that leveraging the taxation potentials of the country is the way to grow the economy away from oil.
Chief Greg Ogbeifun, Chairman/CEO of Starzs Shipping and Investment company Ltd and former President of the Nigerian Shippers council had taken up issues with one of the solutions raised by the Guest Speaker during the Q and A session, especially the one that has to do with compulsory Taxation for every Nigerian. He said only those who earn can and should pay.
According to him, taxation in whatever form, “whether it is the three-key Tax Bode talked about, whether it is the corporate Tax, the Personal Income Tax, the Value Added Tax (VAT), these Taxes are applicable to only those who are productive, or establishments that are productive. Companies that are working and making profits can pay tax and they will pay tax. People who are working earning salaries have to pay tax and they will pay tax. VAT is usually deducted at source and so you don’t have a choice.” He said.
The position of the former Shippers council president is that the situation in Nigeria is such that people don’t have jobs, those who have jobs are losing them just as companies are losing contracts or don’t have any at all. “My point is we are in a country where a lot of companies have gone under. A lot of the sectors of our economy are no longer productive and companies have shut down. A lot of people in the country are unemployed. On an annual basis, we are pushing lots of young graduates into the job market from our universities, from our institutions and you are talking about Tax!” he exclaimed.
Bode insisted that the direction is targeted at certain section of the population.
Ogbeifun said it is about the stark reality Nigerians have to deal with.
The Maritime veteran agreed with the Guest Speaker that the taxable population in the country are less than one percent.
“You want the less than one percent to carry the socio-economic burden of 99.9%? I can’t seem to get it together. I would have thought that in thinking of a way forward for a post oil economy, it is for us to begin to diversify the economy. Nigeria was a great nation before oil. What were we surviving on? You had the Groundnut Pyramids in the North, Abakaliki Rice, Cocoa in the West, Rubber. Nigeria is a highly blessed country; vegetation-wise, climate-wise. Why don’t we go back and explore and grow our massive economic potentials that made us proud in the past! That is one place to employ lots of people who will pay tax.” Said Ogbeifun.
He informed about the latent potentials of the country that have been left untapped and unexplored.
Leading the forum into the Q and A session, Chief Etiebet wanted the audience, which was, largely filled with globally acclaimed Oil and Gas experts to ponder on the concerns about the desperate need for Nigeria to explore ways to survive as an economy away from oil.
“Bode has talked about electric cars. Supposing we replace oil and gas- driven automobiles with electric cars. What do we do? It is a possibility… because the dependence we have on imported goods is such that when the manufacturers of cars are no more manufacturing cars using oil products. We would have to buy those cars because we don’t have a replacement.” Said Etiebet.
For Ogbeifun, it is imperative that Oil Producing African countries, especially Nigeria, understands the rationale behind the development and generation of renewable energy. As far as he is concerned, it is about countries who, besides the environmental pollution excuse, have used those technologies to improvise their way away from a Crude Oil that had become too expensive for their economies to accommodate.
Ogbeifun’s idea, here, answered Chief Etiebet’s concerns when he was transiting the program into the Q and A session.
According to him, most of the countries that are changing the ante by developing the electric cars are doing so because they were importing Oil and it was depleting their economies. The Oil and Gas industry employs a large chunk of Nigerians currently and the reality that all these people may suddenly wake up one morning and be out of job, may not augur well for the nation’s economy.
“Until we get our electricity right, we will continue to depend on Generators. So, we need Diesel. Or, Gas. We shouldn’t be worrying about what the rest of the world is doing, we should be concerned about ourselves. What has God blessed us with? Oil is number one. Like Chief Chamberlain Oyibo said, what can we do with that oil? A lot! We shouldn’t dump it because people who don’t have oil are looking for alternatives.” Ogbeifun insisted.
He admitted the need to be cognizant of the environment and that is why he said the Nigerian Oil can be refined with a view to reducing the Sulphur content to prevent carbon emission among others. “But we should use the oil. For instance, if we begin to build ships tomorrow, the cheapest resource we would use would be Gas and Oil.” Said the former President of Shippers council.
Without a doubt Ogbeifun’s position is evidently novel in the ongoing conversation about renewable energy and its attendant threat to fossil fuel. One only hopes the federal government would take this hint and strategize its approach to the nation’s major resource and revenue earner-Oil.
In brief…
Coronavirus: ‘Patient is in stable condition’ Sanwo-Olu assures
Lagos State Governor, Babajide Sanwo-Olu, has appealed to Lagos residents to remain calm over the first case of the globally rampaging coronavirus that was discovered in the State over the week, adding that the patient, an Italian, is in stable condition, while relevant agencies of the State government are on the trail of the victim’s contact.
He assured that the State has raised its level of response to the disease known as COVID-19, following a reported case of a patient diagnosed with the infectious viral disease in the State. This is coming, just as the Chief Incident Commander and the State Governor, Mr. Babajide Sanwo-Olu, allayed fears of residents on spread of the virus.
The Governor also offered more information on how the patient was identified and efforts currently being made to prevent the spread of the virus.
The patient, Sanwo-Olu said, is an Ogun State-based expatriate who flew into Lagos from Milan in Italy via Istanbul, Turkey last Monday evening. The Governor said the patient, whose name was not disclosed, remained in stable condition at the bio-security facility in Yaba, Lagos Mainland, where he is being isolated.
It was gathered that the patient, although, tested positive to COVID-19 virus, is yet to show any respiratory symptoms at press time. He complained of fever and body pain, which prompted his transfer from Ogun State to Lagos for advanced medical investigation.
Sanwo-Olu said a number of persons, who had physical contact with the patient before the virus was diagnosed, are being traced, while others are currently being examined for possible symptoms.
The Governor shared these details during a first press conference held on Friday at the State House in Marina to brief the public on the matter. Top State officials at the conference included Commissioner for Health, Prof. Akin Abayomi, Commissioner for Information and Strategy, Mr. Gbenga Omotoso, Commissioner for Agriculture, Hon. Gbolahan Lawal, Secretary to the State Government, Mrs. Folashade Jaji and Director General of Lagos State Safety Commission, Mr. Lanre Mojola.
Sanwo-Olu said there should be no cause for panic among Nigerians over the reported COVID-19 incident, stressing that measures had been set in motion by the State and Federal governments to contain the spread of the virus across the country. He particularly allayed the fear of Lagos residents, saying the two bio-security facilities in the State had the capability to contain the virus.
He said: “At 10pm on Thursday, I got a call from the Commissioner of Health, who reported possible identification of patient with coronavirus in Ogun State. Immediately, we triggered all levels of bio-security responses and containment facilities. After series of laboratory examination, the patient was confirmed to have tested positive to the virus in early hours of today (Friday) and we immediately alerted the federal authorities, including the President and everybody who needs to be aware. We are in constant touch with the company where the patient was engaged. The management and personnel of the company have been cooperative.
“Health workers and emergency officials are on the field to track all persons that had physical contacts and interaction with the patient. Our bio-security facilities have been fortified to continue any form of test and contain any other potential case. We are in constant touch with the Federal Ministry of Health to harmonise our response to the incident. For us in Lagos, we are doing anything that needs to be done. The patient is stable and every health intervention required is currently being given to him.”
On how the patient scaled through health screening at the Lagos airport without being detected, Sanwo-Olu said investigation showed the virus did not manifest in the patient at the time he passed through the airport. The incident, he said, prompted the Government to immediately trigger advanced end-to-end screening for passengers flying into Nigeria, especially from high-risk countries.
The Governor said there would not be prohibition of public gatherings and regular activities in Lagos despite the diagnosed case of COVID-19, pointing out that such measure may give rise to needless panic among the general public. He said the condition of the patient was not “highly contagious” at the moment, adding that the State would only ban outdoor gatherings in the case of escalation in person-to-person transmission of the virus.
He said: “It is only when there is a high level of escalation that the public can be panicky and this is when we realize that it is getting to person-to-person transmission. As we have said, this isolated case has been contained right from the hospital where he was first admitted and the guesthouse he slept after his arrival in Nigeria. It is when there is a person-to-person infection that we can trigger another level of isolation and curtail public events where large number of people can gather. I don’t think we have gotten to that level yet.”
Sanwo-Olu also cleared the air on why the patient was transferred to Lagos after the incident was reported in Ogun State, saying the Federal Government only established testing centers to prevent coronavirus in States that have international airports. Lagos, the Governor said, is the only State in the Southwest that has testing centers. He said the State was also considered based on its sophisticated bio-security facilities, which were established during the outbreak of Ebola virus.
Prof. Abayomi explained how the diagnosis was carried out, following the patient’s complaint of fever and body pain. He said the patient started to show signs of illness on Wednesday afternoon, after which he was presented at the Ogun State-based firm’s hospital where investigation began.
He said: “Investigation began at the hospital after the patient gave history of his trip to Nigeria. The medical personnel at the company’s hospital kept the patient in isolation overnight and contacted us at the bio-security in Lagos for assistance. We immediately asked them to transfer the case to Lagos. The patient was brought to our high-containment in Yaba on Thursday morning.
“Immediately the patient arrived, he was put in proper isolation and appropriate tests were conducted on him. Within hours, we received signals that the laboratory tests were showing signs of positivity. At that point, we informed the Federal Minister of Health and Governor Sanwo-Olu, who is the Chief Incident Commander in Lagos.”
The Health Commissioner said the patient was responding well under a supportive therapy, saying efforts were on to identify all persons that had physical contact with the patient to break the cycle of transmission.
He disclosed that the State remained prepared to contain potential spread of the virus, observing that Lagos had wrapped up the capacity of its containment facility to 80-bed as a result of the emergency funds released by the Governor.
Prof. Abayomi said more capabilities were being put in place by the State to deal with increase number of cases. He said aggressive public awareness campaign was going on to sensitize residents on hygiene and activities that can prevent the spread of virus
CBD face-lift: LASG gives Business Owners seven days to remove illegal structures
Lagos State Government, on Thursday, February 27, 2020, gave shop and Business Owners in Lagos Island one-week ultimatum to remove illegal structures and extensions on buildings within the Central Business District (CBD) in order for the State government to commence its regeneration of the area. The State Governor, Babajide Sanwo-Olu, who handed down the directive at an inter-ministerial stakeholders meeting held at the Onikan Youth Centre, said this is necessary as the government intends to commence massive renewal of the Lagos Island CBD, arguably Nigeria’s foremost commercial nerve center, before year-end. Sanwo-Olu, who was represented at the meeting by the Commissioner for Physical Planning and Urban Development, Dr. Idris Salako said it is unacceptable that despite its centrality and importance to the nation’s economy, Lagos Island remains categorized as a slum area, due largely to the inordinate planning and other challenges arising from the attitudinal disposition of the people. He said the stakeholders’ summit was organized to help find solutions to the rising cases of fire incidents, environmental degradation, street trading, traffic control and insecurity of the CBD. “The Lagos State government has an approved regeneration master plan for the entire Lagos Island CBD, and is determined to ensure strict compliance with the plan which is aimed at ensuring the development of a clean, safe and vibrant economy.” He said. While calling for continued partnership with the organized private sector in order to ensure the provision of facilities to sustain the huge economic size of the markets in the CBD, the Governor insisted that government cannot afford to have the CBD being described as the most unsafe and uncontrolled part of Lagos due to the activities of a few. He, therefore, charged all residents of the Island CBD and land-owning families, especially property developers, to continue to comply with all physical development laws in order to move away from the culture of illegalities and awkwardness. In her remarks, the Honorable Chairman, Lagos State House of Assembly Committee on CBD, Mrs. Mojisola Ali Macaulay submitted that the Lagos Island CBD requires serious attention and financial commitment from the public and private sector, saying that “We all must respect the State where we are domiciled, whether for business or otherwise and ensure strict compliance with its laws”. “Disasters which occur as a result of non-compliance with laid down regulations are becoming too rampant and there is need for all stakeholders to join hands together and make the CBD work”, she added Also speaking, the Special Adviser to the Governor on CBD, Mr. Olugbenga Oyerinde said the Governor is committed to making the CBD work.
“This government is committed to ensuring that the glory of the Lagos Island CBD is returned and people would see a new CBD in which they would be proud”, he stated. Oyerinde said the CBD office decided to organize the inter-ministerial stakeholders’ engagement in response to the spate of fire incidents in the area as well as the increase in environmental degradation, street trading, and security challenges. In his own contribution, Simon Gusah, the Team Lead, Future Cities Nigeria, a UK sponsored organization partnering with Lagos State Urban Renewal Agency (LASURA), said the agency is working on how Lagosians can deploy technology to reduce stress and live smarter. “We are asking the questions about whether we could develop the right app that could make people to buy goods from markets on the Island without having to physically come to the Island. If we can achieve this and reduce the five million population trying to trade in the market by half a million, we may start witnessing a massive reduction in the stress level of residents”, Gusah asserted.
