How to make Nigeria great, by Mark, Okogie

IF Nigerian banks are yet to feel the heat of the global economic meltdown, the same cannot be said of the countrys oil and gas industry.

Senior officials of multinational oil and gas firms told The Guardian at the weekend that their foreign credit lines for the execution of seven multi-billion naira gas projects are being affected by the economic crunch.

They said that a review of the projects being executed with the Nigerian National Petroleum Corporation (NNPC) under the joint venture arrangement was inevitable to keep them on course.

And for the near-collapse of the capital market, the Nigeria Labour Congress (NLC) has attributed it to unethical practices by banks in the country.

Labour stated this at the weekend in Abuja at a parley it organised on the implications of the economic crunch on Nigerian workers.

An official of Addax Petroleum stressed the need for immediate parley with the NNPC on the contracts for some of the gas projects to complete them in the event of the foreign banks recalling their credits or refusing to grant new ones.

Some of the gas projects likely to be affected are the Brass LNG, OKLNG, NLNG Trains 6 and 7, Chanomi Gas Project, the phase two of Amenam/Kpono Oil and Gas Export Project (AKOGEP) and re-injection of gas in Oil Mining Lease (OML 124).

Another senior official of the Nigerian Liquefied Natural Gas (NLNG) admitted that the crisis is gradually taking a toll on some on-going gas projects in the country.

He asked the Federal Government to stop pretending as if all was well with our economy. Most of the oil firms financing gas projects in the country get their approvals from their corporate headquarters in the United States (U.S.) and other European countries. So, when banks in the U.S. are refusing to lend money, how do you want the gas projects to continue?

He said that since the government had made gas one of the major areas to generate revenue for the country, there was no way the crisis would not have effects on the projects in the sub-sector.

The official, who sought anonymity, explained that NLNG was keen on the completion of the projects, adding that the company was studying the situation to evolve appropriate response to the squeeze. He said that because of Nigerias proven and unproven gas reserves, the firm would work with the appropriate authorities to keep them on course.

The official, who spoke with The Guardian at the 8th industry luncheon of the Centre for Petroleum Information in Lagos, feared that if immediate steps were not taken, the oil firms might have problems in meeting the nations target for gas domestication and export.

He said the proposed talks with the NNPC should aim to avert the situation where the gas projects listed as national priorities were not abandoned, adding that since the financial crisis had led to the collapsed of major financial institutions in the U.S. and Europe, the oil and gas sector wont be exempted.

Besides, he said it is high time the NNPC starts honouring its contract in the joint venture agreement, as the burden of financing most of the oil and gas projects is gradually taking a toll on their operations.

The NNPC, which operates the joint ventures (JV) agreement on behalf of the Federal Government on a 60:40 ratio basis with the multinationals, has severally defaulted in meeting its obligations under the venture.

He said: With the latest financial crisis rocking the U.S. and Europe, there is every reason that we would meet the NNPC on how to review the issue of gas projects in the country.

We are nervous and jittery on the happenings in the U.S. and by extension Europe, because most of the banks that finance our projects have their partners that provide funds from those countries.

He said even prior to the crisis, the companies found it difficult to source funds due to the Niger Delta crisis. He added that it would be worse now that there is credit crisis as banks might be looking for ways to recoup some of the money they had already advanced.

The official said that the deadline for the completion of some of the gas schemes might not be feasible, as some of them were yet to take off or were in their infancy. He said the sudden decline in oil prices in the third quarter and the crunch could worsen the situation.

Crude oil prices fell below $70 a barrel for the first time in more than a year last Thursday, prompting a rally in the international market but the trend may persist.

Energy markets dropped sharply after the United States released lower-than-expected weekly inventory data for oil and gasoline, indicating lower demand and a slowing economy.

Also, an official of Chevron said the financial crisis would affect the nations oil and gas sector because in spite of the huge money realised by the multinationals in the last three years due to the rise in global oil price, most of these monies had been channelled to various projects in Kazakhstanstatan, Angola, Iraq and Nigeria. But Nigeria may be seriously affected due to the Niger Delta problem. So, channelling investment to gas projects in the country will be affected in terms of sourcing and financing the projects.

At the Labour forum, former NLC President, Mr. Adams Oshiomhole, the associations Deputy President, Issa Aremu and the Director, Labour Centre For Social and Economic Research (LACSER), Dr. Peter Ozo-Eson, agreed that the fall of prices of stocks on the NSE preceded the global crunch.

Oshiomhole said some banks bought their own shares in order to drive up the prices.

Many people believed that the Central Bank of Nigeria (CBN) is aware that banks buy their own shares in order to drive up the prices and after driving up the prices, then they go into public offers and pretend that there is a discount and after this, the shares collapse. Like a commercial bank (names withheld), when they went for public offer, it was about N28, I learnt that it has collapsed far below that even though they say they offer bonus shares. In ways can the CBN ensure that these abuses are discontinued with?

He urged the Federal Government to tow the line of Congress that the state cannot be seen merely as an agent to maintain the armed forces and the police leaving the economy for private sector.

We have always been told that it is wasteful for state resources to be deployed to subsidise specific aspects of economic life for the citizens. Now, we know that when the rich people are in trouble, we now know that the state can be called to intervene and save private enterprises from collapse. The argument that if a private enterprise cannot make it, it should be allowed to die because it is inefficient, I think this crisis has given a lie to it. We now seen from London to Berlin and Washington that state funds are being used to bail-out banks that are collapsing. So, we are asking: Can the state intervene to save some citizens? In fact, what we are now seeing is what is called the socialism of the rich people, with all these, we have seen the limits of deregulation.

Aremu described the bail-out plan as policy nepotism. He said the labour market had crashed for a long time with unemployment slumping to an all-time low of 35 per cent unofficial rate.

It is unfortunate that the government is engaging in policy nepotism by bailing out the crash of capital market and refusing to do anything about the crash of labour market, which has risen to an all-time high of 35 per cent unofficial rate and 18 per cent official rate. What government is doing now is putting poverty alleviation in place for the rich. It is even surprising that the International Monetary Fund (IMF) and World Bank are yet to device means to get out of this crisis. We now see presidents and prime ministers taking economic policies on global economic matters rather than the so-called economic experts congregated in these global institutions. Government must take steps to redress labour market and not only capital and money markets.

Ozo-Eson stated that the impact of the global crisis is limited on Nigeria because of its slow integration into the global development.

He said: Nigeria cannot be insulated from the global economic crisis. However, the extent of the contagious effects may not be as strong as it would ordinarily be if we were an integrated financial market into the global system. The first implication is that the national budget for 2009 was already concluded about two weeks ago and in fact, it was on its way to the National Assembly but had to be recalled and now the government is re-formulating it based on what is likely to be realistic prices of crude next year. Yes, there is no doubt that there is crisis in the labour market and if Nigeria is not careful, we may end up having economic tsunami in our hands.