Beyond oil and gas, What is next?

Oil and gas industry

Beyond oil and gas, What is next?

by George Etomi

Nigeria has been plagued with crude oil malady since its discovery, and it has, in some sense, shut our reasoning to the possibilities that exist for other incomes to come. So, oil and gas have resulted in what I will term ‘social economic imbalance’.

In one hand, it has given us foreign earnings, but it has also created, in the other hand, a rental economy, which is the reason for so much fight  over resource control.

Oil  has given us, especially in the past, the opportunities to create jobs. But it has come, in the case of the host communities, with severe health and environmental pollution and other cost.

I am highlighting how a single export commodity has given us such a major source of foreign earnings and has made us so over-dependent to the point that  we cannot think again.

But thanks to the twin scourges of the Covid-19 and the collapse in crude oil price. I think we are all back to base, and this time,  we have to be committed to doing what is needed to be done, to get ourselves out of this quagmire.

In an attempt to proffer some solution, we need to burst some myth. Looking at the  contributions of the oil sector to Nigeria’s Gross Domestic Product (GDP), between the first quarter (Q1) of 2018 to  Q1 of 2020, the oil sector contributed just about 9% of our total GDP.

So, the non-oil sector actually contributed a lot more to our GDP, and yet we are all in  the bind of  oil curse,   killing ourselves, and sharing poverty in the process.

Our trading partners, including the United States, that used to be the largest exporter of our crude oil, have stopped buying from us. In terms of trade with US, our total export to the United States in 2019, was $2.82Bn, across all commodities, while  out of that, non-crude oil exports made up $2.73Bn, that is, almost 77%.

So where is the oil myth coming from?

The same goes for the United Kingdom, where our total export was 1.16bn, out of which 98.3%, that’s about 1.14bn,  came from non-crude oil exports. So, we begin to wonder why we are so entwined  in this crude oil debacle?

Our problem lies in the growth rate of our GDP compared to our population. Though there have been some modest growths as recorded recently compared to our population which is growing at an average of 2.7%.

The average growth rate has hobbled around 2.2% – 2.4%. In other words, as our population grows faster than the rate of our GDP growth, we are actually expanding the magnitude of the poor people, which looks almost like a deliberate state policy.

Every day, we ask ourselves ‘how do we get out of this’? And the general agreement is that we should begin to look at how we can attract foreign direct investment. But then, what are the factors that will enable us attract these investments?

 After a study of potential investors across multi-national corporations, the number one factor they consider  important to them in taking an investment decision is political stability and security.

The second consideration is the legal and regulatory environment, while the third is a large domestic market, while consideration is also given to the micro-economic stability and exchange rate.The list continues in that order.

So, for anybody to  come and  invest in our environment, or any environment for that matter, the aforementioned factors are a requirement.

If we are determined  to get out of this stunted economic growth, we must begin to encourage the sub nationals, that is, the states to create the enabling environment for the  growth of our economy with such a large scope and promise.

These factors are important in taking investment decisions, but it is also true for the component states. So, states which think that they can survive with funds they usually get from the federal without taking the right decisions, will be mistaken. Because, whether or not we like it, some of these solutions will be imposed on us. Those states that do not, today, work assiduously towards creating enabling environment for investment, will be left behind.

 Legal  and  regulatory environment.

In  my  long career in the corporate environment – I have been a commercial law practitioner, and I have been involved in major transactions involving critical sectors of the economy- I can tell you that from when I started, about 44 years ago, I have seen it all.

I have seen the trajectory from when the banking sector… Who still remembers the tally numbers days? You try to go and get your own money from the bank, you have to leave home very early, get to the bank, they give you a tally number, then you go and do other things.

Then you return home to wash clothes, hoping to be called to come and pick your cash. I recall that, it used to be a mystery,for  those who were finally not called. You are going there to withdraw your own money; it is not as if you want to get a loan. But, look at what banking has become today.

What made the difference?

 Some  leaders with enormous wisdom decided that it didn’t make sense for government to occupy that space, so they freed it up and brought out the genius in Nigeria.  Today, the banking sector, contributes so much to the economic growth of Nigeria.

Look at what our young bankers are doing all over the place. Most African economies today depend on the skills of Nigerian bankers. Is it not amazing that, today, you can from the comfort of your home do as many transactions as you want in banking, both locally and internationally?

Look at the high-quality jobs that are coming out of those operations, consider the complementary businesses that have emerged out of this and take a look at how it has unleashed the genius in Nigerians.

From banking, I go to telecommunication sector. Again, remember that when you owned a phone in those days, it was simply an intention to get a line. There was a big difference between owning the handset and getting a line.

The whole of Nigeria had 700,000 installed lines, out of which only 4000 was active. And don’t forget that, out of that 400,000 about 200,000 lines will be for ‘big men’ who have about ten lines.

Again, forward -looking individuals said  let us open up this space, get the private sector involved, and the legal and regulatory framework was then created. And what we see today, close to 160,000,000 telephone penetrations have been made, in comparison with the 400,000 that we used to have.

Just think about the fantastic ideas that went into this transition. Is it not remarkable ?

When we have seen successful examples of what opening up the business space can do, why do we still argue about freeing up that one sector that has held all of us down? That’s the oil and gas sector.

 The PIB has been lying waste for 20 years. 20 years to do something that we know is good for us. But why is that difficult? It is clear that the power that comes from controlling that resource is what is driving the malady in this country. It is what is even driving and fuelling political instability. Take this malady away and you will see the huge difference.

Whether it is population, distribution, so many things, we have lied about who we truly is simply to get an edge over the next person. Because our economy has been built on sharing as opposed to building.

The day we make the formula for sharing contribution to the centre, we will know how many we truly are in this country. But that’s not going to happen because those in charge of the country still want us to continue to maintain the status quo. And that is how we get to the point of what we are looking at, today.

You would have ordinarily thought the military drove it because we are so quick to blame the military for everything. But the truth is that many of the major decisions that were taken to free up this economy, actually happened in the time of the military. And that was because the decision-making process was quick and sharp.

If you met a military man who believed what you were saying and you told him this is what it takes to get it done, he will get it done. But what is happening today with our political office holders? You would have thought that democracy would have even accelerated the pace of development.

The nostalgia that Governor Makinde of Oyo state was talking about just comes from the simple fact that this democracy is actually threatened by those who benefit from it – the politicians.

Why have we caught ourselves in this quagmire where we do not even make laws that seek for the good and peaceful co-existence of Nigerians? Everything you hear is on ‘sharing’. Everything you hear today is  wrapped around geopolitical zone, Christians, Muslims , warts and all.

When they go behind the scene to share, these things are not mentioned. But for the rest of the populace that keeps us busy, worrying and thinking that that is what matters.

 I want to make it known to you today that democracy itself is not an end, it must be seen as a means to an end. So, we must change the phase and the type of politics we play.

So, there is no easy way out for anyone of you – join the train. Everything I have spoken to you points towards the ease of doing business. Find the ease within the business you do because it gives you a target to look at.

Today in Nigeria, we are not doing too well. In 2012, out of 190 countries surveyed, we were number 133. It started growing worse: 138, 147, 170 in 2015,2016. And in 2017, it was 169. Through the effort of what’s going on today in ease of doing business thanks to the efforts of  the vice president, Professor Yemi Osinbajo, we have started coming back, and today, we are at 131.

131/190 is a huge failure, but we still thank God because it could have been worse than this. That gives us a target that we should be looking at. But, what does it take to achieve ease in business?

 One major thing that will speak at this point, especially to my own constituency, the legal profession. Any businessman or investor  will ask you two questions whenever s/he comes to invest in Nigeria.

How do I get in and how do I get out? So, this brings to  the fore the relationship between the country’s laws and the legal regulatory environment. If you mess with these two factors , nobody will be willing to come.

 And that is why we must go back to ensure that the rule of law takes a central space in our democracy. You can’t take away rule of law when you talk about democracy. It is important so that legislators can understand that when you set laws, it is not to hit at somebody, it should be for the good of everyone.

How do you diversify the economy if you do not open the space? I want to let you know that my office was directly involved in setting up what is today the Telecommunication Act. But we had one major challenge while drafting it, and that was determining who will start allocating frequencies, licenses, because it was the minister, under the old NITEL.

 And if you recall, in those days, the Minister of Communication was just as powerful as the Minister of Oil. But we presented a legislative reform that removed the power from the minister to the regulator. It is therefore not an accident today that the Nigerian Communication Commission(NCC) regulates the sector and investments are coming in, in droves. There’s a direct leverage.

That’s the same thing that should happen with the Petroleum Industry Bill (PIB). There’s no magic to it, open the space up and see how the investments will come in.

Billions will come, billions will go out. That is how investment works. There no sentiments. Investment funds look to go to where they will be welcome. So, there’s no need begging people to come and invest in your country. Do what you need to do and people will beg to come and invest in your territory.

What was it predicated upon? The judiciary is fighting to free itself. Isn’t it an irony that the judiciary is fighting to free itself from the shackles of the executive  in a democracy?

Let me give you the priority order when your judges sit. One is political case, two is criminal case, three civil case. I am sure you all listened to the recent media chat by President Muhammadu Buhari. He said that, when it takes you about 5 – 15 years to decide a case, who will come? So, that is an indictment because that is my constituency, I am not running away from it.

We too must begin to do what we need to because what ever it   is will  impact even on the quality of our judges. When last did you read about a very well-reasoned judgement? Everything is done on interlocutory motion; everything is done on one technicality or the other.

You were all there when they asked the Chief Justice of the Federation at the Senate hearings “Would you be depending on technicalities or whatever?” That question was asked out of anguish because it is sad because you never get to the myth of a matter in court, in any reasonable term.

The first two, three years can go on with ‘service’. Did you serve me? That’s, in an era where and  when everything we do is on the internet and can go online. Why? My Lord has not been served. They come out in their wigs looking great and you think they are doing justice to the economy.

We must change it. We must go to the virtual arena. Covid-19 has told us and has taught us that, many of the things that we thought could not be done, can be done.

We can retune, we can re-equip to prepare the judiciary to play the role that will support any investment effort that will be made. Because, if an investor does not think he can get justice from the authorities, he is not going to come.

So, we begin to look at other ways of diversifying the economy. By the way, a few days ago, I read that Saudi Arabia has renounced that it is an oil producing country, anymore.

Does that send any message to every one of us? Now, they are going into alternative sources of fuel because they know that’s where the world is going to. Today, if you are in the fossil fuel business, you  are going to sweat for funding. If you want to go into renewable, you may have a story.

So, if Saudi is doing that, who are we to give ourselves so much grief over a commodity which, if  properly utilized, can be the catalyst of growth for other sources.

Look at our gas, if we don’t liquify to export it, we flare it to the detriment of the people around. This gas flare regulation should be passed. We don’t even have gas for power.

 We know the importance of electricity in the diversification of our economy. Every day, you are entertained with load shedding. Of course, our people know this because the sector has been opened up.

Before, it was like a cult. Why is it that we do not have enough gas to fire most of our generating plants? 70% of our electricity comes from thermal plants, and the feedstock for thermal plant is gas.

Doesn’t it bother you that a country that has so much oil in  unquantifiable number, does not have enough gas to power its plants? That should keep us thinking. So, happily, I will tell you that ‘Nigeria Beyond Oil and Gas’ has power as the central theme.

And I know this because I have been  involved,  under the auspices of the Central Bank, Minister of Power, Minister of Finance, in re-jigging the entire power sector. And we are trying to create that alignment that starts from gas to generation, to transmission, to distribution.

 Once we get it right, and we will very soon, the story will change. Because if telecoms and banking can make the kind of difference they have made, just think about what power will do?

Ideally, the revolution in the power sector should have come before banking and telecoms. Because anybody can tell you that most of these banks and telecoms operators you are seeing, spend over 40% of their income on self-generation.

In conclusion, Nigeria’s future beyond oil is attainable. I know that there have been so many depressing talks around the politics, but please, nothing comes without a price. Every country in this world went through the stages that we are going through, so we should stop feeling sorry for ourselves.

If you are an historian, look at the ancient history of Europe, the UK, they slaughtered themselves, they did the sort of things we are seeing today. But that wasn’t a reason for them to lose hope. The prayer is that God should raise a few good men that will bring about the change that we so much desire.

When we go through challenges, we seek divine intervention over the matter. So, sometimes we pretend that it is when this country breaks up that things will normalise. That’s a big lie. Because by the time we break up into different component parts. We will realise that trouble always exists. Sometimes within our families, brothers and sisters from the same mothers or fathers have issues.

It is interesting that the population and land mass of the country, gives us opportunity to do what we are doing easily. Some of us are too comfortable being at home, we need to travel out to other parts of the country and see wonderful things.

 We all need to encourage ourselves. We have abandoned education, especially quality education that is not just for book but to add value to the society. Civic should tell, History should tell. We must begin to understand and accommodate one another. We cannot live in isolation. I will still talk about security. Like I earlier said, what we generally need to do, as they say is: keep working, keep hoping, keep striving and God will keep upholding this great nation, Nigeria.

Mr. George Etomi, is a legal practitioner with interest and practice in energy sector for  over four decades . He has worked in major sectors of  the Nigerian economy including Aviation, Housing and Real Estate, Banking and finance , Legislative and policy drafting, telecommunication, arbitration, energy and natural resources laws to mention but a few.  He was part of the team that drafted policies that birthed the transition of the  country’s telecommunication  from public to private establishment. Over the years, he has worked with several local and international oil companies and concession of successor companies in the country’s electricity privatisation process.

He serves as Director and Chairman of many corporate boards including the Nigerian Bar Association (NBA) and Eko Electricity . He made this presentation at the FORUM 2021.