Wasteful oil search in the North – Punch Editorial Board

President Muhammadu Buhari took a wrong step on assuming office in 2015 when he ordered the Nigerian National Petroleum Corporation to double up its search for oil in the North. But it appears the wild goose chase is not about to end anytime soon as the President’s top aides are falling over one another to justify the wasteful adventure. By one account, the Federal Government has spent about $340 million and an additional N27 billion, in seismic expedition, searching for hydrocarbons in the Lake Chad Basin alone.

Taking the politics of oil exploration a notch further recently, the Minister of State for Petroleum Resources, Ibe Kachikwu, has again defended Buhari’s obsession with finding crude oil in commercial quantity in the North. Kachikwu said one of the reasons for that was the fact that it had been established that oil lies underneath the Lake Chad Basin. He said the fall in the price of oil was not enough reason to stop exploration activities because “the commodity is still the country’s dominant foreign exchange earner.” For Maikanti Baru, the Group Managing Director, NNPC, the oil search was driven by the urgent need to increase Nigeria’s oil and gas reserves, thereby improving revenue streams and creating more business and employment opportunities for the citizens.

Nothing could be further from the truth. The search for oil in the Lake Chad area started almost 40 years ago, initiated when Buhari was Federal Commissioner (Minister) for Petroleum under a military regime. He reopened the sectional agenda immediately he was sworn in as President. Since then, he has repeatedly been charging the NNPC to forge ahead as if the country’s economic survival depends on it. With that, every senior aide to Buhari in the oil industry tells him what he craves to hear. In 2015, as Minister of State-designate, Kachikwu had gleefully announced that a major announcement would be made on oil exploration in the North before the end of the year. “There are signs from the latest 3D seismic studies that oil may well may be very close to being found now in Lake Chad after very many years of trying. I think that this is very key; it is key, both for the geographical balancing of oil production and it is also very key for the purpose of refinery placement in the North in terms of access to crude. I am optimistic that by the end of the year, we should be able to announce something major on this,” he said.

But it turned out to be mere wishful thinking. Baru claims it will grow the nation’s crude oil reserves to 40 billion barrels by the year 2020. He adds that he is encouraged by the exploration activities on the frontier basin in the Chad and some areas close to the Kolmani River where Shell had made some indicative discovery of hydrocarbons.

The oil bug is spreading among Northern politicians, too. Through the Northern Nigeria Development Company, the 19 northern state governments have intensified their search for oil and gas in the region with the appointment of a British firm to carry out the exploration activities. For Aminu Tambuwal, the Sokoto State Governor, historical records indicated that the presence of hydrocarbons in the Sokoto Basin had been a subject of interest to geologists for long, a situation that made the French oil giant, Elf, to consider preliminary exploration activities beginning from the 1950s.

The Buhari government is making a bad mistake. Politics, rather than sound economics, underlies this compulsive oil search. In an interview, Itse Sagay, a professor of Law, gave the background to oil exploration in the country. According to him, the first oil prospecting in Nigeria was by a German company known as the Nigerian Bitumen Company. It commenced operations in 1908 and wound up its activities in Nigeria at the commencement of the First World War in 1914. “From these early beginnings in 1908 to the present moment, that is 2014, the Nigerian state, including Northern Nigeria, has never spent one kobo in oil prospecting and oil producing, with funds other than from proceeds of petroleum products. The Nigerian Federal Government has, at all relevant times, been a beneficiary of the petroleum proceeds from the investments and activities of the oil multinationals. The so-called NNPC investments in oil prospecting have only occurred in Northern part of the Nigeria, namely, the Benue trough, the Chad Basin and in Bauchi State. The funds utilised by the NNPC in these Northern areas were obtained from proceeds of the Niger Delta oil operations.”

This newspaper has for long argued that having done its bit these past 40 years, the government should leave the search for crude oil in the North to the private sector. And if they so wish, the northern states should continue to commit their own resources to realise their ambition of becoming oil producing states. The danger now is that good money that would have been invested in promoting the real economic potential of the North – agriculture, mining, manufacturing – is frittered away on a hopeless political venture.

No doubt, crude oil has played a major role in global affairs, leading to the rise and fall of governments. As The Guardian of London reported, the oil shocks of the 1970s reshaped the global landscape and lent new significance to the Middle East. When prices collapsed in the mid-1980s, the Soviet Union’s final demise owed much to the collapse in its export revenues. Saddam Hussein’s 1990 invasion of Kuwait derived in part from an ambition to capture new oil fields at a time of financial stringency. In Algeria, another country dependent on oil revenues, that same price collapse – which reduced the price of crude to below $10 a barrel – contributed to an election victory for Islamists, then a coup, and then civil war. In Nigeria, oil has poisoned our politics, fuelled a civil war, generated insurgencies; distorted the economy and created a rentier state. It is argued that the economy is under the spell of the resource curse because of our over-dependency on oil at the expense of modernisation and diversification.

Buhari should end the wild goose chase. It is for all the wrong reasons. It is so puzzling why the President is so obsessed with oil discovery in the North at all costs. Nigeria’s development failure has made it a common illustration of the “resource curse” – the hypothesis that natural resources can be harmful for a country’s development prospects. The reality of economic growth is the diversity of tacit productive knowledge or know-how. Instead of wasting millions of dollars in the endless search for hydrocarbons in the North, the government will help the region better by creating a policy regime that is conducive to the accumulation of productive know-how or economic capabilities. The Northern governors should also focus on agriculture, mining, education and the expansion of the capabilities of their workforce in the production of goods and services of increasingly greater complexity for exports.

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