Kachikwu’s bogus figures on oil losses

IN a statement with vast implications for the polity, Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, said, on Tuesday February 14, that the country lost as much as $100 billion in revenue last year following attacks by militants on oil installations in the Niger Delta. Speaking during his monthly broadcast posted on his Facebook page with the title: ‘Oil sector militancy challenges: Road map to closure’, the minister claimed that the nation’s oil production fell by one million barrels per day at some points last year. He said: “At the highest point of last year, we were producing 1.2 million barrels, which means we were losing literally a million barrels of oil per day. At that time also, we were basically losing an average, if you look at 2016, of over $50bn to $100 bn of unearned income as a result of this disruption. Jobs were cut; pipelines were strewn all over the place; refineries couldn’t work to capacity, and we couldn’t meet our contractual international obligations. ”

To say the least, Dr Kachikwu’s postulation was highly bogus and unbecoming of an official of his standing. How could anyone claim that Nigeria lost between $50 billion and $100 billion to crude oil disruptions in 2016? In 2016, the budget benchmark for a barrel of oil was $37. Assuming that the country produced at maximum capacity per day, that is, at 2.2 million barrels of crude oil per day and sold oil at that benchmarked rate, it would have made a total of $29.79 billion in that year. However, because budgets are mere estimates, it would be helpful to consider the country’s actual production in the year. According to the verified figures widely disseminated by the Nigeria National Petroleum Corporation (NNPC), Nigeria produced a daily average of 1.8 million barrels of oil in 2016, that is, with a shortfall of 400,000 barrels per day occasioned by the activities of militants in the oil-rich Niger Delta. The average selling price of crude oil for 2016 was $45, $8 above the budget benchmark.

Going by that figure, the country made $29.65 billion and lost $6.59 billion. The calculation is simply thus: 1.8 million barrels per day multiplied by $45 multiplied by 366 days = $29.65 billion total revenue. For the loss, it is 400,000 barrels per day multiplied by $45 multiplied by 366 days = $6.59 billion. Now, even if the country actually lost one million barrels of oil per day and not 400,000 as reported by the NNPC, the loss would have been $16.47 billion, a far cry from Kachikwu’s figure. So, where did Kachikwu get his “$50 billion to $100 billion” from?

Indeed, had the nation produced maximally at the average market price of $45 per barrel throughout the year — and we expect the oil minister to still remember this figure — it would have made a total of $36.23 billion. So, how could an entity which would have made a total of $36.23 billion from crude oil sales if it had produced at maximum capacity have lost “$50 billion-$100 billion” in revenue? Kachikwu’s bogus figures give the sad impression that governance in the country left the region of empirical facts and landed in a world of fantasy. His exaggeration is particularly needless because, even at the current official rate of N305.5 to a dollar, the $6.59 billion lost to activities of militants in 2016 translates to over N2 trillion. This is a humongous figure, and Kachikwu could still have made his point, namely that  militants’ activities had adverse effects on the nation’s revenue in 2016 – without resorting to fables and insulting the intelligence of the Nigerian public.

Sadly, even the clarification embarked upon by the minister following his public distortion of figures was no less disastrous. The minister, in a statement released by his Technical Assistant on Media, Uche Adighibe, claimed that : “Over the last decade spanning through various administrations, the oil industry in Nigeria has suffered critical disruptions to operations resulting in the unearned incomes amounting to $50 billion—$100 billion due to militancy activities and vandalism. This can be verified through the report provided by the Nigerian National Petroleum Corporation (NNPC) during the 2016 Fiscal Liquidity Assessment Committee retreat which showed that the industry lost over $7 billion due to activities of militancy groups and oil pipeline vandals from January 2016 to October 2016.” Pray, just how could Nigeria have lost “over $7 billion” from January 2016 to October 2016 when crude oil was only $45 per barrel?

To be sure, we have no problems with Kachikwu’s 20-point agenda for reversing the losses, including engagement in town hall meetings, inter-agency collaboration, ring-fenced state approach, security hold hand, peace and investment on state basis and focused investments in gas-to-power, as well as  incentive for peace scheme, massive civil infrastructure revamp and Niger Delta Development Fund Initiative. We also endorse his promise, namely: “Working with the Nigerian National Petroleum Corporation, we are going to embark on looking for third-party funds to massively begin infrastructure revamp of the assets that are required in the industry. In addition to that, we want to target specific investments in this area.”

We would however advise him to be more painstaking in his future presentations and resist the temptation of sensationalism, not least because such a course of action makes Nigeria a laughing stock in the comity of nations.

 

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