by Mohammed Dahiru Aminu
The success in managing the oil wealth of Nigeria will enable the country achieve some set objectives including but not limited to assuming a prudent savings stratagem for the advantage of future generations
The discovery of oil in Nigeria dates back to the event in the small village of Oloibiri in southern Nigeria in 1956. Most, if not all of the discovered oil fields were pioneered by the joint efforts of Shell-BP. During the end of the Nigerian civil war in 1970, there was a massive rise in global oil price, and for this, Nigeria was able to garner immediate riches from the oil it has produced. Soon, Nigeria would join the Organisation of Petroleum Exporting Countries (OPEC), and equally, the country founded its state-owned company with a mandate of overseeing the major activities in the upstream and downstream sectors of the Nigerian economy. The company came to be known as Nigerian National Petroleum Corporation (NNPC).
Since then crude oil production and export has played a central role in the economy of Nigeria and it has accounted for about 90 percent of the country’s gross earnings. This central role to which the petroleum industry has attained has driven other sectors of the economy, including agriculture; a sector that has for very long served as the time-honoured mainstay of the economy of Nigeria prior to the discovery of oil.
But then again, the story of oil in Nigeria has remained a two-pronged affair. On the one hand, oil discovery has yielded proceeds for the economy, but on the other hand Nigeria could not break away from the often familiar ‘Dutch Disease’. Like the Netherlands, Norway, and Britain before her, oil discovery in Nigeria have directly or indirectly hyped certain social glitches e.g. consistent industrial stagnation, and a rising unemployment figures, amongst other limited but tangible societal problems.
In an effort to curb these societal difficulties, at some point in time, governments in Nigeria have come up with pecuniary plans by establishing government interventions in the form of petroleum development funds of one kind or another. But to what extent have these funds achieved their mandates?
At different times in Nigeria’s post-independence years, a few petroleum development funds were established by the government, each with its own mandate. In the past, there was the Petroleum (Special) Trust Fund, i.e. PTF. Other development funds include the Petroleum Technology Development Fund (PTDF), and the Niger Delta Development Corporation (NDDC). However, in 2010, it is said that Nigeria announced its plan to set up another fund; Sovereign Wealth Fund.
- Petroleum (Special) Trust Fund: Known as PTF, this fund was officially inaugurated in March 1995 by the administration of the late Head of State, General Sani Abacha. It’s embracing mandate included the restoration of roads and waterways; revamping of health and educational institutions; the provision of books, stationeries, and other teaching aids, equipment and facilities in elementary, secondary, and tertiary institutions; obtaining vital drugs and vaccines for communities; provision of portable water for domestic use through the enhancement of water supply systems; reawakening the crumbling agricultural sectors of the country; linking remote areas of the country to the national electricity grid; spreading out railways and telecommunications, and guaranteeing an unfailing supply of food. Because these tasks that the PTF is bestowed with are usually tasks that could have normally be met by the federal government through its core ministries, departments, and agencies, the PTF—seen as duplicating the obligations of established peripheral organisations of the central government—carried out its mandate with all seriousness that it became widely dubbed by society as “the alternative government.” In 1999, at the beginning of Nigeria’s new democratic rule, the PTF was scrapped by the government of the day.
- Petroleum Technology Development Fund: Also known as the PTDF, it was established in Nigeria as an agency of the Ministry of Petroleum Resources in 1973. Although existing, the PTDF did not begin its full operations by following up on its mandate until 2000, when, after scrapping the PTF, the newly elected democratic government of President Olusegun Obasanjo resolved that the organisation be made a functional one. Very broadly, this organisation is tasked with the development, advancement, and implementation of petroleum technology, and the development of manpower through training and research. The fund sponsors Nigerians from all walks of life to institutions of learning both in-country and overseas as graduates, professionals, craftsmen, and technicians in various fields of engineering and technology, geology and earth sciences, economics and management, and all other pertinent disciplines in the petroleum and minerals industry. It is also, particularly committed to the targets of developing Nigeria’s energy sector by controlling and balancing the operational dominance of the oil and gas industry by non-local, or perhaps foreign personnel and expertise. It inducts, outlines, and implements an effectual, home-grown research and development competence for the oil industry in Nigeria as well as the solid minerals industry. By coordinating with research centres and universities in Nigeria and abroad, the adaptation of technological advancements for the Nigerian oil industry is greatly enhanced. Not enough, the PTDF uses current human resources development services to attain an enlarged manpower development programme in the oil and gas industry. Lastly, it provides scholarships, grants and bursaries to Nigerians, in whole or in part, in colleges, polytechnics, and universities that harbour oil and gas related disciplines, in Nigeria and/or overseas.
- Niger Delta Development Commission: The NDDC, established in 2000 was charged with the mission of enabling the accelerated, regular and sustainable development of a geographic unit of Nigeria popularly known as the Niger Delta region. It seeks to make the Niger Delta as self-sustaining and prosperous as possible, while enhancing the stability of the region socially, economically, and politically. As well, the NDDC has a wide-ranging mandate that includes the formulation of policies and guidelines for the progress and advancement of the Niger Delta region; understanding, planning and executing—under ethical rules and regulations—programmes and projects that border on sustainability, including roads, waterways, and jetties, health, employment, industrialization and mechanization, fisheries and agriculture, water supply, housing and urban development, electricity and telecommunications, etc. It surveys the Niger Delta so as to determine measures that are essential to the promotion of physical and socioeconomic growth. It prepares schemes and master plans modelled to advance the physical improvement of the Niger Delta area by the government both at central, state, and local levels. It identifies factors that hamper the development of the Niger Delta area, and supports member states of the Delta in the implementation and formulation of policies that ensures the attainment of resourceful and competent management of petroleum wealth. It assesses and reports on projects funded or executed in the region by oil companies or any other companies comprising non-governmental organisations, in addition to making sure that funds allocated for such projects are essentially utilized. It engages in tackling environmental and ecological issues that stem from the exploration of oil and minerals in the Niger Delta area, and advises the central government and the member states on palliative and control measures for oil spillages, flaring of natural gas, and environmental pollution. It liaises with a variety of oil, gas, and mineral prospecting and producing companies on every single matter of prevention and control of pollution. Lastly, it fulfils such other works and accomplishes such other utilities, which in the choice and preference of the commission, is vital for the sustainable and workable development of the Niger Delta geographic space and its people.
- The proposed Sovereign Wealth Fund: This proposed fund is to be operated by the central government of Nigeria with a view to dealing with the problems springing up from the way Nigeria’s Excess Crude Account (ECA) is managed. The ECA is a 2004 government-established account with the interest of safeguarding calculated budgets against deficits due to unpredictable prices of crude oil. Part of the problems associated with the management of the ECA is that since inception, the everyday administration of the account is not by any way delimited on account of any legal checks and/or balances. Against this backdrop, the SWF is going to serve as a protective approach to restraint the seemingly ostensive underperformances of the ECA. To this effect, the president of Nigeria ordered the initiation of the fund by signing into law the Nigerian Sovereign Wealth Investment Act of 2011. As with SWFs elsewhere, the effective implementation of this fund will go a long way to ensure that Nigeria’s budgetary surplus is put back into the economy through investments. More so, the SWF will open avenues for economic competitiveness through Foreign Direct Investments (FDI). The towering momentousness which the establishment of the fund will portend is sure to become a good index for gauging government’s dedication to universal standards of governance, among them transparency, probity, and accountability, etc., as to how natural resources are managed. It will ensure that there is prudence in resource control and management through moderating the culture of limitless disbursement of unanticipated incomes. Investments are certain to be ground on thorough, clear, and sustainable economic and financial bounds. It will make available a stock of savings for generations unborn. It will assist in softening budget vagaries in income over a time limit through ensuring prompt handiness, and through the obtainability of what could be referred to as a Counter-Cyclical Economic Stabilization Fund. Finally, the SWF will offer interventions through an Infrastructure Fund to address critical areas of the economy. Of course this is necessary since the infrastructure insufficiency in Nigeria is a foremost challenge that requires enormous investment in resources. This, if achieved, will span diverse sectors of the Nigerian economy in consistence with the often multifaceted nature of thinkable and realisable interventions.
The ultimate goal of every benign government, especially of countries so categorised as ‘developing’, and so intended for a keen march into 21st century modernity is to adopt global best practices as regards governance. And as regards countries with huge oil reserves, the efficient management of petroleum wealth is of utmost significance for both present and future generations. Oil rich countries must understand that oil is a non-renewable resource that will in the long run, run out. Therefore the fact of oil’s non-renewability should signal to governments on how much oil to extract, and on how swiftly or slowly this is done. It is also important for governments to decide on how much of its income from oil is enjoyed by its population in the short term, and how much could be invested for the future. These strategic controls on oil wealth management could serve as a determining factor on how long a country’s proceeds from oil is enjoyed, without being inclined to forget future generations.
In an article titled ‘Avoiding the Curse of the Oil-Rich Nations’, Tina Rosenberg wrote in the New York Times that “Every nation wants to strike oil, and after it happens, nearly every nation is worse off for it.”Rosenberg continued that “It may seem paradoxical, but finding a hole in the ground that spouts money can be one of the worst things that can happen to a country.” Likewise, in an attempt to understand the proverbial ‘resource curse’, Stanford University professor, Terry Lynn Karl, annotated that oil dependent countries “eventually become among the most economically troubled, the most authoritarian, and the most conflict-ridden in the world.” It is perhaps for reasons of trying to sidestep this ‘curse’ that countries blessed with oil, gas, and in some cases both – that comprise Norway, the UAE, Saudi Arabia, Kuwait, Russia, Qatar, Algeria, Libya, Kazakhstan, USA (Alabama, Alaska, Texas), Azerbaijan, Brunei, Canada (Alberta), East Timor, Oman, Mexico, Angola, Trinidad & Tobago, Venezuela, Gabon, Mauritania, Equatorial Guinea, Ghana, and Papua New Guinea – have set up government interventionists agencies or development funds to cater for its populations.
Notwithstanding, as is shown above, Nigeria is not left out in the list of countries with these development funds. As Africa’s economy booms, and as Nigeria remains Africa’s largest oil producer with a production value of more than two and half million barrels per day, the country owes its people a duty to manage its oil wealth effectively, for the benefit of all Nigerians. The success in managing the oil wealth of Nigeria will enable the country achieve some set objectives including but not limited to assuming a prudent savings stratagem for the advantage of future generations, while down-casting the habitual splurging of proceeds realised from the country’s oil exports; stabilizing oil prices in order to avoid plummeting of such prices below the estimated sum in any financial year; and functioning as the superstructure that would aid the development of the country’s infrastructure. But by and large, whereas these initiatives are viable and worthy, its actualisation is a challenge that Nigeria must take seriously.
Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija.