Sweet Crude

September 5, 2017

Nigeria earned, squandered N77trn oil revenue in 17 years

By Michael Eboh

Nigeria, over the last seventeen years, has recorded huge earnings from the petroleum industry, but had been unable to utilize the funds to improve the lives of its citizens, neither has the country used it to develop the economy.

Specifically, data compiled from the Central Bank of Nigeria, CBN, showed that Nigeria earned N77.348 trillion from the oil and gas industry from 1999 to 2016.

Analysis of the various oil and gas earnings showed that the country recorded gross oil revenue of N77.348 trillion over the 17-year period (1999 to 2016) while after various deductions, net oil revenue over the same period stood at N41.038 trillion.

A breakdown of the earnings showed that from 1999 to 2003, the country’s gross earnings stood at N7.329 trillion, while net oil revenue stood at N4.713 trillion; gross oil revenue and net oil revenue from 2004 to 2007 stood at N17.868 trillion and N9.561 trillion respectively.

From 2008 to 2011, the country recorded gross and net oil revenue of N23.998 trillion and N13.152 billion respectively, while from 2012 to 2016, N28.153 trillion and N13.612 trillion was recorded as gross oil revenue and net oil revenue respectively.

Ironically, despite the huge resources earned from petroleum, the country has nothing concrete to show. Nigeria is still besieged with inadequate infrastructure, epileptic power situation, low foreign exchange reserves, low savings and an abysmally low standard of living. The country’s currency is currently exchanged at about N360 to a dollar.

Nigeria’s gross oil earnings translates to an average annual earning of N4.55 trillion, while the net oil revenue translates to average annual earning of N2.414 trillion.

Nigeria’s net oil revenue of N41.038 trillion would have been able to build nine refineries with a refining capacity of 650,000 barrels per day refineries at N4.32 trillion each, about $12 billion. It would have helped increased Nigeria’s refining capacity by 6.5 million barrels per day, helping the country to effectively end fuel importation.

The ongoing Dangote Refinery project is valued at $12 billion and when completed, would have a refining capacity of 650,000 barrels per day.

The net oil revenue over the 17-month period would have also helped increased Nigeria’s electricity supply by 16,800 megawatts, thereby ending Nigeria’s power woes. In particular, the Zungeru power project, with a proposed capacity of 700 megawatts (MW) is been constructed a project cost of $1.3 billion, about N468 billion, using current exchange realities.

At the same amount, N468 billion each, Nigeria could have used N11.232 trillion to build about 24 power plants of similar specifications; four in each of the six geopolitical zones. Other funds would also be utilized to boost the country’s transmission facility and other arms of the electricity value chain.

The net oil earnings would have also financed the Second Niger Bridge, valued at N108 billion; the Lokoja – Benin expressway rehabilitation, valued at about N65 billion; the Lagos-Ibadan rail project valued at N535.68 billion ($1.3 billion); and the Ibadan-Ilorin-Minna-Kaduna-Kano rail line, valued at N2.196 trillion ($6.1 billion). The fund would have also been used to set up a national air carrier for the country.

The fund could have also financed the three seaports proposed by the Federal Government, valued at $6 billion (N2.16 trillion); and would have been used to build hospitals to improve the provision of healthcare services and contributed to the development of the education sector among others.

Today, instead of growing the economy, Nigeria’s debt profile as at March 2017, stands at N19.16; the naira is currently exchanged at N360 to one dollar; electricity supply is hovering around 3,500 megawatts; refining capacity as at May 2017 is put at 106,667 barrels for the three refineries combined.

Also, Nigeria’s foreign exchange reserves, according to the Central Bank of Nigeria, CBN, stood at $31.22 billion as at August 8, 2017, while the country is littered with bad roads, dilapidated and poor rail network, poor educational and healthcare system among others.

Commenting on this situation, Executive Secretary of the Nigeria Extractive Industries Transparency Initiative, NEITI, Mr. Waziri Adio, disclosed that in the last forty years of oil production, Nigeria has extracted about 31 billion barrels of its oil reserves, while from 1980 to 2015, the country exported crude oil worth about $1.09 trillion.

Adio lamented that in spite of these benefits and the huge revenues that have accrued from oil and gas over the years, Nigeria has one of the lowest natural resource revenue savings in the world.

He noted that Nigeria currently has three oil savings funds, the Sovereign Wealth Fund with $1.5 billion, the Excess Crude Account with $2.3 billion and the stabilization fund with N29.02 billion ($95 million).

He said the absence of sufficient savings left Nigeria severely exposed when the price of oil, Nigeria’s main source of government revenues and foreign exchange, started to plunge in 2014.

He emphasized the need to remove government expenditure from oil revenues to support policy initiatives that pursues prudent macro-economic policies, better economic and social environment for the next generation.

He said this was in addition to ensuring that there is constant savings whether oil prices are high or low and provide regular payouts from the returns on investments of the funds to compensate beneficiaries (the three tiers of government) for their sacrifice.

According to him, these measures have to be implemented as soon as possible because, even though the country has lost fifty years’ worth of savings from its oil revenue, Nigeria does not have fifty years left to prepare for life after oil revenue.

Speaking in the same vein, Executive Secretary of the Centre for Social Justice, CSJ, Mr. Eze Onyekpere, said Nigeria was currently at a cross road and needs to take effective decisions on its next fiscal and economic steps.

According to him, the petro dollar boom is over as commodity prices have collapsed, adding that hard choices need to be made on how to expend the little available resources and new sources of generating revenue.
These choices, he said, are between acceleration and stagnation, stability and fragility and the quest for social solidarity.