The Sunday Mail
Darlington Musarurwa recently in ABUJA, Nigeria
THE pitter-patter sounds of sandal-clad feet trailing a slowing, often desperate motorist on the streets of Abuja, Nigeria’s political capital, is all too familiar as predatory opportunists move in to plug fuel shortages that have hit Africa’s biggest economy of late.
For a Zimbabwean, it is the most nauseating and traumatic throwback to the fuel crisis that peaked in 2007 when Government, through the National Incomes and Pricing Commission, directed retailers — cutting across virtually all sectors of the economy — to revert to prices that obtained as at June 18, 2007.
So bad were the queues and the occasional scuffle of impatient motorists that economists thought the economy would collapse.
At the time, the country’s inflation accelerated to 4 530 percent — the highest in the world.
This is reminiscent of Abuja today, though it hasn’t mutated into a full-blown crisis.
But, as was expected, fuel attendants at the fuel stations that are able to access the “black gold” are in most cases colluding with sleek “fuel mules” that in turn sell it to desperate motorists at punitive prices.
For all the superlatives and sugar-coated words that are used to describe the Nigerian economy today, the recent fuel shortages, especially for one of Africa’s biggest producers of the commodity, represent the most bestial warts that are holding back the continent’s growth prospects.
On April 6, 2014, Nigeria’s chief statistician, Mr Yemi Kale, announced that the country’s GDP had been re-based to US$453 billion, which is US$69 billion more than South Africa — previously Africa’s largest economy.
In comparison, Zimbabwe’s economy at US$14 billion is 32 times smaller than that of the West African country.
Growth was mainly spurred by the burgeoning success in the music and film industry, including the telecommunications industry, which again is considered to be Africa’s largest.
It is estimated that the Nigerian film industry had grown to more than US$5,1 billion or 854 billion naira by the end of last year.
But income inequalities remain markedly deep in Nigeria than in South Africa as the former’s GDP per capita at an estimated US$2 700 is light years behind the latter’s GDP per capita at US$7 500.
South Africa still has the most sophisticated capital markets on the continent.
The World Bank estimates that the ordinary Nigerian lives on less than US$2 per day.
But economists are convinced that Nigeria will be the world’s next growth zone.
Just like China, the demographics seem to favour the sub-Saharan country, which is home to more than 170 million people.
Investors seem to favour the huge market that the growing population — about one-sixth of Africa’s population — presents.
Structural weakness
To its credit, Nigeria, particularly in the decade leading to 1980, invested a lot of effort to unclasp the grip that foreign companies had on the oil industry.
German firm Nigerian Butimen Corporation was the first to explore for oil in 1908 but subsequent World Wars deferred full investments into the sector.
But when activity began, British company BP-Shell, then named Shell D’Arcy, was given the sole concessionary rights over all of Nigeria by the British crown in 1937.
The first resource that could be commercially exploited was however made in 1956 at Oloibiri in the Niger Delta.
By the time Nigeria gained independence on October 1, 1961, the oil concessions had been opened up to foreign companies such as Mobil; Agip; Elf, which used to be called Safrap; Texaco and Chevron.
Crucially, between 1971 and 1979 the military government led by General Yakubu Gowon, including his successors Murtala Mohammed and Olusegun Obasanjo, had made ground-breaking empowerment interventions.
By the end of 1979 Nigeria had formed the Nigerian National Petroleum Corporation (NNPC)and through a constitutional provision, Section 40 (3) of the 1979 of the constitution, the country’s natural resources were nationalised.
Essentially, through that period the government’s participation had improved to more than 60 percent.
Before the active participation of the federal government into the production cycle of oil, the fiscus only depended on revenues accruing from taxes and royalties.
Currently, joint ventures now account for 95 percent crude oil output, and, most importantly, the Nigerian government now has controlling stakes in all of the six foreign firms, holding 55 percent in the Shell Petroleum Development Company of Nigeria, a company that accounts for more than half of the national production.
In the joint venture companies with American firms Chevron Nigeria Limited and Mobil Producing Nigeria Unlimited the NNPC has 60 percent equity in both.
Similarly, authorities also hold 60 percent in Agip (Italian), Total (French) and Texaco.
Although Nigeria has managed to gain a foothold on its non-renewable resource, it continues to be weighed by a sickening inability to refine all its local production.
Value addition
Though the government has built four refineries – two in Port Harcourt, one in Warri (Niger Delta) and another one in Kaduna in the North – they are only able to process 445 000 per day, which is insufficient to meet local demand.
Africa’s richest man, Nigeria’s Mr Aliko Dankote, plans to build a new refinery with a capacity to produce 400 000 barrels per day at an estimated cost of US$8 billion.
There is enduring speculation within Nigeria that lobbyists that control stakes in the money spinning petroleum import business and foreign businesses that continue to benefit from exporting refined petroleum products continue to actively work to maintain the status quo.
Authorities are however trying to buck the trend.
Last year, most long-term oil contracts worth an estimated US$40 billion were awarded to Nigerians and global trading houses such as Trafigura and Glencore lost out.
The inability to process its own crude has meant that the bulk of the country’s fuel requirements have to be imported, and to cover the obscenity of selling fuel at a high price, government has had to subsidise importers under the Petroleum Support Fund.
Government presently insists that fuel must retail at 87 naira (USc49 using the official exchange rate of US$1 to 205 naira).
To do this it has to shell out a subsidy of 35 naira per litre.
The appetite to control the sensitive market has inadvertently spawned black market traders.
In Abuja, fuel is being sold between 200 naira (USc 97) and 250 (US$1,21) on the black market.
President Robert Mugabe, the current chairperson of the AU, contends that Africa needs to control her resources and process them in order to sweat the maximum possible value especially from non-renewable resources.
Although Nigeria has accomplished the first lag of controlling its resources, it is yet to decisively deal with a situation where it remains a primary producer of raw materials and a final consumer of the value-added products.
The long queues that slither around the streets of Abuja are testimony to this.
Most revealingly, Nigeria is but a microcosm of the fundamental challenges across most African countries that are battling to assume a respectable position on the global economic space.
It is however believed that the current wave of resource nationalism will ultimately revolutionise African economies.
