The trouble with Nigeria's Oil and Gas Industry, by US-based expert

2010-01-31
THE GUARDIAN Newspaper-Chris Paul Otaigbe


Sam Omale is a London-based commercial services consultant. He spoke with CHRIS PAUL OTAIGBE in Abuja, on a wide range of issues in the nation's oil and gas industry. Excerpts:

What do you think is the biggest challenge of the Nigeria's oil and gas industry?

The Nigerian oil and gas has become a place where a lot of portfolio businessmen and investors have gone into. There are a thousand and one oil and gas companies in Nigeria; yet, you can't drive into a filling station and fill your car tank. I would suggest mergers among these business ventures they call oil companies.

In the UK and the US, how many oil companies do you hear about? Perhaps, one, two, or three - very few. They need to come together to begin to refine our own crude; because what is happening to us right now is that we are selling what we don't have to buy what we have. We take the crude away cheaply; they refine it and sell back to us at a very expensive rate. So it would have been better if we didn't have the oil at all.

There are so many things that can be extracted from the crude to generate products, services and employment. Then we can start exporting refined oil, not crude. Crude oil is raw, just like any farm produce. It's like selling your cocoa raw and buying Bournvita or chocolate at expensive rate. Until we do that, oil will continue to be a curse on Nigerians.

On the capital market, there is a product futures on oil to be developed. Futures on oil is an international trading; and Nigeria is a big player on the global oil market. There is no reason we can't have oil futures trading right now in our capital market.

Could you further explain what you mean by oil futures?

A 'futures' is an investment instrument that determines future price today. The oil is such a volatile product, because any disturbance anywhere in the world in Iraq or any of the oil-producing countries will increase the price. An investor can take advantage of such by buying a future. You buy the price of oil you want to buy, say, in three months now. And it is paid for. If in three months' time the price is higher, you can't pay more than you have paid. If it is lower you can't go lower.

So, people who can understand to interpret the analysis that follow oil production, oil storage and the stock levels around the world can do that. And with the billions of oil in reserve, we should have futures in our capital market. But again they are thinking about how to develop more products on the capital market. The Abuja commodity exchange should be championing that. Once you create this on the capital market, a lot of synergy, a lot of employment will be generated and business activities will be increased.

The capital market is a driver of the economy of any nation. And the more of these products are generated on the platform, the more interesting and active the capital market will become.

What extra value do you think the capital market can add to the oil and gas industry?

As I said, creating a platform to introduce the oil futures in the capital market will be a whole realm of sector for trading on these futures; and if oil companies and individuals start to trade in that, it will create a lot of revenues to the companies that will be trading in it. So, the Nigeria Stock Exchange can really add value to that.

As a Nigerian businessman in the Diaspora, what comes to your mind when you see long queues at our filling stations?

It's the economic cost of this wastage that comes to my mind. On you way to this place, you must have seen the queues that run into miles. Think of the man-hour that you lose...most of those queuing up are workers in various places. Until we start quantifying the effect and the magnitude of money we are losing due to queuing for fuel; and until we quantify the number of people that are dying as a result of storing fuel in their home; and until we are able to quantify them to see the quantitative implication on our lives, we will not be able to know what we are losing.

It is a negative development on any economy. You cannot go anywhere without energy. Energy is the driving force of any economy. Before the Nigeria economy can start to think of moving up at all, you need energy not just fuel; but power must be in place to drive that. I think I read something about some private refineries coming on stream very soon. We should do that quickly.

We should not allow anyone to queue for fuel at all. This will save Nigerians a lot of psychological pain and torture. It shouldn't be heard that the sixth largest producer of oil is queuing for fuel

 

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