Wanted: A moratorium on crude oil production 1

For several months running, they gathered in the Federal Capital Territory, Abuja to discuss issues related to the restructuring of the Nigerian federation. As this piece was being put together, the conferees were supposedly on the last lap of the process. And the signals that much would indeed be achieved from that convocation were not there. But did anyone expect more than that? At its inception, some of us rooted for the Confab. But it was neither for want of anything better to do nor because we did not know that there was a real likelihood that not much would be achieved at the end of the day. It was more because, having elected to function as a democracy, the only lawful option for the people of Nigeria is to talk through any and all problems. Any other path is haram. Which brings us to the subject of this piece. Calling for a moratorium on crude oil production in Nigeria today may be misunderstood by some as selfish (coming from a Niger-Deltan) and seen by some others as an extreme reaction. But this writer has some defence in the Itsekiri adage which says that ‘the sacrifice that calls for blood would not accept palm oil substitute.’ The truth about the Nigerian condition today is that we are indeed in very dire straits. Papering the cracks would just not do. At the core of the motivation for the harsh measure being advocated is the imperative of arresting the slide in the land and dealing with the crisis of productivity. This is because, far beyond the availability of natural resources and the sheer mass of population, productivity is truly the real winner for any national economy in the world today. And this involves at its base the provision of an enabling environment as well as the continued supply of incentives with which this would be achieved. When the Chinese faced the crisis of productivity several decades ago, they wisely resorted to a programme of liberalising parts of their economy from the stranglehood of obtuse central planning. It helped. The defunct Union of Soviet Socialist Republics did not get it. It crashed. There is a time to take a decision. There is day to fix a problem. Nigeria, this is your day. To be sure, Nigeria’s decades-old over-reliance on crude oil exploration and production for its revenue receipts was clearly going to be a problem. In addition to the fact of living in dread of price shocks that come from time to time on account of the global politics that has now come to be part of the economics of oil production and pricing, there have also been introduced additional difficulties on account of the distortions in our national governance order. Hemmed in on both sides, the managers of the nation constantly then have to juggle all of the balls at the same time. They have to watch out for anticipated crisis in the world that could have a negative impact on the price of crude oil, hence the continuing attraction to base the annual budgets on less than market prices which in turn fuels further failings. They also have to constantly balance political interests within the land that stem from the unavoidable demands for more and more resources from oil-producing communities and the countervailing interests of non-producing communities and states who worry that they would continue to get less and less resources from the composite ‘federal’ pie if more and more of these resources are shelled out to the producing communities and states. Within this dialectic of perennially increasing demands and counter-demands, we lose sight of the bigger issue. And this namely is to gauge whether indeed the nation is preparing for, and mobilizing the best of the productive potentials of all of her people in such a way that the cumulative result will be a net performing nation in economic terms. And when this path is not taken, we are correspondingly confronted with the current situation where we are constantly moving from one spiral of crisis to the other. Last week for example, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, explained that the current resort to the option of transporting crude oil to the refineries by vessels due to the activities of vandals and oil thieves who periodically rupture oil-bearing pipelines has increased the cost of refining the product by $7 per barrel. Before Diezani’s revelation, there had been other costs. There is for example the legendary one about the loss of inter-regional economic competitiveness that was the hallmark of Nigeria’s First Republic. During that period, the leaders of the regions strove among themselves to develop resources with which they would later deliver dividends of independence to the people. Sadly, the end of that era has left us with the very precarious mono-economy that we have today even as it has also encouraged the very tragic structural alienation of the citizenry from direct involvement in the workings of government; leading to the non-involvement of the mass of the people in the affairs of state and the improvement of their well-being. There are other costs. Oil spillage and the despoilation of the environment, criminality, banditry, piracy and illegal bunkering, the rise of an easy money culture, spiralling corruption and graft, lowering of the work ethic and indeed the incentive to work and an overall decline in productivity are some others. The truth is that when people see that they can get things the easy way, they would not be motivated to go about their lives following a ‘more difficult route.’ Having made our core point, it is important to address the other side of the tale. What does the nation do in the short-term to address the issue of immediate revenue declines that would accompany the coming into force of our proposed moratorium on crude oil production? And then for how long should the moratorium be in place? Two quick answers can be deployed here. One, while it is true that there would be a resource strain on the nation in the short term on account of the moratorium, the point is that the combination of deft and sincere economic management and putting in place a staggered programme of implementation would ameliorate the challenges. For example, we could in the first instance request the Organisation of Petroleum Exporting Countries, OPEC, to progressively reduce our assigned production quotas to 75 per cent of current figures in the first year, 50 per cent in the second year and 25 per cent in the third. For the next three years after then, we could cut back further to just only 10 per cent of current production quotas which should almost exclusively be used to power local demand and needs. Two, the continuing improvement in Internally Generated Revenue, IGR, in states like Cross River, Ogun and Lagos suggests that there is indeed a basic premise for the more efficient generation of revenue and opening up of the economy countrywide if the enabling environment to drive this is put in place. Our moratorium which would reduce revenues going to states would serve then as a litmus to tighten efficiency in governance and administration at the state level which is the critical plank upon which the new and more productive economy being envisaged would be hinged. The benefits from this scheme therefore would include improved fiscal discipline, the development and expansion of alternative economic paths, reduced oil spills and expectedly also, agitation from local communities and elite contestation for more and more resources. To be most effective however, this scheme would have to be supported by political reform to ensure that states control the bulk of the resources and economic activities from their areas. And this is where leadership from the Presidency would be most critical.