News -- 1% of Nigeria's population gets 80% oil/gas revenue � World Bank

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Just 1% of Nigeria' s population gets 80% oil/gas revenue — World Bank

By Hector Igbikiowubo
Tuesday, October 26, 2004

PART of a World Bank report contained in the revenue fact sheet of the Organisation of Petroleum Exporting Countries (OPEC) has disclosed that about 80 per cent of Nigeria’s oil and natural gas revenues accrues to just one per cent of the country’s population.

The other 99 per cent of the population receive the remaining 20 per cent of the oil and gas revenues, leaving Nigeria with the second lowest per capita oil export earnings put at $212 (N28,408) per person in 2004.

The 2004 per capita earning when compared to $589 per person earned in 1980, the peak year for Nigerian oil export revenues (in inflation-adjusted terms) shows a decline of more than 50 per cent. A recent survey conducted by an anti corruption watchdog, Transparency International (TI) disclosed that oil wealth is often a breeding ground for corruption while estimating that billions of dollars are lost to bribery in public purchasing with the Nigerian oil sector among other nations as a particular problem.

Mr. Eigen, a spokesman for TI, explained that in some oil producing countries including Nigeria, public contracting in the oil sector is plagued by revenues disappearing into the pockets of Western oil executives, middlemen and government officials. “As the Corruption Perceptions Index 2004 shows, oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all have extremely low scores,” said Mr. Eigen.

Mr. Eigen pointed out that oil companies could help check corruption in the sector by ensuring that they publish details of the payments made to governments and state-controlled oil firms, periodically.

“Access to this vital information will minimise opportunities for hiding the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and post-war economies,” Mr. Eigen said.

However, another dimension to the frittering away of oil and gas resources in Nigeria is the incidence of crude oil theft which is currently put at over 100,000 barrels per day, with state officials accusing faceless highly placed Nigerians of being the masterminds.

While upstream oil industry operators continue to lament the rising incidence and its impact on their operations, government has shown it is incapable of checking the trend with its security agencies bandying blame over complicity.

Probes revealed that the oil war lords operating in the Niger Delta area have also been engaged in illegal bunkering activities and an official in the presidency had disclosed that at a meeting brokered to discuss peace in the area, one of them had asked that he be allowed to carry on illegal bunkering activities unhindered.

While further probes indicate that the presidency may have reserved its response to the war lord’s request to avert aggravating an already tense situation in the Niger Delta, there are indications that illegal bunkering activities will continue without a firm response from government.

OPEC projection indicates that Nigeria’s net oil export revenues are expected to increase 29 per cent or to $27 billion in 2004, compared to $20.9 billion in 2003 and $16.5 billion in 2002.

This represents a big increase from 1998, when the country earned less than $9 billion amidst a period of political and social turmoil.

However, there are indications that given the rising prices of crude oil in the international market and increased oil exports, Nigeria could net over 33 per cent or $32 billion in oil export revenues by the end of this fiscal year. Nigeria’s real GDP is estimated to have grown by 4.2 per cent in 2003, with forecast growth of 3.6 per cent in 2004 and 3.1 per cent in 2005. Although Nigeria was expected to export around 2.2 million barrels per day of crude oil in 2004, up from the 1.9 million barrels per day it exported in 2003, the country began exporting over 2.5million barrels per day since the beginning of the third quarter.

Nigeria’s 2004 budget reportedly is based on an assumption of $23 per barrel (for Nigerian oil), about $11 per barrel below EIA’s oil price forecast for Nigeria for 2004. However, Nigeria’s sweet crude prices have averaged about $40 per barrel this year.