Following the fall in crude oil price from $115 per barrel in June 2014 to the current low od less than $50 per barrel, the Rivers State chapter of the Trade Union Congress of Nigeria has raised concerns that the Nigerian economy is in a very bad shape and that the country is obviously not prepared for any sustained fall in crude oil price as global analysts forecast.
The state chapter of TUC noted that global analysts like Goldman Sachs have forecasted that global oil price will remain at $50 per barrel till 2020.
According to the congress, its main worry is that Nigeria is not prepared for any sustained fall in crude oil price going by the economic indicators of the country.
It said: “For instance Nigeria has just only $2 billion in excess crude account which reports say may soon be shared; less than $30 billion in external reserves; owes over $60 billion even as many states in the country continue to seek for loans and bailout funds to pay workers salary.
“The country owes the Joint Venture (JV) partners some $6 billion and forced a 40 per cent cut in oil and gas JV operations last year; devalued the currency from N155 to some N200 per US$ etc. Juxtapose this with Saudi Arabia that has external reserves of some $900 billion.”
The TUC in Rivers State therefore expressed serious doubt that President Mohammadu Buhari may be able to deliver on his campaign promises to Nigerians if the price of crude oil, which accounts for some 90 per cent of Nigeria’s total export revenue and 75 per cent of total consolidated revenue, continues to hover around $50 per barrel between now and 2019 as forecasted by global experts like Goldman Sachs.
This was revealed in a position paper by the Rivers State Chairman of the TUC, Comrade Hyginus Chika Onuegbu, titled: “The Historical Overview of the Impact of Global Oil Politics on Crude Oil Prices, Investments and Employment Relations in the Nigerian Oil and Gas Industry.”
Comrade Onuegbu stated that already, the fall in crude oil price has started taking its toll on the oil and gas industry, cutting deep into revenue projections and big losses at the end of third quarter of 2015 and has also led to significant contraction in exploration and production activities globally as the oil and gas companies embark on massive cost cutting measures to weather the storm.
According to him, the fall in crude oil price has begun to negatively impact very heavily on the Nigeria oil and gas industry and indeed the Nigerian economy, adding that already there are strong fears that some 120,000 direct and indirect jobs might have been lost in the Nigerian oil and gas sector .
He said: “At present many state governments are unable to pay the salaries of their workers as the federal allocation has dwindled seriously. Already many of the state governments including States in the oil rich Niger Delta are resorting to borrowings and the federal government bailout funds to pay workers’ salaries.
“The fact remains that in the coming months, analysts expect the country to rise above politics by making the needed bitter reforms if it must remain afloat. Already economic watchers foresee a situation where many State Governments will in 2016 and 2017 or thereabout begin massive cut in public expenditure which may even include discussions over lay-off of public sector employees if the Government does not take urgent steps to mitigate the effect of the current economic crises occasioned by the fall in global crude oil price and industry scale oil theft continues unabated.”
Comrade Onuegbu noted that the situation in Nigeria is made worse by the fact that there were existing serious challenges in the industry, which were yet to be addressed by the government and other stakeholders.
Key amongst these challenges listed by the TUC Rivers State chair include stealing of about 400,000 barrels of crude oil daily through pipeline vandalism, well head vandalism and illegal crude oil diversion, escalating insecurity and kidnapping in the Niger Delta, leading to significant increase in the cost of doing business, government’s inability or refusal to fund JV budgets and expenditures, thereby stalling ongoing oil and gas projects and operations.
Onuegbu stated that other challenges are huge cash call arrears and the non-passage of the Petroleum Industry Bill, which has reportedly stalled some $80 billion in investments in the sector as international investors adopt a wait and see attitude refraining from making any new investment pending the passage of the bill.
He said: “There are also very serious challenges in the Nigerian downstream sector as the nation’s four refineries produce at far less than their installed capacity, forcing the country to import much of its needed refined products, and embracing a subsidy regime to reduce the cost per litre to the public.
“Unfortunately the subsidy programme has become unsustainable under the current regime of low crude oil price, opaque and riddled with corruption. As if the above challenges are not bad enough, half way into 2014, the Nigerian National Petroleum Corporation (NNPC) announced a 40 per cent cut in the JV programme budget after the JV partners had gone ahead to spend on the basis on the DEVCOM approved figures and the 2013 levels.
“The effect of this is a significant cut in exploration and production activities from the second half of 2014. This in addition to non-funding of JV operations forced the JV partners who are major oil companies to significantly scale down their operations in Nigeria and also owing their contractors thereby exacerbating the problem in the Nigerian oil and gas sector.
“The net result of all these is a very big decline in investment in the Nigeria oil and gas sector; steep fall in Nigerian oil and gas operations; unprecedented increase in redundancies, asset divestments, restructuring and right sizing in the Nigerian oil and gas industry.
“Indeed this is a very difficult time for the Nigerian oil and gas sector and indeed Nigeria. The sector and the economy has seen unprecedented number of job losses (some 120,000 direct and indirect jobs have been lost in the Nigerian oil and gas sector) as companies and organisations struggle to keep afloat in the midst of pressures from international crude oil price and Nigeria’s inability to make needed reforms especially passage of the Petroleum Industry Bill, diversification of the economy and stoppage of crude oil theft.”
Onuegbu therefore appealed to NUPENG and PENGASSAN, together with their labour centres – NLC and TUC – to collaborate with the Nigerian Government, employers and other stakeholders to evolve appropriate strategies to protect its people from the vagaries of global politics, ups and downs in the international crude oil price as well as effectively resolve other outstanding challenges in the Nigeria Oil and gas industry.
Without these strategies and their effective implementation, the current administration of Buhari and any other administration for that matter, will be incapable of delivering on its campaign promises to the Nigerian people, Onuegbu said.
Similarly, without these strategies and their effective implementation, the Nigerian labour movement, especially the two unions in the oil and gas sector, NUPENG and PENGASSAN, would be unable to deliver on their objectives to their members and the general public and would therefore be in danger of becoming irrelevant, leading to their eventual extinction.
Some of the strategies Onuegbu proposed include the adoption of Partnership Approach to Industrial Relations and a strategic shift in our approach to industrial relations to enable the Unions partner with the management and the government to co-create win-win solutions to the current challenges facing the industry and the organisations their members work for.
He advised the labour unions in Nigeria to adopt the Norwegian partnership model.
Other strategies canvassed for include the diversification of the Nigerian economy and review of Nigeria’s system of fiscal federalism; passage of the Petroleum Industry Bill and conclusion of the reforms in the Nigerian oil and gas sector; good governance and anti-corruption; and education and training of their members and labour leaders to appreciate the current economic realities and its implications for the economy and the unions.
Onuegbu therefore advised the labour unions in Nigeria to adopt the Norwegian partnership model and called for a proactive review of the approach to industrial and employment relations by the government, unions and employers in the Nigerian oil and gas sector.