Human rights activist and senior lawyer, Dr. Olisa Agbakoba, SAN, has highlighted that Nigeria’s public debt has surged to $91.46 billion (N121.67 trillion), despite the nation generating over $1 trillion from oil and gas in the past 40 years.
In his presentation titled “The Paradox of Nigeria’s Oil and Gas Industry: A Policy Paper,” delivered at a media engagement in Lagos, Agbakoba pointed out several issues contributing to the country’s economic predicament.
He cited the exclusion of Nigerians from key value chains, weak enforcement of local content laws, incorporation of foreign agreements, tax avoidance, and corruption as significant factors.
“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,” Agbakoba stated.
“Yet, Nigeria consistently resorts to borrowing, with the total public debt standing at N121.67 trillion ($91.46 billion) as of March 31, 2024, according to the Debt Management Office, DMO.”
Agbakoba emphasized that several critical value chains in the oil and gas industry largely exclude Nigerian participation.
“There are 36 value chains related to crude oil exploration, with at least seven crucial ones largely excluding Nigerian participation: legal, shipping, banking, insurance, drilling, oil field services, engineering, and construction,” he explained.
He noted the loss of over $1 billion in legal work 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,” Agbakoba added.
He also pointed out that funds from crude oil production are often held in foreign banks for months before remittance to the Central Bank of Nigeria, depriving Nigerian banks and the economy of substantial business and potential multiplier effects.
Additionally, the Nigerian insurance industry plays a minimal role in the oil and gas sector, with no major Nigerian insurance underwriters covering risks for the over 25,000 foreign vessels in Nigerian cabotage waters or the over 1,000 oil rigs in Nigerian waters.
“Nigerian companies are often excluded from major drilling contracts, with these lucrative opportunities primarily going to foreign firms,” Agbakoba said.
“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.”
He further highlighted that 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,”
Agbakoba lamented.
“Incorporation of foreign agreements often excludes Nigerian laws and designates adjudication forums outside Nigeria, contradicting local content policies.”
Agbakoba criticized the current structure for heavily favoring International Oil Companies (IOCs), which results 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,” he said.
“The dominance of IOCs has led to a lack of technology transfer and skill development among local companies.”
He also revealed that 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,” he said.
“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.”
Agbakoba called for new measures to increase Nigerian participation in legal services, shipping, banking, insurance, drilling, oil field services, and engineering within the oil and gas industry to address these issues and enhance the nation’s economic stability.