The politics of reforming Nigeria’s oil sector

Nigerian legislators are attempting the impossible – to reform the management of their nation’s biggest cash cow – and failing. Decades of mismanagement and grand corruption have left Nigeria’s oil sector with entrenched and convoluted interests that are almost impossible to untangle and dislodge.

Africa Confidential reports:

Efforts towards comprehensive reform of Nigeria’s oil and gas industry are in tatters some five years after the first version of the Petroleum Industry Bill was presented to Parliament. After several redrafts, the PIB is still on the floor of the National Assembly and at the centre of partisan disputes, as parliamentarians pick over clauses which they claim favour one region of the country over another.Meanwhile, well connected companies and officials continue to benefit from an opaque system of management and operation that has allowed as much as US$100 billion to be siphoned off from state oil and gas revenue over the past decade, according to a report drawn up by the former anti-corruption czar, Nuhu Ribadu (AC Vol 53 No 9).

The failure to pass the reforms mooted in the PIB, which was intended to boost accountability and state revenue from exports, has developmental as well as financial costs. Nigeria has been unable to conduct a licensing round to award new blocks since 2007 because of uncertainties about new regulations and fiscal terms. This has limited new investment, raising the possibility that production capacity, which has been fixed at around 2.5 million barrels per day for a decade, could start to fall in the next few years.

More on this here.

Georgetown MSFS Launches New Africa Scholarship

The application deadline is January 15, 2014. Spread the word.

Starting in fall 2014, the Master of Science in Foreign Service (MSFS) at Georgetown University is offering a full- tuition scholarship for a talented graduate student from sub-Saharan Africa.

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MSFS is a two-year, full-time graduate degree program in international affairs. Students will take courses in international relations, international trade, international finance, statistics and analytical tools and history. In addition, students choose an area of concentration such as International Relations and Security, International Development or International Business.

Reason for African Petro-Rulers to be Worried

Africa’s petrorulers (heads of state of Angola, Cameroon, Chad, Congo-Brazzaville, Equatorial Guinea, Gabon, Ghana, Nigeria, South Sudan, and Sudan) may be headed for tough times later this year. According to a piece by (Steve Levine) over at FP, Saudi Arabia – the world’s leading oil producer – is considering flooding the global oil markets with the aim of sticking it to the Russians and Iranians. Saudi action of this nature could lower prices to as low as US $40 a barrel from the current $83.27.

With the exception of Ghana and Cameroon, such a drop in oil prices would almost certainly lead to political unrest in the rest of Africa’s oil producers. Sudan and South Sudan are already facing huge revenue shortfalls due to a dispute over the sharing of oil revenue.

More on “The Coming Oil Crash” here.

Links I liked

I just discovered Chri’s Blog on Madagascar and other Africa-related issues.

For those with a flavor of finance and capital markets and the political economy of development be sure to read Frontier Markets.

Germany is on the hunt for the UN security council seat in Africa.

And lastly, Justice – Uganda style:

Vice president upsets the president during tenure, president fires vice after election. Former vice gets accused of corruption. President declares former vice innocent, but leaves the matter up to the “independent” Inspectorate of Government. Here’s a quote from the president:

“What I know is that there was a power struggle between Bukenya and some businessmen but I found no merit in the case. But since the Inspectorate of Government is an independent body, let them investigate thoroughly.”

Yeah right.

Inequality, Terrorism and Governance in Nigeria

On June 17th Nigeria experienced its first ever suicide bomb attack. Boko Haram, a militant Islamic group that seeks the imposition of Sharia Law in all of northern Nigeria, claimed responsibility for the attack.

Although the group’s principal aim – at least according to its press releases – is the imposition of Sharia Law, its motivating factors include economic, social and governance issues that the Nigeria’s infamously kleptocratic elite have so far chosen to ignore. According to the Christian Science Monitor:

The “nationalization” of the Boko Haram problem will intensify pressure on elected leaders and security forces to deal decisively with the group and prevent further attacks. Nigerian officials have proposed solutions ranging from crackdowns to outreach programs to amnesty offers. The government has to some extent pursued all of these options. Yesterday former Kano State GovernorIbrahim Shekarauproposed a hybrid approach of sorts, which would rely on intelligence gathering to defeat the group while advancing employment programs to deal with social and political grievances in Northern society.

Whatever course the government pursues, the Boko Haram problem has already led several Northern leaders, including the newly elected Governor Kashim Shettima of Borno State, to speak quite bluntly about the North’s serious problems of economic stagnation and political isolation. Northerners have been voicing such concerns for some time, but perhaps now these concerns will reach a broader audience and stimulate a debate that goes beyond just the issue of Boko Haram.

Since the unification of Nigeria in 1914, the north has continued to lag the south in a number of socio-economic indicators. Years of military rule by northern generals did not make things any better. Most of the country’s oil revenue wound up in Swiss bank accounts and as investments in properties in European cities – even as regular folk in Kano, Katsina and Maiduguri, and in the wider northern region, continued to wallow in poverty.

In a sense Boko Haram and its ghastly attacks on civilians and government installations is as much a rejection of Western/Christian education (its name loosely translates to non-Islamic education is a sin) as it is an indictment of northern Nigeria’s leadership. Even by Nigerian standards, the north is doing very badly.

Recently, the governor of Nigeria’s Central Bank, Professor Chukwuma Soludo, chastised the northern elite by noting that the “high and persisting level of poverty in the country is a northern phenomenon.” Nearly all northern states in Nigeria have poverty rates higher than 60%, with some at 90%. Prof. Soludo further added that “if you look at all the indications of development, what constitutes today the North seems to be lagging far behind that the gaps seem to have even widened.

It is hard to ignore the fact that regular southerners are inching ahead of their northern counterparts despite the generous revenue sharing arrangements among Nigeria’s 36 states.

What does this mean for national politics and governance in Nigeria?

Well, for one we know that the apparent north-south political divide in the last election was merely an artifact of presidential politics. Gubernatorial elections revealed that northern elites are also aboard Goodluck Jonathan’s gravy train.

Northern Nigerian elites are as much a problem in the north’s underdevelopment as the historical north-south divide.

In light of this, groups like Boko Haram show that the northern elite in Nigeria can no longer play the north-south card while keeping all the money from the national treasury to themselves. The men and women on the streets and in northern rural areas also want their cut.

I hope Abuja will not bury its head in the sand and pretend that Boko Haram is purely a security problem.

Kenya tried doing the same with the Mungiki group (with extra-judicial executions and all) without much success.

To Abuja I say: you must try to solve the problem you have, not the one you wish you had.

goodluck jonathan poised to win nigeria’s election

The Daily Nation reports:

Nigerian President Goodluck Jonathan has taken a wide lead in elections in Africa’s most populous nation, results showed today, putting him on a possible course for a first-round victory.

Millions of voters turned out for Saturday’s election as Africa’s most populous country bid to put years of rigging and badly flawed ballots behind it and hold the cleanest polls for head of state in nearly two decades.

Observers gave the polls an initial thumbs up, but concerns were raised over regional divisions, a scenario many analysts had hoped to avoid in a country as fractious as Nigeria, roughly split between Christians and Muslims.

Results from 30 states showed Jonathan had won 20, while ex-military ruler Muhammadu Buhari had nine and the former head of the anti-graft agency, Nuhu Ribadu, had one state.

Mr. Jonathan’s cross-national victories are a good omen for Nigerian unity moving forward. Now the big question is how Mr. Jonathan and the PDP will govern. Top on the agenda will be Nigeria’s energy problems. Sub Saharan Africa’s largest oil producer also happens to be one of its biggest importers of refined oil products. No new refineries have been built in the country in ages. The country also suffers frequent power outages despite the fact that millions of cubic metres of gas get flared in its oil fields daily. About 23 billion cubic metres get flared annually in Nigeria (second only to Russia).

That is 23 billion cubic metres of gas that can be harnessed for power production or LPG.

nigeria holds first transparent election since 1993

The last time Nigeria had a transparent election was in 1993. Then, opposition leader Moshood Abiola won the election only to be denied the chance to lead Nigeria by strongman Ibrahim Babangida. Mr. Abiola died in jail in 1998. Nigerians had to wait until May of 1999 to see the end of kleptocratic military rule. Mr. Olesegun Obasanjo, a former military ruler, was Nigeria’s first elected president since the early 1980s. His party (Mr. Obasanjo’s) the People’s Democratic Party (PDP) has since then won two elections under questionable circumstances, to put it mildly.

The latest election appears to be different.

Initial results show that PDP is set for a thumping in the legislative and governorship races, although its presidential candidate (Goodluck Jonathan) is still the front-runner with 62% approval rating.

Credit goes to Attahiru Jega, a professor of Political Science and head of the Independent National Electoral Commission (INEC), for ensuring that the Nigerian elections have credibility both at home and abroad.

Watch this space for the results of the gubernatorial and presidential elections in the coming weeks.

 

Goodluck Jonathan wins pdp nomination

Nigerian president Goodluck Jonathan has won his party’s primary nomination. The BBC reports:

Correspondents say the margin of his victory was a huge surprise, with several central and northern states backing Mr Jonathan, a southerner.

“The People’s Democratic Party has spoken with one strong voice,” Mr Jonathan said in his acceptance speech, wearing a trademark fedora hat and black traditional robe.

The African behemoth (population > 150 million) holds elections in April. Mr. Jonathan is favored to win.

 

The Gambia, Iran, Nigeria and the confusion over arms

Remember the story about the mysterious cache of arms found in Lagos Port, Nigeria? Well, turns out the story goes beyond Nigeria. FP reports that there is reason to believe that the arms from Iran were destined for The Gambia. Authorities in Banjul expelled the Iranian officials in the country, increasing speculation that the arms were meant for rebel groups linked to last year’s coup attempt against President Yahya Jammeh who by the way, cures AIDS on Thursdays.

Just as Libya is retreating from its bad habit of financing and arming rebellions all over the Continent Tehran appears poised to assume this role, especially in Muslim sub-Saharan Africa. There is not a clear strategic reason for this kind of involvement by Iran in The Gambia, although theories abound out there. To add to these, I think it might be that someone within the Iranian government is involved in the global drugs trade and wanted to use The Gambia as a transit to Europe. On November 19th Nigeria discovered US$ 10 million worth of heroine shipped from Iran.

West Africa plays a major role in the global drugs trade. Barely afloat West Africa states, particularly Guinea and Guinea-Bissau, are key transit points for drug shipments from Latin America and Asia into Europe.

goodluck jonathan announces his candidacy on facebook

Nigerian President Goodluck Jonathan has announced that he shall be running for president in next year’s general election, according to a post on his facebook page. Apparently the good sir takes social media seriously:

While some observers were surprised that Mr Jonathan had used Facebook to announce his candidacy, he said in July that comments on his page had influenced him in overturning his ban on the national football team . . . . . . . . . “People may scoff, but we take the interactions seriously, we track the [Facebook] feedback,” a presidential adviser told the Reuters news agency.

It will be interesting to see how the rank and file of the PDP reacts to this announcement. Under the party’s implicit North-South agreement the next president has to come from the North. Mr. Jonathan is a southerner.

a very nigerian affair

The BBC reports that the Nigerian state owned oil company (NNPC) is insolvent, with a US $ 5 billion debt. Most of the money ($ 3b) is owed to the Federation Account a lootable cash cow that distributes money to different levels of government within the Nigerian state. The country is divided into 36 states (and one federal capital territory, Abuja) and 774 local governments, all of which have legally guaranteed claims to oil revenues.

The report also notes that: Despite Nigeria being a major crude oil producer, it must buy almost all the oil it uses on the international market because its own refineries are insufficient and dilapidated.

Recently the Nigerian government signed a deal with the Chinese that hopefully will result in the construction of an $ 8 billion refinery in Lagos to ease the country’s dependence on imported petroleum products. 80% of the cash will come from the Chinese and 20% from the Nigerians.

No prizes for guessing why on earth A LEADING INTERNATIONAL OIL EXPORTER should import almost all of its petroleum products or why it took so long for the Nigerian leadership to start thinking of expanding Nigeria’s refinery capacity…

Achebe’s assessment of the Nigerian condition in the early 1980s still rings true: “The trouble with Nigeria is simply and squarely a failure of leadership.

Yar’Adua passes on

Nigerian President Umaru Yar’Adua died today. According to the Nigerian constitution Goodluck Jonathan who has been acting president will formerly assume office as president of the federal republic. Mr. Yar’Adua had had problems with his kidneys going back to his days as governor of Katsina state. May he rest in peace.

Wole Soyinka, the Nigerian Nobel laureate had this to say about Mr. Yar’Adua’s passing on:

“What passes for the Nigerian nation is nothing more than a tragic arena, and Yar‘Adua is only the latest tragic figure. The vampires, including those within his own family, turned him into a mere inert resource for their diabolical schemes. They have a reckoning with their conscience, assuming they know what the word means. One can only hope that, while mouthing sanctimonious platitudes such as ‘Power belongs to God,’ they have now learnt that the politics of Do-or-Die cannot guarantee who does and who dies. They must stop playing God. I pray for the repose of the soul of their latest, much abused innocent victim.”

abuja is sleeping on the job

The Nigerian government has failed its people in so many respects that we have come to not expect the men and women in Abuja to deliver much. That said, this is too much. At the risk of sounding religiously intolerant, I am gonna go out on a limb and say that this should be considered cruel and unusual punishment.