Nigeria loses revenue through illegal shipment of oil and gas

Jan 13, 2005 01:00 AM

by Godwin Oritse

Mr Gatilma Liman, a seasoned maritime consultant to both the Federal Government and the National Assembly has raised alarm over the unreceipted revenue being taken out of the country through oil and gas exploration in the Gulf of Guinea region.
He spoke to our maritime reporter, on other issues bordering on problems of developing indigenous capacity and making the Nigerian seaports more attractive to both ship and cargo owners.

Question: Exactly what is the problem with the Gulf of Guinea region and how does operations there affect the country?

Answer: The Gulf of Guinea region revolves around Nigeria, Angola, Sao Tome, Equatorial Guinea and Bakassi and this area is one of the oldest if not the oldest part of the granite region of the world. Consequently, the hydro-carbon oil and gas product that come out of this region are the best in the world and the advanced industrial nations of the world are looking for quality oil and gas and hydro-carbon. So, Nigeria's productsat the international scene is highly sought after. Therefore, Nigeria is in a very strong position to negotiate and get the best advantage from the oil and gas exploration.
But Nigeria is not getting that at the moment simply for two reasons. Firstly, instability in the Niger/Delta and if the nation can begin to speak with one voice, it can maximise her comparative advantage in the global scene because these oil and gas exploited in that region is most highly sought after for space exploration, for firing of V-8 engines, and other high-tech engines.

Whether or not we get our acts together, the world community is moving to deep shore oil drilling and that portends a real danger for an un-united political entity that can exercise its sovereign rights over the resources of the country because a substantial part of the drilling taking place at the Bakassi is being done without any proper record, which means that the monitoring mechanism that will be in place will be greatly impaired as it presently obtainswith the on-shore oil drilling which has a zero level monitoring mechanism because we are not an operating partner.
The NNPC is a sleeping partner and it beats me to know that in a country that 90 % of the wealth of the nation comes from that area of comparative advantage, we still do not have national exploration capability to be operating partners and that makes the country lose a substantial amount of revenue and sadly all development economists that are advising government are advising government to look the other way. It is only in Nigeria that the kind of sharing formula is acceptable. In countries like Iraq, Venezuela and Mexico, such 70 % to oil producing companies and 30 % to the state is unacceptable.

The present civilian administration of Obasanjo is forced to over-turn a very difficult system that was obtained in the military era. We all must support him and we also need to retrieve the national psyche away from other non-oil producing commodities at the moment because you have not exploited fully your comparative advantage area and now if you use that resource, your mental and your legislative capacity and every other thing you have to fully exploit the comparative advantage, then you can use the excess funds that will come from that optimisation and leverage other parts of the economy.
This is what is normally done, you can then go into agric, you can go into cassava production and then you can be in a position to have the foreign exchange to improve capacity utilisation, bring in employment and reduce social vices. Otherwise the amount of money the economy requires for infrastructural development will be Herculean, having about three decades of uncoordinated economic development plan and when you begin to think about the economy of Nigeria, you need to begin to have a GDP and an annual growth rate of something in the region of 12 % per annum translated into receipts of something in the region of $ 30 to $ 40 bn for an economy the size of 120 mm people and Nigeria is capable of doing that because we have this commodities running into billion and trillion of cubic litres of LNG which is the energy of the future and is a very strong negotiating chip for any investor to come in.

Question: Now what in your opinion do you think the government can do to checkmate the activities on the Gulf of Guinea and see how Nigeria can benefit from the operations there?

Answer: The world of the future is a world of knowledge and surprisingly even the advanced nations have not stopped you from benefiting, that is the irony of it. If you wake to your responsibility, so be it, otherwise, the world is not going to wait for you. The whole thing should be seen as more as a strategic commitment by the country talking with its own partners.
Mind you, Nigeria's Niger/Delta contains 60 % or more of the reserves in the Gulf of Guinea that the whole world is after. Nigeria should take advantage of its present situation.
Nigeria's economy is solid enough to write off the $ 36 bn debt. How can an oil and gas economy be tied down by an amount as small as $ 36 bn. We have the reserves, but the point is that the nation as a whole must speak with one voice, the whole thing is a political issue tied to economic freedom of the nation.

Question: So much has been said about the fact that government does not have the political will to bring about drastic changes in the maritime industry, we have talked about the cabotage law, the ISPS code and all that.
What do you think could be the problem with the industry vis-a-vis government interference?

Answer: The government has had the political will let's be frank with you, for government to stand up to shipping companies to pay the 3 % bench mark rate and according to what the media reported over $ 600 mm has so far been collected, not to talk about what the ports authority has also collected. It is all about commitment by managers of resources to channel that fund to effective development of the indigenous component. It is not just giving $ 5 mm loan to an individual which can hardly buy some spare parts of some tanker vessels.
Until Nigerians realise that value can be added to wealth of the nation through maritime transportation, whether it is through their involvement in the LNG project or tanker shipping, we will continue to be short-changed. The National Maritime Authority (NMA), the focal point providing the backing as no individual genuinely in a developing country can cough out $ 90 mm for a VLCC (very large crude oil carriers) that are used to ship these products to overseas markets.

For businesses like that, the NMA has to be sharpened. At the moment, an organisation that oversees the nation's maritime businesses is a parastatal reporting to a director of maritime services in the ministry of transport, so you can see that it will be difficult to do certain things even if it is in the interest of the country without the consent of the director. And this is not a big structural problems that Nigeria is not capable of handling, it is just for the policy makers to turn their minds away from all the noise making and rhetoric and imbibing issues that are significant to national discourse and focus attention on the economy because it is when the economy is solid that the bedrock of political discourse and the social well being of the society is guaranteed.
At the moment, the discussions are moving away from where the nation has comparative advantage -- oil and gas, maritime, ports and moving into areas where we can hardly get anything in the international market for now because it will be difficult for us to produce export products for international markets.

Question: You just said that the NMA needs to be sharpened up. In what areas do you think the authority need changes?

Answer: If NNPC's oil and gas is just a product and is a cargo that has to provide the basis for ship acquisition but NMA, I am sorry to say, is nothing compared with the wealth and powers that NNPC has. And now the NNPC is under the presidency and I do not see how a parastatal chief can direct the president who is the minister of petroleum at the moment to take certain decisions unless through moral suasion. So until this political backing is given to NMA, the president himself may continue to supervise the shipping sub-sector.
Whatever structure that is in place, Mr President would have to realise that he needs somebody who has the ability to direct any product producing parastatal or company to listen to the good voice of international trade via shipping where Nigeria has strategic advantage when you have large volume of cargo that is well sought after. Nigeria could begin with chartering in vessels they do not need to own for now. Once the cargo is there, the world is listening, it is keen to see when the Nigerian government will give the political support to the NMA to say look you must do business and we need to see concretely that our nationals are participating in it even for the long term strategic interest.

Source: Vanguard
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