Emeka Okwuosa is the chairman of Oilserve Group, which is into power, oil exploration and production and farming. He chairs five other companies in the group, that is involved in building the largest pipeline system. In this interview with JOSEPH JIBUEZE and NNEKA NWANERI, he speaks on pipeline vandalism, how Nigeria can survive fall in oil price and the recession, and how to improve refining capacity, among others.
How can Nigeria survive the oil price plunge?
I’ll give you a background to oil price drop. It is a normal thing. Oil is a natural resource that we mine or drill through a process. When you talk about oil production and utilisation, you talk about a global phenomenon. We apply the basic knowledge of economics here. When you have production and consumption, you try to match them. When production becomes higher than consumption, you have a glut of the product. So, what you have is a drop in price. When consumption at anytime is higher than production, you have a squeeze, which leads to oil price increase. I can tell you that the current drop in oil price is the fourth cycle I’ve seen in the industry. The first one was in 1986. Oil went down to $5 per barrel. The second one was in 1997/1998. Oil price went down to $9 to $10. The next was in 2008 when we had the global economic crisis. There was a major problem in the structure of the world economy. Oil price went down, before we had the one of two years ago. It’s a normal thing. Therefore, being a normal thing, it’s left for any producer to plan ahead. Our problem in Nigeria is not low oil price, but lack of planning of the economy. At $20 or $30, it’s tough because production cost in Nigeria has gone up to about $28/$29 per barrel, which should not be so. If Nigeria had gotten its oil industry under control, and managed it properly, we should not be having production cost of more than $12 or $13 per barrel. So for it to be over $20 is our fault.
The inability of successive governments to plan ahead and know that when you have a resource based economy, you will be open to all the vagaries of price changes of this commodity is the problem. We should not at this stage, after more than 60 years of oil and gas production, be a single commodity economy. Today we should have an oil industry that should have gone through second or third cycle of evolution where we’re using the oil and gas industry to develop various industries to have added economic benefits. Why is Nigeria still exporting crude oil? All you do is produce it and sell. Who you sell it to will be the one to refine, produce bitumen, and other things that you go back to buy. It’s a no-brainer that it’s not sustainable. Today we should not be importing refined products. We should be producing our products. We should produce enough fertiliser from our gas. We should have added economic benefits from our oil. We have not done that and that’s why we’re suffering.
The second part is the way we have structured our economy. It is not robust enough to adapt to world economic changes. So, oil price drop is not the primary thing that is affecting our economy. It is primarily because we have not planned and executed very well, and we do not have enough savings to drive the process. So, I hope we have learnt from this.
Full story at The Nation Online.
By Joseph Jibueze and Nneka Nwaneri.
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