BY SONNY ATUMAH
At the dawn of the third millennium in the year 2000, the United Nations gave a boost to the least developed countries including Nigeria and others a window to improve their developmental strides in what was known as the Millennium Development Goals (MDGs).
Fifteen years on, the global body, appraised that programme and remodeled it in a set of Sustainable Development Goals (SDGs) by the year 2030.
This agenda is to perk up the welfare of people through diversification of our economic base. Using petroleum as a launch pad, Nigeria should translate this to increased fiscal revenue, increased employment, improved skills acquisition, and therefore a reduced national destabilisation owing tensions.
Integrity and absence of profligacy: One posits that the SDGs set by the United Nations are not unassailable. Our petroleum resources could be that springboard for sustainable development if we do the right thing.Doing the right thing bothers on integrity. Warren Buffett says that if you are looking for people to hire, you look for three qualities: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you. If you hire somebody without integrity, you really want them to be dumb and lazy. Buffet, best known as the ‘Oracle of Omaha’, is an 84- year old American investment guru, one of the richest and most respected businessmen in the world.
Nigeria must not get it wrong this time especially now that the new administration of President Muhammadu Buhariis trying to do away with some petroleum resources managers who are avaricious in nature.We must solve this lingering problem in our own way. We should not be cajoled into giving away our four refineries in the name of privatisation; as touted recently by the immediate past Petroleum Minister, Diezani Alison-Madueke, but for the resistance of Labour Unions in the industry.
The new government of Muhammadu Buhari must not make the mistake of previous administrations that were either deceived or deliberately ignored our calls for diversification via refining and petro-chemicals in Nigeria. We are not lost in memory over how the only fully fledged petrochemical complex in Nigeria which came on stream in 1990, became moribund in the early 2000s due to lack of maintenance.
The preferred investor acquired the wholly owned Port Harcourt subsidiary of the NNPC in August 2006, did the normal turn around maintenance (TAM), and rehabilitated the complex. In three months, the petrochemical complexresurrected and the then President Olusegun Obasanjo was invited to commission it on October 12, 2006. Since then that facility which was prematurely led to its death-bed,had the investors done turn around maintenance twice, which our people did not do.
It is on record from OPEC sources that Nigeria earned $77 billion in 2014, $89.3 billion in 2013, $94.6 billion in 2012, $87.1 billion in 2011, $66.9 billion in 2010, $42.2 billion in 2009( low figure in 2009 because of militancy in the Niger Delta)from crude exports.The previous administration between 1999 and 2007 had more revenue from crude exports.
If we had invested about five percent of these amounts we would have had our four refineries back on stream and possibly constructed more. We were profligate, concentrated on snake oil importation, and paid phony price differentials in the name of subsidy which actually is a racket. We have been embroiled in trillions of Naira arms – length transactions between petroleum marketers and the Federal Ministry of Finance.
Vertical diversification:
When we refine locally, ‘subsidy’ which had fraudulently claimed trillions of our hard earned Naira would disappear. Our discourse should rather be whether adding value would make a difference in the life of the average Nigerian. There is something fundamental we must do to add value to this natural endowment; refining gives 105 percent of by products and derivatives (5 percent gain), there is no waste in petroleum. That is where investing in local refining and petrochemicals would come in handy as a way of diversifying the economy.
Vertical diversification is where we use vertical policies in the direction of higher value added activities related to petroleum resource industries. We enjoy this diversity in natural resources as petroleum is considered a comparative advantage sector in our economy. When we refine, we are diversifying the economy away from relying solely on crude exports.
Saudi Arabia, the giant in OPEC and the Middle East, and better known for its upstream activity, is set for an ambitious target in the downstream. The country has identified that higher value refined petroleum products, are expected to account for more of Saudi Aramco’s export portfolio in the coming years.
Malaysia, Indonesia and Mexico have all diversified vertically using petroleum. Malaysia’s National Oil Company, Petronas, equivalent of our NNPC, used vertical policies to invest in refining and petrochemicals, to become an efficient and global company operating in more than 30 countries. The NNPC can also build local linkages with the rest of the economy using our local content laws to build local capabilities in the downstream sector. Malaysia discovered oil in the 1970, almost two decades after the discovery of crude oil in Nigeria.
Investment opportunities: The benefits of local refining cannot be wished away on the altar of crude export. If by 1970 our gross domestic product (purchasing power parity) was $1572 and by 2010 it was $1695, we should re-evaluate our approach towards sustainable development by 2030. We have a market of 340 million people in West Africa to make us invest in refinery and petrochemical plants. This large market would make Nigeria become the real giant in the sub – region. An expanded industry would go a long way in reducing the unemployment figure in Nigeria which the National Bureau of Statistics recently, put at about 4.9 million.
What we need in this vertical linkage is to invest in petroleum based industries in fuels, agriculture, automobile, fashion and beauty, electrical/electronic, medical and health services, construction, packaging and other domestic uses. See a List of 144 of 6000 petroleum by products and their derivativeswhen we refine a barrel of crude oil (Courtesy:Ranken Energy).
Agriculture: In perspective, agriculture is a major beneficiary of petroleum. When we invest in refineries and petrochemical plants that produce artificial fertilisers, pesticides, herbicides, fungicides, mineral spiritsand other agro-chemicals, as well as products like storage shelters, mulches, planting bags, agricultural products storing tanks, fish crates and boxes, irrigation pipes, egg trays, fishing nets, among others,we enhance agricultural productivity. There is of course the fuel component for agricultural machinery and vehicles for evacuation of agricultural produce.
A critical component of paving road, highways, or aircraft runway as well as waterproofing is asphalt. Asphalt is a semi-solid by- product of petroleum distillation. Fashion and beauty products are large beneficiaries of petrochemicals. Here is a list of 50 fashion and beauty products when we refine locally: –lip stick, lip gloss, lip plumper, mascara, eye liner, Vaseline, nail polish, eye makeup, makeup remover, hair gel, hair spray, perfume, foundation, face powder, eye shadow, concealer. Body lotion, sunscreen, hair conditioner, shampoo, hairbrush, hairbands, bobby pins, toothbrush, soap, tampons, sanitary pads, ibuprofen, aspirin, toothpaste, breath mints, gum. Acrylic, nylon, polyester, coated formaldehyde, finishes, organic cotton, socks, buttons, stretchy part of underwear, all bra, running shoes, stretchy jeans, shirts, plastic earrings, bracelets, necklace, sunglasses,purse, iPod and cellphone.
Strategic Alliances:We should collaborate and form alliances.The Gulf Cooperation Council (GCC) and the European Union met this month in Saudi Arabia, for a comprehensive Free Trade Agreement. The $19billionSadara Chemical Complex is expected to come on stream this year. The joint venture project between the Saudi Aramco and Dow Chemical Company would produce more than 3million tonnes of chemical products per annum.Saudi Aramco is to invest $150billion at home and abroad through 2019.
It is to expand her market share in China, South Korea, and Japan. These investments are in thedownstream sector (refining and petrochemicals).Most Middle East and North African (MENA) countries have realized the benefits of value added and are tinkering on refining and petrochemicals from their liquid hydrocarbons. We should take a cue from them to form regional alliances and also go into joint ventures with Asian countries with strong economic base for sustainable development.
Conclusion:There is no doubt that an investment in the downstream of the petroleum sector is a way of vertically diversifying the economy. Diversification would assist in capturing the West African market thereby increasing our GDP and keep our youth in employment. If we exhibit some levels of integrity and accountability, we may be in the right path of joining the league of self-reliant countries in agriculture and other industries with vertical linkages.
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