Diversification has been a topical issue discussed in several fora, especially when the global oil price war began few months ago.
Though oil may have done more good than evil for Nigeria, the Federal Government’s total reliance on it is a disadvantage that cannot be denied, even as the said price war was worsened by the advent of Coronavirus disease.
For any discerning government, this is the time to go back to the drawing board and restrategise on how to look into other viable sector of the economy, especially Agriculture.
In an exclusive interview with the former Minister of State for Petroleum, Dr. Ibe Kachikwu, explained that some of the disadvantages of oil and gas are that it creates a lot of pollution, shutting down a lot of farms and sometimes distracting young people from careers, because everyone wants a quick oil return.
He emphasized that Agriculture should be one of the focal points of this country because of the endowed massive landmass. He admitted that President Muhammadu Buhari has intensely refocused Government investment attention on agriculture and infrastructure.
Kachikwu offers insights into what we need to do as a nation. According to him, Nigeria needs to get people back to farms, build modern infrastructure, while it needs to step back from the model of controlling the investment opportunities in the oil sector and allow the private sector to take the lead on harnessing these opportunities.
As a past President of OPEC, do you think the cutting of oil production is the lasting solution to the fall in oil prices? If so why, but if not, what further step should be taken?
When oil production is cut, it could be for a number of reasons. In the immediate situation, we have oil supply hovering between 15 and 17 million barrels in excess of world demand. This is because industries, airline services, and the general world economy have been shut down as a result of the COVID-19 pandemic. Even without a policy, oil prices had to be cut down. Realistically speaking, the cut in production was necessary, indeed almost inevitable.
A long-term solution to this should be a regional focus. Each country must look within its immediate region to see how it can satisfy those immediate demands so that at least oil can go to places that are shorter in distance and much more dependable as markets.
With oil prices falling to unprecedented lows globally, will the price ever get back to the initial $57 benchmark as stated in Nigeria’s 2020 budget?
It doesn’t matter what happens, oil is not likely to get to $57 a barrel this year. We are likely going to see a rebound in terms of prices over the first or second quarter of next year. However, it is even doubtful whether we will get to the $57 benchmark early next year, for many reasons.
For example, a lot of countries with huge financial resources like China and America built huge initial stockpiles of oil in the initial months of COVID-19 when prices were low. So, even when the pandemic is over, there is going to be a lot of pressure on prices.
With the triple whammy of low demand, high supply, and minimum storage of crude, what are the underlying effects of these on local producers?
We are suffering in terms of storage and because of that, a lot of our oil still lie onboard vessels that haven’t been able to be discharged. Storage capacity all over the world is full, but Nigeria has been particularly badly hit because we have very limited storage inland.
We need to address storage and create storage obligations among oil producers. We need to address the issue of diversification in terms of our product lines into petrochemicals and gas, so that we get a lot more out of oil. We also need to massively grow our refining capacity so that there is a consumer pattern that is even locally based.
It costs Saudi Arabia $2.8 to make a barrel of oil – the lowest production cost in the world. With the gloomy oil price of Nigeria’s bonny light, will it be a case of reducing production cost for Nigeria?
The first thing to do if you’re not getting a good return on your investment, in terms of cost versus pricing, is to shut down such products and look for fields that have better margins, to enable you to compete.
Above all, when all this is over, we will need to continue to address the cost element, I think that was one of the high points of some of the policies that we made when I was in Government. Under the leadership of the President, we began to focus very heavily on the cost of production and set benchmarks.
We achieved about $15pb cost of production in some fields and we were aiming over the next 2 to 3 years to pull the cost of production for most fields down to about $10-$11pb and thereafter go downwards from there.
There is a need to create rewards for those producing at very low cost; right now there is none in place. If there are incentives for producers who meet certain benchmarks on cost reduction, everyone will follow suit. Simultaneously, there should also be a penalty for producers who produce at a very high cost.
Many Nigerians feel that the biggest problem faced by the Federal Government is the inability to refine crude in Nigeria. Dangote refinery has been at the forefront of this for a number of years. What benefits would that provide for the FG and every stakeholder in the oil value chain, once it begins operation?
I won’t focus on just Dangote refinery, although that is probably the most positive one we have in the country right now; I will focus on all the refineries. If all the refineries in this country, including Dangote refinery, were to come on stream, some of the issues we have dealt with in the questions asked so far relating to storage, consumption, and pricing, will reduce substantially because we will not be selling crude oil as crude oil. Rather, we will be selling refined petroleum products so there will be value-added.
We will stop importing refined products. We will also be able to rejuvenate the downstream sector of the oil industry, which is right now almost abandoned. Nigeria will be the real energy King of Africa in terms of sending refined petroleum products to African nations. This will lead to job creation, improvement in technology; it will challenge our private sector investors.
Do you think the energy market will ever return to the old mode of operations, as many African petroleum-producing nations have been forced to review their budgets downward due to COVID-19?
Hopefully, I pray the COVID-19 pandemic does not last long and that it does not irreversibly affect the oil market. Although we cannot tell when the current COVID-19 will end, the global scientific projection is that it will buy about the 1st quarter of next year. What this does for us, if we use the time well, is that it will help us intensely refocus our attention to other sectors apart from the petroleum sector, and invest massively in mechanized agriculture, services, tourism, etc.
The oil and gas sector has its disadvantages too. It is creating a lot of pollution, shutting down a lot of farms and sometimes distracting young people from careers, because everyone wants a quick oil return. Agriculture should be one of the focal points of this country because we have massive landmass.
President Buhari has intensely refocused Government investment attention on agriculture and infrastructure. We need to get people back to farms. We need to build modern infrastructure. The government will need to step back from the model of controlling the investment opportunities in the oil sector and allow the private sector to take the lead on harnessing these opportunities. The government can then sit back to enjoy its royalties and taxes.
You want to serve as a visiting professor in institutions across the world. What do you hope to take away and accomplish from the experience?
My drive is simply to share experiences that are useful to those who are coming up the block. I modestly hope to share personal experiences, as I’m privileged to have worked with the private sector for over 25 years and the public sector for about four years. I think one owes it to society at large to share one’s knowledge. This is one of the factors that propel my writing. I was writing before I went to the government and when I was in government, I continued.
I try to look at everything I do and how to document experiences. It helps the next person that will take your desk to do better than you by virtue of the information at their fingertips.
What private ventures are you into now?
One passion that I have is intellectual, so going into institutions to share thoughts and learn along with people, as talked about already, is part of my ventures.
Another is Afric Energy, a venture that we are floating and hoping to grow. The whole idea is to look at Africa across the board and decide what kind of consultancy models we can bring to address some of the immediate problems that we see across the African oil sector.
Having served as both the President of OPEC and three-time President of APPO, I aim to work with some of my former African petroleum sector Ministers who are still there to help them solidify the plans that they have.
As a lawyer in the Petroleum Industry, you have stated in the past that Nigeria needs to go back to the drawing board to find the right approach to the sector. What approaches, in your opinion, can we take?
One approach is regulatory. We haven’t been able to pass some key bills; for example, the “Petroleum Industry Bill.” The time has come to focus attention on this because the absence of an adequate regulatory environment creates uncertainties among investors. I am hoping that during this second tenure of President Buhari, the attention will be on passing the PIB in whatever form that they believe is best for the country. A lot of work has been done in the last 2 Assemblies, and it is now time to bring this to a conclusion.
The second approach is to set policies that create a competitive environment in the energy sector. By this, I mean that we need to diversify investment into petrochemicals, refineries, and creating necessary storage infrastructure.
The third and final is to begin our plan for the heydays of oil. It is clear that oil production as is seen today will not be there forever. The challenges posed by new technology, environmental regulatory controls, global consumption behavioral patterns, and coming new world economic order makes it imperative for us to begin to investigate an economic model that is not completely dependent on oil. This is the drawing board that we all have to focus on.
US government to ban WeChat and TikTok from app stores
Chinese-owned social media apps are facing a ban in the US over national security concerns.
The United States government says it will ban the services of Chinese tech giants, WeChat and TikTok, from online mobile application stores in the U.S. It also plans to prohibit any funds transfer/payment services through the WeChat mobile application.
This was announced by the U.S Commerce Secretary, Wilbur Ross, in a statement on Friday, following President Donald Trump’s Executive Orders (E.O.) 13942 and E.O. 13943, on the 6th of August.
“In response to President Trump’s Executive Orders signed August 6, 2020, the Department of Commerce (Commerce) today announced prohibitions on transactions relating to mobile applications (apps) WeChat and TikTok to safeguard the national security of the United States,” said Wilbur Ross.
He added that the Chinese Communist Party (CCP), has proven it has the means and the motive to use Chinese tech apps, to threaten America’s national security foreign policy, and the economy of the U.S.
He said the following transactions will be prohibited from September 20th for WeChat and November 12th for TikTok
- Any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates, through an online mobile application store in the U.S.
- Any provision of services through the WeChat mobile application, for the purpose of transferring funds or processing payments within the U.S.
Mr. Ross said that with the Executive Order, the US government has taken a ‘significant action’ in fighting China’s malicious personal data breach on American citizens, and also promote democratic rule-based norms, and aggressive enforcement of U.S. laws and regulations.
The U.S government announced that further prohibitive measures, relating to both companies may be announced in the future.
“Should the U.S. Government determine that WeChat’s or TikTok’s illicit behavior is being replicated by another app somehow outside the scope of these executive orders, the President has the authority to consider whether additional orders may be appropriate to address such activities.”
President Trump has given until November 12, to resolve the TikTok security concerns of the US. He added that the prohibitions may be lifted, if they are addressed.
WTO: Okonjo-Iweala still in contention as 3 candidates depart race for DG
Okonjo-Iweala and the remaining 4 other candidates hope to succeed the current DG, Mr Roberto Azevêdo.
Three candidates running for the post of the Director-General of the World Trade Organisation have fallen out of the race after failing to secure enough votes in the first rounds of voting, leaving only 5 candidates left, including Nigeria’s Ngozi Okonjo-Iweala.
This was disclosed by Bloomberg on Thursday, before the meeting on Friday. The Candidates that are out of the race are Jesus Seade (Mexico), Tudor Ulianovschi (Moldova), and Hamid Mamdouh (Egypt). The candidates were not able to secure the support needed for the first round of 3 rounds of voting.
Dr. Ngozi Okonjo Iweal joins 4 other candidates for the next round of voting. The candidates are; Liam Fox (UK), Amina Chawahir Mohamed Jibril (Kenya), Yoo Myung-hee ( South Korea), and Mohammad Maziad Al-Tuwaijri ( Saudi Arabia).
Ngozi Okonjo-Iweala disclosed last month some of her plans for the Organization if made President. Nairametrics reported she noted that part of her vision is to build a trade institution where there is greater trust among its members. She also stressed that the WTO, at this critical time, is needed to ensure that trade and global markets remain open.
On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:
“Well, this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’’
She added she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.
“You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members,’’ she said.
Okonjo-Iweala and the 4 other candidates will present themselves to the members of the global trade body for the later stages of voting in the hopes of securing the highest number of votes to succeed the current DG, Mr. Roberto Azevêdo.
WTO: Selection of new DG might be tied to the upcoming US presidential election
The eventual winner could be dependent on the outcome of the November 3 US Presidential elections.
The WTO’s effort to select a new leader entered a new stage this week, as the ambassadors from 164-member countries met for private consultations, on who they would support.
Six former WTO officials and trade experts revealed that the politicking in Geneva, Switzerland – WTO headquarters, could be a wild goose chase, as the decisive developments that will shape the future of the embattled global trade organization, are unfolding miles away in Washington, ahead of the November 3 presidential elections.
Although, the support of a particular candidate by the United States is critical; 4 trade experts, including former WTO employees, believe that the Trump administration is unlikely to breathe life into a multilateral body that he once threatened to leave. Donald Trump launched a trade war with China, repeatedly imposed tariffs on US allies, and destroyed WTO’s ability to intervene in disputes, by blocking the appointment of members to its Appellate Body.
David Tinline, a former adviser to Azevedo said, “I find it hard to imagine that the Trump administration would shift tack and do something very positive for the system.’’
The US Trade Representative (USTR), Robert Lighthizer, had in June told US lawmakers that, “the WTO needed a reform-driven leader and that he would veto any candidate who showed any whiff of anti-Americanism.”
The former WTO officials and trade experts said that the US-China economic conflict is a further divisive factor, as both countries will likely reject any candidate backed by the other.
The 8 candidates in contention for the top job, are expected to be trimmed down to 5 after the first confessional meetings on September 16. This will be further cut down to 2, and the final decision designed to be taken by convention before the November 7 deadline – just four days after the US elections.
Aside from the two influential African women vying for the role, Liam Fox, Britain’s former Trade Secretary, is a force to reckon with. If a favorite candidate does not emerge, some WTO members might prefer to wait until after the US election in case Joe Biden wins the US presidential election; especially, as Voting, seen as a last resort, has never occurred in WTO’s history.
A former member of WTO, Peter Van Den Bossche said, “They could play a waiting game, but that would push the decision until at least February or March 2021.”
Even though WTO is member-led, a strong leader who can facilitate decision making, and galvanize its 164 member nations, is crucial to reviving a severely embattled global organization.