Speaking at a one-day sensitization workshop on addressing oil and gas revenue loss in the Nigerian extractive sector, the Executive Director of Civil Society Legislative Advocacy Centre (CISLAC), Auwal Ibrahim Musa, revealed that the Organization of Petroleum Exporting Countries (OPEC), made it known that Nigeria has almost 40 billion barrels of proven oil reserve and total gas reserves of 203.16 trillion cubic feet (TCF) as put by the Department of Petroleum Resources (DPR) in 2020.
Musa stated further that after nearly 50 years of exploration, the oil and gas sector continues to play a significant role in the economy and accounts for 65% of total revenue to the government and more than 80 percent of Nigeria’s foreign exchange earnings. With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria is Africa’s largest producer of oil, and the 13th largest oil producing country in the world.
Nigeria has however faced significant challenges in managing the sector and maximizing its revenue potential for various reasons, including the impact of the COVID-19 pandemic and the attendant fall in crude oil prices and drop in demand for petroleum products, inadequacy in hydrocarbon measurement infrastructure, oil theft, spillage, corruption, gas flaring and gross mismanagement and maladministration of extractive resources. A key finding in the 2009 audit of the Nigerian oil and gas industry by the Nigeria Extractive Industries Transparency Initiative (NEITI) was ‘inadequacy of metering infrastructure’ in the sector. In 2012, the Petroleum Revenue Special Task Force (PRSTF) reported the same problem. More recently, the 2017 National Petroleum Policy stated that “the state of metering and measurement of hydrocarbons was not satisfactory.”
The CISLAC Executive Director, posited that the hydrocarbon metering system is expected to provide the necessary data upon which Royalty and Petroleum Profit Tax (PPT) are calculated. A consequence of the inadequacy of metering infrastructure, therefore, is that Nigeria may be losing revenue that otherwise could be used to fuel economic growth. The OPEC disclosed at the 2021 Nigeria International Petroleum Summit in June 2021 that there was a $1 trillion loss in revenue in two years by Nigeria and oil-producing members due to the plunge in oil prices between 2015 and 2016[1]. The Nigeria Extractive Industries Transparency Initiative (NEITI) in its latest report with information from 98 organizations including 88 oil and gas companies, 9 government agencies and the Nigerian Liquefied Natural Gas (NLNG) Company, revealed that Nigeria lost 42.25 million barrels of crude oil valued at $2.77 billion to oil theft in 2019. NEITI data also showed that between 2012 and 2015, Nigeria lost about US$9.8 billion and US$1.09 billion due to crude oil and petroleum products pipeline theft/sabotage respectively.
Musa was of the view that both the Federal Government and some economy analysts have attributed the country’s recent slide into recession to adverse developments around the oil sector. Broadly speaking, two things primarily affect petroleum product earnings- the volume you can sell and the price you can sell it at. Hence, the Nigerian government while exploring the diversification of its economy towards non-oil product earnings, needs to aggressively address volume-related gaps in extractive sector operations towards improving oil and gas revenue mobilization for sustainable development financing.
The above key extractive sector issues have remained elusive with divergent opinions as to its workability and cost and considering its strategic place in oil and gas sector governance and the country’s economy. To advocate for improvement in the state of metering infrastructure and practices, the first step is to understand the current state of the infrastructure in place and the avenues of extractive revenue loss; and devise collaborative strategies to drive the needed advocacy to turn the sectorial tide to the benefit of Nigerians.
Comment here