The rising crude oil prices

LATELY, crude oil prices have rallied steadily, rising above $60 per barrel in November. The increase has been precipitated by three principal factors. First is the production cut by members of the Organisation of Petroleum Exporting Countries (OPEC). The reduction in OPEC members’ output reduced supply to the market with a corresponding increase in prices. Another reason is the ongoing hostilities between Iraq and Kurdistan over the status of the city and region of Kirkuk. The crisis has impeded Iraq from reaching its optimal production capacity.

But the most recent factor is the situation in Saudi Arabia. When Saudi Arabia’s Crown Prince, Mohammed ibn Salman, launched an anti-corruption purge which saw the arrest and detention of 201 persons, including 11 princes and 38 officials, oil prices rose to $62 per barrel, hitting the highest point since July 2015. Since the Kingdom is the world’s largest exporter of crude oil, whatever happens therein goes a long way in determining the direction in which the oil price pendulum will swing.

The rise in the prices of crude oil is good news to Nigeria because oil is the main source of the country’s revenue. Thus, a rise in its prices signals a surge in Nigeria’s revenue inflow which increases the likelihood of budget implementation and project execution.  However, since the benchmark used for the budget is usually lower than the expected crude oil prices, high crude oil prices means that more money than appropriated comes into the government’s coffers. The temptation, therefore, is for government agencies and officials to treat such money as free fund and squander same.

A pointer to this is the issue of the Nigerian National Petroleum Corporation (NNPC) which was forced to pay N30 billion into the Federation Account following the boycott by state finance commissioners of the September meeting of the Federation Account Allocation Committee (FAAC) because, according to them, the revenue to be shared was grossly inadequate.

The House of Representatives ad hoc committee investigating the pump prices of petroleum products quickly swung into action, directing the Department of Petroleum Resources (DPR) to provide details of the N30 billion unremitted crude oil revenue into the Federation Account. While the step taken by the House is commendable, the action of NNPC suggests that the above-the-benchmark revenue from crude oil sales is largely unaccounted for and ends up in private accounts because if the commissioners had not raised the alarm, the money would not have been paid into the Federation Account.

However, the failure of the NNPC to remit the money points to the far more serious issues of incompetence and negligence of those whose responsibility it is to track the nation’s revenue. Since there is a daily production figure and crude oil prices are not a secret, why was it so difficult for those in charge of monitoring this to find out the unconstitutional act of the NNPC before the commissioners’ protest? Was it a case of a collusion of a few against the interest of the majority? The current administration has repeatedly accused its immediate predecessor of failing to save and squandering the nation’s resources. Therefore, it should not be found guilty of what it accused others of.

Every avenue for ripping the country off should be effectively blocked. The excess earnings from crude oil sales should either be deployed to infrastructure development or saved for the rainy day in the Excess Crude Account as stipulated by the nation’s laws. It is distressing and discomfiting to note that in spite of the hike in the prices of crude oil and the attendant increase in the nation’s revenue, so much debt has been amassed in the last two years. This is not the way to go. No country can experience development without prudent utilisation and optimal management of resources.

The Ministry of Finance must up its game of monitoring and managing the nation’s resources for the benefit of every Nigerian. Every dollar earned by the country must be properly appropriated for the benefit of every Nigerian. It should not be left for a few to misappropriate.