Nigeria’s current oil and gas governance framework, primarily implemented through Joint Ventures (JVs) and Production Sharing Contracts (PSCs) with International Oil Companies (IOCs), is fundamentally flawed and detrimental to Nigeria’s sovereignty and economic interests. This system allows IOCs to extract Nigeria’s natural resources in exchange for profit sharing and bonuses, effectively giving them undue control and ownership over resources that rightfully belong to the Nigerian people.
The Current System: A Violation of Sovereignty
The present arrangement can be likened to two deeply problematic scenarios:
- Hiring someone to drill a well, only for them to claim ownership of the well itself.
- Engaging a tow truck to transport goods, then having the driver claim ownership of the transported goods instead of accepting payment for the service.
In both cases, the service provider is overstepping their role and infringing on the rights of the resource owner. Similarly, IOCs in Nigeria have moved beyond their role as service providers to become de facto owners of Nigeria’s oil and gas resources.
The Cycle of Exploitation
Under the current system:
- IOCs extract natural resources (oil and gas) from Nigeria.
- These resources are transported out of the country for refining.
- The refined products are then returned and sold to Nigerians at international market prices.
This cycle not only deprives Nigeria of the full value of its resources but also makes Nigerians dependent on foreign entities for products derived from their own natural wealth. This arrangement is both unfair and a clear violation of Nigeria’s economic sovereignty.
Constitutional Concerns
The current model raises significant constitutional issues:
- It contradicts Sections 16 and 44(3) of the Nigerian Constitution, which mandate the government to manage Nigeria’s natural resources for the maximum welfare of its citizens.
- The outsourcing of oil and gas management to IOCs through JVs and PSCs may constitute an unlawful delegation of governmental authority.
- The federal government’s willingness to share ownership with IOCs, while resisting shared ownership with state governments, represents an inconsistent and questionable application of resource ownership principles.
The Development of Oil Alternative
The “Development Oil” approach offers a more equitable and sovereign-respecting alternative:
- IOCs would be engaged purely as service providers and paid a fee or wage for their extraction services.
- The extracted resources would be handed over to Nigerian companies for refining and sale.
- This approach would allow Nigeria to retain control over its resources while still benefiting from the expertise and technology of IOCs.
Benefits of Development Oil
Implementing a Development Oil approach would:
- Reassert Nigeria’s sovereignty over its natural resources.
- Promote the development of domestic refining capacity.
- Create more job opportunities for Nigerians in the oil and gas value chain.
- Ensure that a larger portion of the wealth generated from oil and gas remains within Nigeria.
- Align the management of oil and gas resources more closely with constitutional mandates.
Conclusion
The current governance framework for Nigeria’s oil and gas sector is unacceptable. It allows for the exploitation of Nigeria’s natural resources by foreign entities, violates the spirit of the Nigerian Constitution, and hinders the country’s economic development. A shift to a Development Oil approach would realign the sector with Nigeria’s national interests, promote economic sovereignty, and ensure that the country’s oil and gas resources truly benefit the Nigerian people.
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