In what can truly be described as historic and economically beneficial to Nigeria, President Muhammadu Buhari this week signed the amended Deep Offshore Act in the far city of London where he is on a private visit.
Importantly, Section 5 of the Act highlights royalty by water depth and royalty by price, saying: “Royalties shall be calculated on a field basis and shall be at rate per centum of the chargeable volume of crude oil and condensates produced from the relevant period as follows: In deep offshore: greater than 200m water depth – 10 per cent, and in frontier/inland basin – 7.5 per cent.”
Significantly too, the new law, on the issue of payment of royalty by price, says: “The royalty rates shall be based on increase that exceeds $20 per barrel, and shall be determined separately for crude oil and condensate as follows: From $ 0 and up to $20 per barrel – zero per cent; above $20 and up to $60 per barrel – 2.5 per cent; Above $60 and up to $ 100 per barrel – 4 per cent; Above $100 and up to $150 per barrel – 8 per cent and Above $150 – 10 per cent.”
Speaking after signing the legislation into law, the president said the law is important for all Nigerians, particularly the young generation.
“I signed into law the amended Deep Offshore Act,” he said. “Nigeria will now receive its fair, rightful and equitable share of income from our own natural resources for the first time since 2003.”
Though the president said since 2003, the drama surrounding this law began in 1993 when Nigeria entered into deep offshore production sharing contracts with multinational oil companies. Because as at then, deep offshore production was a new thing and an expensive venture while success could not be guaranteed, Nigeria offered attractive incentives to the companies to encourage them to invest in the fields with, of course, added advantage that if they hit oil beyond 1,000 metres, they would not pay royalty.
However, they were asked to pay royalty in various percentages for oil explored between 100 meters and before 1,000 metres. The companies were also told pay a flat 10% royalty for oil found in the inland basin.
Fortunately for Nigeria and the contractors, oil was discovered earlier than expected, technology became better and adapted and cost of production lowered. In 1999, owing to the success of the project, Nigeria enacted a law on deep offshore and inland basin which provided that if crude oil price went as high as $20 per barrel, the terms of the agreement with the oil companies would be reviewed and if oil did not hit $20, the terms should be reviewed after 10 years and every five years thereafter in a way that it would be economically beneficial to Nigeria.
Suspiciously, but in a reflection of the kind of corrupt relation between oil companies and their friends in Nigeria’s official quarters, about two months after making the law in 1999, Nigeria amended the law and moved the threshold from 10 to 15 years. Curiously, in a deal completely skewed against the NNPC and Nigeria, when it was 15 years, the terms were not reviewed and the price of crude oil was above $90 per barrel. Regrettably, at that time, the contractors were taking 80% of the deep offshore oil and while the Nigerian National Petroleum Corporation (NNPC) got just 20%.
Recently expressing his unhappiness with this state of affair, Senator George Sekibo (Rivers East) complained: “The price of crude has since 1999 been on the rise; it was supposed to be revised after 15 years since the law was formulated. The country can make more money from PSC, but it hasn’t. Why have we failed? I understand that there is a cartel frustrating it because they make money at the expense of Nigeria. The president must personally take this upon himself and recover all the outstanding arrears.”
Regrettably too, the best the country did was to get the Department of Petroleum Resources (DPR) to write a letter to the oil companies in 2007 informing them of the 2008 timeline for the review. The National Assembly ignored the matter and other concerned authorities brushed the matter under the carpet.
And, since then, like the president said, all attempts, though not serious attempts, to amend the law on the distribution of income have failed until now because of the “combination of complicity by Nigerian politicians and feet-dragging by oil companies.”
That development, of course, has “for more than a quarter-century, conspired to keep taxes to the barest minimum above $20 per barrel” while the price of oil per barrel has gone three times upward within the period in question.
But, everything must sometime come to an end, and so it did for the oil companies’ exploitation of the country. Now, like the statement issued by president said, “for the first time under our amended law, 200 million Nigerians will start to receive a fair return on the surfeit of resources of our lands,” and this money can be invested in hospitals, schools and infrastructure.
In fact, according to the Chief of Staff to the President, Mr Abba Kyari, with the signing of the new bill into law, Nigeria will generate an estimated $500 million in additional revenues for the federal government in 2020, and over $1 billion yearly after 2021.
But, above that, with the new law, the Buhari-led government has refused to allow national interests to be a secondary consideration to the interests of the International Oil Companies (OICs) whose sole interest is to maximise their profits, to the detriment of Nigeria and Nigerians, and exporting those profits beyond the shores of Nigeria.
For too long but for so little to Nigerians, the selfish and parasitic oil companies and their allies in government and the National Assembly have worked against the implementation of the Deep Offshore Act, depriving Nigeria, in the process, of significant revenue.
Thus, the current leadership of the National Assembly, headed by Senator Ahmed Lawan must be commended for the quick passage of the bill, in the face of the intense lobby by the oil companies and their local friends against its passage. The president too must be praised for assenting to the legislation despite reported pressure mounted on him not to give his assent to the new bill.
And, thankfully, the Deep Offshore Act would, no doubt, provide significant boost to the 2020 budget which expected to be passed by the National Assembly.
Essentially, the coming into force of the Deep Offshore law has, in the views of many people, brought to a happy ending the long held belief that the country’s leaders are corrupt and think little or not about Nigeria. Now, the president has demonstrated to the world that, indeed, Nigeria has come of age and its leaders know exactly what is good for the country and its people.
Welcome onboard Sarah Alade
Recently, in an effort meant to express his determination to refocus the economy and make it to function effectively and efficiently, President Muhammadu Buhari has appointed Dr Sarah Omotunde Alade as the Special Adviser to the President on Finance and the Economy.
Alade is to work in conjunction with the Ministry of Finance, Budget and National Planning.
Dr Alade, who holds BSc in Economics and PhD in Management Science (Operations Research), retired from the Central Bank of Nigeria (CBN) as deputy governor in 2017, after spending 23 years in the apex bank.
She had also acted, briefly in 2014, as the CBN governor. Now, to discharge her duty as an adviser, Alade should bear in her mind that a nation can be seen as being economically viable when certain things, including, especially electricity, are put in place.
Electricity remains one factor that can help grow Nigerian economy. Electricity means everything, there can be no industrialisation and economic improvement in Nigeria without fixing its electricity.
Once electricity is fixed, that will encourage investments and such investments will lead to economic improvement.
Of course, every nation of the world determined to grow economically should appreciate its local produce. Regrettably, Nigerians are fond of spending their money on foreign products, when there are similar products made in Nigeria.
Nigerians cannot be talking about improving their economy, when Nigerians are not appreciating their locally made products and, instead, spending billions of naira on foreign goods. Undoubtedly, spending money on local products will improve the country’s economy.
Speaking on improving the economy, there is need for the Nigerian government to tame corruption which has eaten so deeply into the Nigerian system. Agreed, this administration is putting a spirited fight against this vice, still corrupt practices engaged by, especially Nigerian public servants, have dealt a dirty blow on the economy of the country.
Today, it is technology that rules the world and any economy that does not embrace innovations and technology is a poor economy. The Nigerian nation has all the endowment and resources to be ranked one of the richest African nations. Thus, it is time for Nigeria to embrace technology to fight most of the ills plaguing it.