•Agbakoba
The Senior Partner, Olisa Agbakoba Legal, Dr. Olisa Agbakoba, today, said Nigeria’s public debt rose to $91.46 billion (N121.67 trillion), despite its ability to generate $ 1 trillion in 40 years.
Dr. Agbakoba identified the alleged exclusion of Nigerians from key value chains, weak enforcement of Local content laws, incorporation of foreign agreements, tax avoidance and corruption as possible reasons for the development.
He also called for the implementation of new measures, including the increase of Nigerians’ participation in legal services, shipping, banking, insurance, drilling, oil field services, and engineering within the oil and gas industry.
In his presentation – The Paradox of Nigeria’s Oil and Gas Industry: A Policy Paper – at an engagement with the media, in Lagos, obtained, Dr. Agbakoba, said: “Over the past 40 years, the cumulative revenue from oil and gas has exceeded $1 trillion, an amount that should have been sufficient to transform the nation’s economy and infrastructure.
“Yet, Nigeria consistently resorts to borrowing, with the total public debt standing at ₦121.67 trillion ($91.46 billion) as of March 31, 2024, according to the Debt Management Office.
“There are 36 value chains related to crude oil exploration, with at least 7 crucial ones largely excluding Nigerian participation: Legal, Shipping, Banking, Insurance, Drilling, Oil Field Services, and Engineering and Construction.
“Over $1 billion worth of legal work is lost to foreign firms annually due to a perception of superior expertise and international experience.
“Nigerian shipping companies are not engaged to ship crude oil products due to the absence of a legal framework for developing a national fleet of vessels, leading to significant loss of potential revenue and employment opportunities.
“Funds from crude oil production are often domiciled in foreign banks, sometimes held for months before remittance to the Central Bank of Nigeria, depriving Nigerian banks of substantial business and the economy of potential multiplier effects.
“The Nigerian insurance industry plays a very insignificant and limited role in the oil and gas Industry. No major Nigerian insurance underwriters cover risks for the over 25,000 foreign vessels in Nigerian cabotage waters or the over 1,000 oil rigs in Nigerian waters, representing a massive loss of premium income for the Nigerian insurance sector.
“Nigerian companies are often excluded from major drilling contracts, with these lucrative opportunities primarily going to foreign firms.
“The oil field services sector, which includes activities such as seismic surveys, well completion, and production optimization, is dominated by international companies, limiting opportunities for Nigerian businesses.
“Large-scale engineering and construction projects in the oil and gas sector are frequently awarded to foreign companies, despite the potential for local capacity building and job creation if Nigerian firms were more involved.
“Despite the existence of laws like the Coastal and Inland Shipping (Cabotage) Act 2003, Nigerian Oil and Gas Industry Content Development Act, Cabotage Act, and Merchant Shipping Act, Nigerian participation in key industries remains limited.”
He said: “Incorporation of foreign agreements often excludes Nigerian laws and designates adjudication forums outside Nigeria, contradicting local content policies.
“The complexity of these contracts often puts Nigerian entities at a disadvantage due to limited expertise in international oil and gas law.
“The use of foreign legal frameworks has sometimes resulted in unfavorable outcomes for Nigeria in international arbitrations.
“The current structure heavily favors IOCs, resulting in a significant portion of revenues leaving the country.
“IOCs often have more bargaining power in negotiations with the government due to their technical expertise and financial resources.
“The dominance of IOCs has led to a lack of technology transfer and skill development among local companies.”
He said: “Oil rig companies have formed a cartel for tax avoidance, with NIMASA confirming they do not collect tax from oil rigs. This represents a massive loss of potential government revenue.
“The revenue attributable from oil rigs is estimated at N3 Trillion yearly, approximately 15% of the National Budget. The loss of this revenue significantly impacts the government’s ability to fund development projects and public services.
“The practice of tax avoidance by these companies creates an uneven playing field and discourages compliant companies.”
Dr. Agbakoba said that the nation has the potential to “increase oil and gas revenue by 30-40% within 5-10 years. This could translate to an additional $15-20 billion annually based on current production levels.
“Enhanced local content implementation, downstream investments, and increased Nigerian participation in key value chains could create an estimated 500,000 to 1 million new jobs in the oil and gas sector and related industries over the next decade.
“With increased refining capacity, reduction in fuel imports, and the development of a national fleet for oil and gas shipping, Nigeria could save $10-15 billion annually in foreign exchange.
“By addressing tax avoidance by oil rig companies, Nigeria could potentially recover up to N3 Trillion yearly (approximately 15% of the National Budget) in additional tax revenue.
“Strict enforcement of local content laws and capacity-building initiatives could increase Nigerian companies’ participation in the industry from the current estimated 30% to 70% within 10 years.”
