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The oil-for-cash deal with India

The Federal Government is currently negotiating a $15 billion oil-for-cash deal with India, which will spin many years. Perhaps, it will last longer than President Muhammadu Buhari – even if he serves two terms. That is a long-term commitment of Nigeria’s crude oil, while the proceeds might be spent, perhaps, within a couple of years.

To be fair to the current administration, this is not the first time such a long-term arrangement is being made by a government which had suddenly run out of sufficient dollars to keep exchange rates, interest rates and inflation within tolerable limits.

The Nigerian Liquefied Natural Gas (NLNG) project would not have been possible if the Babangida regime had not made the same sort of long-term commitment of our gas in exchange for ready cash. Today, the nation is better for it. So, on no account must we discard this idea just because it is a variation on the former approach which brought badly needed dollars in the late 1980s and early 1990s. Certainly, it has its merits. But, it also poses dangers for the future.

To start with, Babangida acted then as a military President and only made a perfunctory show of “consulting broadly” with Nigerians when, invariably, the decision had already been made. Furthermore, the “Age of Gas” was just starting. It was the discovery that Nigeria had more gas reserves than oil that changed the classification from an oil-producing nation to one which is now known as “gas associated with oil”.

The global gas market was characterised by scarcity and Nigeria had lots of it unused. It was not so difficult to find takers in the joint venture. We negotiated from position of strength. Today, even the gas market is now experiencing some glut.

Right now, there is no oil scarcity; all the producers are experiencing production cutb-acks. It is much more difficult to drive a good bargain when you are negotiating on your knees. We, therefore, ask the Federal Government to fully disclose all the details of this deal; and for the National Assembly to interrogate them critically. The Assembly must approve it before the deal is sealed.

The consequences of getting it wrong are too frightening to contemplate. Granted, what the Buhari administration seeks to do amounts to mortgaging the future. But, if the proceeds are directed towards remedying infrastructural deficits and promoting education and agriculture, it will be beneficial in the long-term.

But, if it is applied to “give-away” programmes, the future would have been mortgaged for nothing. We also want to know if the volumes sold to India under this arrangement will form part of our OPEC quota. If so, succeeding governments would be in deep trouble if low crude oil prices persist.


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