The Punch Editorial: Politics of oil block sharing

Inspired by Senator Ita Enang’s shocking revelations on the ownership of oil blocks in Nigeria, The Punch newspaper, in its Tuesday, 19 March, 2013 edition, has published an editorial comment on the issue that is a must-read.

THE need to address concerns about the procedure for awarding oil blocks in Nigeria has become urgent, given the current controversy over which section of the country controls majority interest in the oil industry. 

Senator Ita Enang caused a stir during the Senate plenary on March 6, 2013 when he alleged that 83 per cent of the oil blocks were owned by people from the northern part of the country. This, if true, could only have been possible in an atmosphere of arbitrariness, corruption and lack of transparency; which, therefore, reinforces the need for the restoration of orderliness and method in the process of allotment of oil blocks in Nigeria. Without doubt, the apparent overlap between the political and business elites in Nigeria has undermined public confidence in the oil licence bidding process and created suspicion over its legitimacy.

Making contributions to the debate on the Petroleum Industry Bill, which just passed its second reading at the Senate, Enang, who represents Akwa Ibom North East Senatorial District, spoke passionately to validate his claims that northerners controlled the lion’s share of the country’s oil wealth, contrary to what they would want the world to believe. He said, “The oil is produced in the Niger-Delta, yet, it is the people of the North-East and the North-West and a little of the North-Central, almost nothing for the South-West and the South-East, that own and control these oil blocks. Almost nothing for the South-South, Niger Delta oil producing areas…”

If indeed Enang’s claim is true, it simply implies that the rest of the country – foreigners and those from whose soil the oil gushes inclusive – are condemned to sharing a paltry 17 per cent of the oil blocks. This is an inequitable and unjust sharing formula, which President Goodluck Jonathan and members of the National Assembly should investigate and review.

Essentially, Enang’s exposition was targeted at debunking claims by the northern political elite that their region of the country had lost out to a warped and inequitable system of oil wealth distribution, which is skewed in favour of the oil producing states. For the benefit of clarification, the oil producing states in the Niger Delta are statutorily entitled to just 13 per cent extra from oil revenues as compensation for their land and waters that have been rendered unsuitable for farming and fishing due to activities of oil exploration and exploitation. The money also compensates for the environmental pollution and the health hazards that come with gas flaring and other exploratory and exploitation activities. That same 13 per cent, the northerners claim, has been responsible for the gross underdevelopment of their region and the high rate of poverty among their citizens.

The northern political elite blame this perceived marginalisation for the burgeoning population of idle and uneducated youths and street beggars that are available for ready enlistment into terrorist groups in the North. They have been so strident in making that point that the international community, especially the Americans, have come to believe the fiction that “unjust” distribution of wealth between the North and the South is at the root of the crisis of insecurity that has blighted the North and is also threatening the existence of Nigeria as a whole. They have argued – with their own range of facts too – that ownership of oil blocks is actually dominated by southerners. They even claim that the blocks belonging to the northerners are not as productive as those of the southerners.

It is not surprising that Enang’s claims have ignited the interest of Nigerians in the grand level of corruption in the management and allocation of oil assets and revenues by public officials and their proxies in the private sector. This controversy, in an organised and transparent society, ought not to have arisen at all. The problem is the reckless abuse of the policy of local content vehicles, which grants shareholdings of up to 10 per cent in all the bidding consortia and allows obscure companies, with strong political connections, to win oil licences after the initial bidding process and realise a substantial profit on them within a matter of months.

Given the sensitive nature of oil, allocation of blocks should never be an under-the-table matter. But Nigerian rulers, especially the military heads of government, claiming discretional powers, had, over the years, cornered most of the oil blocks for themselves, their cronies, friends and business associates. Part of Enang’s allegations is that a former Petroleum Minister, Rilwanu Lukman, also owns an oil block, perhaps using his position to acquire one. This is official corruption at work.

Over the years, the Nigerian people have been the losers. According to a United Kingdom-based non-governmental organisation, Global Witness, in its January 2012 report, the oil licence allocation system has been keeping the people in poverty, while enriching elite and the international companies that are willing to do business with them. Signature bonuses running into billions of dollars were, in some cases, allegedly waived or even paid into corrupt officials’ bank accounts. These are allegations that the President should ensure are thoroughly investigated.

Global Witness advises that decisions on how oil and gas licences are allocated to companies need to be taken in a transparent way to remove any risk of conflicts of interest on the part of government officials or donors to political parties and prevent licences from being “flipped.” It cannot be said better. To avoid whatever doubt some observers may have about Enang’s claims, his allegations should be investigated.