It is tempting to keep on lamenting and condemning the truly astonishing fact that for over six decades since oil exploration began in Nigeria, the country has relied on the oil multinationals for vital statistics on volume of oil production and consequent earnings from the commodity. But it is more positive to focus on the new, commendable initiative by the Nigerian Upstream Petroleum Regulatory Agency (NUPRA) to install its own flow meters on oil production facilities and pipelines in the upstream sector for this purpose.
Following the reported approval by President Muhammadu Buhari, a forensic audit of all flow stations and production volume in the sector is currently being undertaken while Original Equipment Manufacturers (OEM) engaged by the NUPRA for the purpose are said to be about concluding stipulated procurement processes.
The initiative could not have come at a better time. Indeed, its speedy actualisation may turn out to be the critical saving grace for an economy on a steep fall, with drastic revenue shortfalls, escalating indebtedness and the attendant continuing decline in productivity in virtually all sectors arising from high energy costs, widespread insecurity and chronic infrastructure, among other factors.
It is sad that for years Nigeria has been unable to independently ascertain both the production volumes of oil lifted from the country and the true figures of the revenues accruing therefrom. In the cold, calculating and often amoral world of international oil business, the operators have no obligation to furnish the country accurate figures of their transactions since we opted to rely on data from their installed facilities, leading to possible inevitable loss of humongous revenues to the country over time.
This situation has particularly become unsustainable and even existentially threatening in the light of recent developments such as the ongoing Russia-Ukraine war. Although most other oil-producing countries have been reaping huge revenues as the conflict has caused high increases in international oil prices, this has not been the case in Nigeria which relies entirely on imported refined oil products such as Petroleum Motor Spirit (PMS) and diesel. The consequent spike in the domestic price of PMS in particular, which continues to be hugely subsidised by government, has led to an alarming increase in the size of the subsidy, severe paucity of funds for capital development, social services as well as security of lives and property. This has continually been forcing government to resort to more borrowing even to finance recurrent expenditure.
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Matters have been worsened by a steep decline in the daily production of oil, the country’s major revenue earner, as a result of large-scale pipeline vandalisation and oil theft. It is estimated, for instance, that between January and July this year, Nigeria lost about 433,000 barrels of oil daily to oil theft, which is calculated to amount to over$43million daily, at an average $100 per barrel. Consequently, the country is unable to meet its average production quota set at 1.7 million barrels per day by the Organization of Petroleum Exporting Countries (OPEC), as production fell from over 1.4 million barrels daily in January to 1.1 million barrels as at July.
While government recently contracted a private security outfit to help enhance the safety of oil pipelines in the Niger Delta and reduce the level of theft, the new move to install facilities to help the country autonomously determine the volume of its oil produced and sold by the private oil companies is no less imperative and long overdue.
This will not only be more self-respecting for us as a sovereign country, it will also help to stem the obvious fiscal haemorrhage in the sector due to underhand dealings over the years, other things being equal. The expected considerable enhancement in declared revenue earnings should also help substantially to deal more effectively with current economic challenges.
However, if adequate attention is not paid to effective monitoring of operations and institution of requisite mechanisms to enhance transparency and enforce accountability under the new system, the obvious criminal activities of the past will most likely continue as local indigenes are no less susceptible to greed and corrupt proclivities than foreign operators. This must be anticipated and preempted.