The slippery business of Nigeria’s oil

Oil is the undisputed kingpin of Nigeria’s economy, contributing more than 90% of its export earnings. But more than four decades after the start of oil extraction in Nigeria, the industry remains in foreign hands — much to the frustration of local entrepreneurs.

At present, the Anglo-Dutch oil company, Shell, dominates oil production in Nigeria, generating a substantial portion of the 2,3-million barrels of crude that are exported daily. Official figures put local participation in the industry at about 5%.

Although Nigerian companies that provide services to the oil sector exist, their owners say oil multinationals still shop for these services abroad.

“Most of the oil companies would rather patronise foreign oil-drilling multinational companies in spite of our impressive credentials,” observes Humphrey Idisi, chief executive of the Lonestar Group, a local oil drilling services firm.

As a result, adds federal legislator Chudi Offodile, billions of dollars are lost to the local economy.

“About 95% of the yearly expenditure of approximately $8-billion flows out of the economy through technical services and goods procured outside the county,” he says.

But, just as demands for black empowerment are gaining momentum in South Africa, so Nigeria is witnessing calls for “local content” in the oil industry.

“It was in consideration of this that the industry set up a national committee on local content in October 2001, with a mandate to review all existing documents on the issue and come out with policy statements and a draft Bill,” says Funsho Kupolokun, group managing director of the state-owned oil company, the Nigerian National Petroleum Corporation.

He adds: “Local content has been the focus of several industry discussions and seminars in recent times … Such exhaustive debates are necessary to help develop robust solutions.”

The obstacles to increasing indigenous participation in the oil sector are many. They include low levels of technological “know how”, and limited avenues for funding and poor infrastructure: setting up a business in the midst of periodic power cuts, and without access to proper roads, can be a challenging experience.

Nonetheless, the government has set the ambitious target of having 50% of oil and gas activities catered for by local companies, by 2010.

Edmund Daukoru, adviser on petroleum to President Olusegun Obasanjo, says steps taken in this regard include the awarding of offshore oil blocks to indigenous companies. In one of the latest developments, 32 local firms have been allotted 24 marginal oil fields with an estimated reserve of 300-million barrels of crude oil.

But Offodile believes more decisive action is required.

The legislator has proposed a new law to the national assembly, the Nigerian Content Development Bill, which seeks to compel multinational companies to give more top posts to Nigerian professionals. It also aims to increase the participation of indigenous companies in the oil industry.

Offodile says that if the Bill is passed into law, it will create jobs for Nigerians — ultimately helping entire communities.

“The importance of this Bill and the potential impact on the economy cannot be overemphasised,” he adds.

It is believed that the Bill will be on the books soon, given the support for it in official circles.

Efforts to increase local involvement in the oil sector have gained greater importance after the announcement of plans to increase Nigeria’s oil production. The hope is that this will reach four million barrels per day by 2010.

Oil multinationals, determined not to be caught napping on the issue of “local content”, say they’re taking measures to complement the government’s drive towards giving local business a greater share of the industry.

Fred Ohwahwa, media relations manager of the French company Elf, says the firm “has a robust Nigerian content development philosophy grounded in measurable actions”. In practice, this means the introduction of development programmes to educate Nigerian scientists who can work in the oil industry.

Beyond the matter of local content, larger issues about control of the sector loom.

As Ledum Mitee, president of the Movement for the Survival of the Ogoni People (Mosop), points out, it is unwise for any country to allow its economy to be dominated by one company — as Nigeria is by Shell.

Mosop is a group that has lobbied for a greater share of oil wealth to be given to the Ogoni community, which lives in the south-eastern region of Nigeria where much of the extraction has taken place.

The group’s charismatic leader, Ken Saro-Wiwa, was executed by Nigeria’s then-military government in 1995, after years of pushing for fair distribution of oil revenues — and an environmental clean-up to address the effects of oil pollution. Mosop has been especially critical of Shell’s role in Nigeria.

“If you find a company, particularly in this part of the world … controlling that sizeable aspect of your economy, then we are in a disaster — because they become the government without taking the responsibilities of government,” says Mitee.

No one in the world’s sixth-largest oil producer is under any illusions that addressing these issues will be easy. But the notion of indigenous ownership has staked out a place in debates about how to manage Nigeria’s economy — and it shows no signs of dropping off the radar any time soon. — IPS

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