‘2023 Transition Will be Pivotal for a Better Nigeria’
Nigerian court that would be enforceable in a timely manner, why would he need to go to New York or The Hague to sue? It all boils down to the administration of justice framework in Nigeria. Now, don’t get me wrong, there’s also a small issue of litigation strategy around what we call the “deep pocket” theory. What this means is that you sue the parent company abroad, because they have a lot more money and resources that you can attach if you secure a judgement. That said, I believe the stress and anguish of grinding through the judicial process locally, puts many people off. People just say “to hell with it”, and they file suit abroad. In terms of depriving Nigerian Lawyers of work, that may not be entirely so, because even if you file these suits abroad, you’ll need local counsel on the team.
Can you speak to the volatility of oil prices and the rush by the first world to find alternatives to oil, and how Nigeria can optimise its oil resources whilst we stay relevant with renewable energy?
Let me begin with the resource optimisation question, as that’s a lot easier. We just need to ask ourselves, how others have successfully done the same thing. How have Norway, the UAE, Saudi Arabia, Qatar and others optimised their own oil and generated enormous development? Why reinvent the wheel, when there’s a template of success that you can copy? The problem with us as a people is that we make very simple things complicated, and make very complicated things appear simple. That’s the problem. Instead of fighting the oil majors and whining and complaining about how they are cheating us, we need to develop a proper compact that encourages them to invest in Nigeria. The more investment they make here, the more jobs are created and the multiplier effect on the economy is massive when you tie in the local content linkages. Unfortunately, our policy makers and lawmakers haven’t seen the logic of this approach. Instead they’ve adopted a nationalistic focus that hones in on increasing the immediate revenue to government, by enacting legislation to alter the sharing and distribution of oil revenues between the government and its partners. The result of this has been a near total freeze on investment by the oil majors in Nigeria. How do you do business in a country where you provide your own power, you provide your security, the infrastructure is deficient, and then the same government seeks to claw back your assumed and projected share of profit by what’s essentially retroactive legislation? Would you stay if it was you?
Now as far the question on renewable energy goes, my personal take is to totally discount the conversation as a waste of time as far Nigeria and the developing world is concerned. In fact, any conversation about renewable energy irritates me, because it smacks of gross hypocrisy. The industrialised world which polluted and destroyed the environment in order to power its development, now tells us to slow down or even stop exploration and production of oil and gas because it exacerbates global warming and climate change. How dare they? It’s total nonsense. The entire African continent contributes less than 3% of all greenhouse emissions, so, why should we be the ones to bear the brunt of fixing a mess we did not create? I recall being a speaker on a panel at an energy conference in Abu Dhabi before the Covid lockdown, and this same debate about renewable energy came up. I told them that we have no reliable grid electricity, so any talk of migration to electric vehicles is meaningless to us. I don’t think there are up to five Tesla or other electric cars in Nigeria. We are still at that stage where people still use firewood for cooking and for basic energy needs, and they want to talk to me about electric cars and wind farms and solar power. Total nonsense. No country in this world, has attained development from sole reliance on renewable energy. My apologies for being heated and emotional on this issue. It really irks me.
Let’s talk about gas flaring. Isn’t there a better way for us harness all our gas resources,
instead of just burning the gas and creating environmental problems?
The simple answer is yes, we can do a lot better with our gas assets. The truth is Nigeria is really a gas basin, with some little oil. Gas is where we have a dominant position, in terms of aggregate proven and probable reserves. There’s some valid operational reasons why gas is flared, but given our severe energy deficiency as a country, we really should be sequestering and capturing gas that would ordinarily be flared as a result of upstream production activity. The problem is that the regulatory framework and requisite infrastructure to support elimination of flaring is nascent, if not moribund. So, the operators just drill for their oil, and the associated gas that they encounter is either re-injected into the well or burnt as flare, and they happily pay the penalty which is imposed for flaring. It’s that same deficient framework that has made it more profitable for us as country to export our gas in liquified form to global markets, whilst our domestic need remains unmet.
Let me follow up on the points you’ve just raised about exporting gas versus utilising the gas locally to develop Nigeria. Why are we in such a situation?
In simple terms, there two markets available for our gas resources. The international market which we supply with Liquified Natural Gas (LNG), and the domestic market which we supply to support the power generation companies, as well as manufacturing and other commercial type entities. By far the largest consumers of domestic gas are the power generating companies, which really are privatised assets of government with major residual baggage from historical operations. Many of them really, are technically insolvent. So, they can’t even pay on time for the gas they are supplied with. If you are a producer of gas, wouldn’t you rather sell to the export market where you have a guaranteed 30 year contract with pricing in US Dollars? Would you be inclined to develop a gas processing plant only to sell the gas you produce to local Naira paying companies who wouldn’t even pay you? That’s the reality. We have policy instruments that impose a domestic supply obligation on the oil companies, but in reality, you cannot force them to undertake gas development projects given the facts on ground.
In my time at NAPIMS we sanctioned the Assa North Ohaji Gas Project and took the Final Investment Decision (FID) at a cost of $1.6 billion, if I recall correctly. That’s serious money, and that’s what it costs to build gas processing plants. So, again, I ask you why would you deploy that quantum of cash to support Nigerian customers who won’t pay? Same way they refuse to pay their Lawyers, is the same way they refuse to pay gas bills. In fairness to the power companies, they themselves are owed by the consumers of power, so it’s a vicious cycle of bad debtors!
What impact will the Dangote Refinery have on the economy, and do you have any thoughts on deregulation of the price of petrol?
The Dangote Refinery is an absolute game changer. It’s a massive project that, upon completion, will impact our economy almost immediately in profound ways. We are talking about a refining capacity of 650,000 barrels a day. That quantity of refined products will more than meet our consumption, and there’ll be abundant supplies left for export. We are talking self sufficiency and energy security on one hand, and conservation of foreign exchange which we currently use for importation of fuel products.
As far as the deregulation question goes, both sides of the debate have meritorious arguments, but we must be honest about our economic situation. We are not a rich country. We also haven’t evolved to the point where we have robust enough processes to manage a subsidy regime, without brazen corruption and outright thievery. So, rather than waste our lean resources on subsidising a false price for petrol, let’s for example use the N4 trillion in this year’s subsidy budget to support the development of transport infrastructure, to enable mass movement of citizens. In any event, as long as our neighbouring countries have a deregulated petrol pricing regime, our own regulated pricing creates a loophole for arbitrage through cross-border smuggling. It’s tough but it’s one of those bitter-pill type scenarios. We have to do what we need to do. We need to completely deregulate the pricing of petroleum products.
Let’s move on to the Petroleum Industry Act of 2021 and it’s impact, if any, and if you could please tell us about how the host community provisions would bring about peace in the Niger Delta.
The new Act is a welcome development, to the extent that it has consolidated the various pieces of existing legislation into a single updated document. That’s commendable. That said, my opinion is that the Act is a little too late in coming. The conversation about a robust legislation, started over 20 years ago. We wasted too much time going back and forth, and I fear the global oil industry has moved on and left us behind. When we started talking about the then PIB, Guyana as a country wasn’t producing a single drop of oil. They started production late in 2019, and in March ExxonMobil announced that they would be producing 1.2 million barrels a day in
Guyana by 2027. That’s more than half of what Nigeria produces at peak capacity. So, whilst we were blowing grammar and arguing back and forth in the National Assembly for 20 years over PIB, the rest of the world was moving on and eating our lunch in the process. Our new Act is, as they say, in Texas, a day late and a dollar short.
Now, the host community conversation is a whole different bowl of wax. It is now so complicated that, I’m not quite sure if the host community trust fund alone will resolve the issue. We must accept that whilst there’s some genuine and sincere agitation, there’s also significant criminality masquerading as resource control agitation. I am an Urhobo man, from deep in the Niger Delta. Forget my fancy credentials and speaking of English, I have some intimacy with the issues that generated initial agitation in the swamps and creeks. Those issues will need to be addressed in a comprehensive manner, that goes beyond just throwing money into bureaucratic entities like the NDDC or the Ministry of Niger Delta Affairs. That approach even creates more problems, as we have all seen with the recent probes and drama involving those agencies. An absolute shame.
Now that you have attained the grand old age of 55 as you like to put it, what are your thoughts on life and the future of Nigeria, and do you have any plan to return home to serve again?
I am truly grateful to the God, for the life of adventure that he’s led me through so far. I have at different times been an academic, a Wall Street deal Lawyer, in-house counsel at a global corporation, a senior executive in a publicly traded company in Silicon Valley; I headed the National Human Rights Commission, I’ve been a Limited Partner in a private equity firm in the US; I headed two major NNPC entities, and became Chief Operating Officer of two different directorates in NNPC. It really has been an amazing run. In the past 25 years, I’ve lived in 26 homes in 10 cities in three continents. I’m done. It’s time to retire, and settle down.
As far as Nigeria goes, I think the 2023 transition will be pivotal one, and the future for Nigeria is bright if we tackle the problem of the big elephant in the middle of the room which no one is talking about, namely, the large number of out of school children, and the demographic explosion that confronts us. If the economy is well managed and we see meaningful GDP growth, then we will be fine. The alternative is too harrowing to consider.
As for my personal plans going forward, I have zero desire to return to Nigeria to seek private or public sector employment. I’m already back to doing what I enjoy most, which is teaching. Last semester I taught a class on energy policy and climate change as a visiting Professor at Georgia Tech. Next year, I’m planning to teach a seminar group at Harvard Law School on Climate Change. These endeavours, keep me intellectually stimulated. I still have an active role in private equity, and that’s where I make the money to feed my family and do philanthropy. So I’m good.
“As far as Nigeria goes, I think the 2023 transition will be pivotal one, and the future for Nigeria is bright if we tackle the problem of the big elephant in the middle of the room which no one is talking about, namely, the large number of out of school children, and the demographic explosion that confronts us”