Nigeria’s 50-Year OPEC Journey - THISDAY
In less than eight weeks from now, the Organisation of Petroleum Exporting Countries (OPEC), will roll out the drums in celebration of its 60th year anniversary. In 50 years of those six decades, the story of Nigeria has been strongly intertwined with that of the oil cartel. Emmanuel Addeh writes that it has been a marriage that has seen both good and bad times, as portrayed by some key Nigerian OPEC participants, who reflected on the history of Nigeria’s involvement in the organisation
On September 14, 1960, the Organisation of Petroleum Exporting Countries (OPEC), an inter-governmental cartel of 13 countries was founded in Baghdad by its first five members, namely Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
Now headquartered in Vienna, Austria, OPEC, at the time said it sought to coordinate and unify the petroleum policies of its member countries and ensure the stabilisation of oil markets to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.
Going by 2018 figures, OPEC accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s “proven” oil reserves, giving the organisation a major influence on global oil prices. Nigeria discovered crude oil a few years before the formation of OPEC, and it didn’t take too long for the country to realise that it needed to be part of a multilateral organisation that could protect its interest and ensure stability in the oil market.
Before some oil-producing nations came together to form OPEC, the oil market was largely dominated by multinational oil companies and could sway the prices of the commodity to their advantage but to the detriment of the oil-producing countries at the snap of a finger.
This enormous power was reflected sometime in 1959, according to records, when the oil companies unilaterally reduced the price of Venezuela’s crude by $0.05 and $0.025 per barrel and the price of the Middle East crude by $0.18 per barrel, without any care how it could affect the oil-producing countries. Although there had been talks among the few producing countries at the time to counter the antics of the multinationals, these actions by private oil companies accelerated the establishment of OPEC.
The singular need to be part of decisions that directly affect them prompted Iraq to invite the other four countries to a meeting in Baghdad to discuss issues surrounding oil pricing which eventually berthed the cartel after a four-day conference.
Although, there are a few persons that reason that Nigeria has no business being a member of OPEC, many stakeholders who are aware of the workings of the market insist that the cartel’s intervention in oil pricing and stabilisation of supply, has ensured that the country earned more from its oil resources. Aside that, it is argued that the organisation has offered Nigerians the platform to engage in international administration and has served as a ready source of the country’s energy policies as OPEC research department remains very strong in this regard.
Indeed, over the past 50 years, Nigeria has produced six presidents of the OPEC Conference, including Shettima Ali Monguno (1972/73), Mallam Yahaya Dikko (1982/83), Dr Rilwanu Lukman (1986/1989 & 2002), Prof. Jibril Aminu (1991), Dr. Edmund Daukoru (2006) and Dr. Emmanuel Ibe Kachikwu (2015). In total, the country has presided over 26 OPEC ministerial conferences held in several countries, including Buhari, who also served as head of Nigeria’s delegation to OPEC from 1976-1978.
In addition, Nigeria has provided four OPEC Secretaries General, including Chief M.O. Feyide, Rilwanu Lukman, Edmund Daukoru and the incumbent, Dr. Sanusi Barkindo who was acting secretary general from January 1, 2006 to December 31, 2006 and has been secretary general since August 1, 2016. This amounts to a total of 15 years of managing the affairs of the OPEC secretariat on behalf of all its members.
However, it must be said that being a double-edged sword, Nigeria’s relations with OPEC also means that the country has had to adhere strictly to production restrictions, like it is currently happening, despite the temptation to pump more oil. Although tapered by the current Covid-19 pandemic amid the restriction of movement and gatherings, both OPEC and Nigeria, recently found a way to mark the country’s 50th anniversary, with Nigeria having joined in July 12, 1971.
President Buhari, who has been an active participant in OPEC, having been Nigeria’s oil minister in the 70s and currently the defacto oil minister in the country, said that Nigeria’s membership of the organisation has fostered cooperation and reduced the chaos in the international oil market.
“Nigeria’s membership is important because without OPEC the oil industry would have been in a chaotic situation where the winner takes all. Many countries, like Nigeria, would not have been able to develop their oil industry due to stiff competition.
“However, the good collaboration between OPEC member-countries has made it possible to accommodate both the weak and strong players in the oil production industry,” the President said during the celebration of the anniversary.
According to the President, it must be acknowledged that being a member of OPEC has facilitated closer relationships and fostered bilateral cooperation in other fields and industries as the countries seek to identify areas where they can be of help to one another.
Looking back at the historic day, OPEC Secretary-General, Barkindo, noted that being the 11th member of OPEC, with the conference unanimously agreeing to accept the country’s application for membership, it was a seminal moment for the country and for the cartel, with Nigeria being the first sub-Saharan African nation to join the organisation.
For Nigeria and OPEC, Barkindo emphasised that it has at times been a rollercoaster journey, with various market cycles being negotiated, and unexpected events, such as macro-economic uncertainty, natural catastrophes, geopolitics, technological innovations and especially in 2020/21, global health pandemic, threatening to throw OPEC off course.
Stressing that the links and symbiosis between Nigeria and OPEC were too numerous to mention in their entirety, he said that while the organisation was born on September 14, 1960, 17 days later, on October 1, 1960, Nigeria proclaimed its independence and a new era was entered into. “The destiny of the two were interlinked from this point in time,” Barkindo noted.
The OPEC helmsman pointed out that since joining the cartel just over a decade later, Nigeria has played a major role in driving the organisation’s focus on cooperation, goodwill, a sense of belonging and unity, and in working towards achieving market stability, conscious of the benefits it brings to both producers and consumers.
“Nigeria enjoys world renown as a consensus builder and deal maker, and it has been clearly on display throughout its five decades in OPEC. Looking back at the story of Nigeria’s 50-year association with OPEC makes me feel both proud and humble.
“ I am tremendously proud of how far the relationship has come, and how important the two have been to each other. I have Nigeria in my heart, it is where I am from, but OPEC has also become part of my DNA. And I am extremely humbled to follow in the footsteps of the giants of the Nigerian oil industry and OPEC,” he enthused.
The opportunity of the event, which saw OPEC release a bulletin solely dedicated to Nigeria, also afforded a veteran of the organisation, Edmund Daukoru, now a traditional ruler and Chairman of the Nigeria Liquefied Natural Gas (NLNG) an opportunity to bare his mind on the OPEC/Nigeria ties.
Daukoru maintained that there was no doubt that Nigeria has benefited from its membership of OPEC in many ways, including through sharing technical know-how with other members, exchanging views on policies, as well as evolving a better understanding of the global oil market.
“Most importantly, Nigeria’s membership of OPEC has given the country the opportunity to participate in the important goal of the organisation to stabilise the global oil market, which is a requisite for the survival of the industry, and by proxy, the survival of a country like Nigeria that heavily depends on revenue from oil production.
“All these underline the importance of Nigeria’s OPEC membership to the country’s oil development over the past 50 years,” he stated. Having served as OPEC Secretary-General and conference president in 2006, Daukoru expressed joy that the organisation was able to withstand the storm and contribute its little part to the survival of the global oil industry.
He mentioned that the hosting of the 143rd (extraordinary) conference in Abuja in 2006 was one of the highlights of his days in OPEC, despite the challenges that were encountered, further recalling the oil market crisis of between 2004 and 2006.
“Another important highlight is that the oil industry was facing many challenges when I assumed the presidency of the OPEC conference on January 1, 2006. The challenges actually began around April 2004.
“This had to do with rising oil prices due to a combination of factors, contrary to what the industry usually faces. Prices rose from below $30/b to over $70/b by the second half of 2006, member countries had to make huge investments to raise production in order to cool the market. “This was a true demonstration of OPEC’s exceptional role that considers not only the interests of producers, but also the interests of consumers,” he explained.
However, Daukoru admitted that OPEC’s position in the oil production business is gradually slipping with countries like the US becoming major oil producers, but added that the role of OPEC in helping to stabilise the oil market remains important and necessary.
“The implication is that OPEC will need the collaboration of non-OPEC producers to enable it to continue playing that role. Hence, the recent ‘Declaration of Cooperation’ will need to be strengthened and widened for the survival of the oil industry.
“This evolution will have to become a permanent feature. In that sense, Nigeria’s role will continue to be important as the largest oil producer in Africa, and to serve as a rallying point for other African producers,” he stated.
In his intervention, Kachikwu stressed that OPEC as an organisation has added unquantifiable benefits to Nigeria’s oil policy and income-harnessing stability and helped ensure global energy stability over the last 60 years. “Nothing epitomised OPEC’s contributions more than its roles during the three cyclical price periods that occurred in the 1970s and in 2015 and 2020. The unity of purpose amongst members allowed OPEC to resuscitate world petroleum product and market stability, and enabled the sector and various member nations’ economies survive.
“The truth is that for countries like Nigeria that depend on crude oil and has over 70 per cent of its foreign exchange income, the absence or failure of OPEC would have been brutal to the local economy and the development of the local oil industry,” noted Kachikwu.
But for the DoC which was activated by OPEC, Kachikwu opined that prices were tumbling down and the US was bringing a lot of pressure to bear on member countries singularly and collectively.
“I expect OPEC to remain relevant into the next decade and Nigeria to continue to play a bullish and relevant role in the organisation. Having been given the honour of producing an extremely capable secretary general to administer the organisation, Nigeria is in a unique position to help navigate and shape the direction of the organisation for the near future,” he stressed.
Current Minister of State, Timipre Sylva, who on his part spoke in Abuja on the landmark event, pledged Nigeria’s renewed commitment to full compliance with the country’s crude oil production quota. In June OPEC pegged the country’s quota at 1.554 million barrels per day.
The minister explained that apportioning quotas has in no way hurt the country’s production, noting that if not because of the cartel’s intervention, the price of crude oil would still be very low, recalling how it fell into the negative territory around April last year.
Sylva noted that the 1.554 million barrels per day which was allocated to Nigeria for June, excluded condensates, stressing that as at today Nigeria has fully complied without exceeding the total allocated to the country since the OPEC member countries agreed to cut production.
“Our OPEC quota is around 1.554 million bpd for crude oil, excluding condensates. We are complying with the OPEC cuts and it really doesn’t hurt us because the danger is that with non-compliance, prices can go the other way round and everything you are producing will fetch you less money.
“It’s the right thing to do and whenever OPEC gives us our quota, we do everything to achieve it. Right now , we are completely compliant with the total that has been allocated to us as Nigeria,” he noted. Chronicling Nigeria’s participation in OPEC in the last 50 years, Sylva stated that the relationship between Nigeria and the oil producers’ group has been of mutual benefits to both parties.
On the one hand, he noted that OPEC has supported the growth of the oil industry in Nigeria through the harmonisation and adoption of relevant policies among its member countries, as well as through the sharing of knowledge and technical expertise.
Conversely, Sylva stated that Nigeria has also contributed enormously to the survival of the OPEC through turbulent times, by lending full support to the efforts of the organisation to balance and stabilise the oil market.
As a member of the Joint Ministerial Monitoring Committee (JMMC) , Sylva noted that Nigeria recently served as special envoy to some African participating countries earlier this year in order to bolster commitment to the agreements.
The minister insisted that oil will continue to be an important component of the energy mix into the foreseeable future and will continue to power the global economic growth in order to eradicate poverty, which is still prevalent worldwide.
In an interview with the OPEC team, a lawyer, economist, Public Relations expert and former NNPC spokesman, Ndu Ughamadu, also gave his perspective on Nigeria’s relationship with OPEC in the last 50 years. He posited that many cases of the discovery of oil were made in the 1950s by multinational companies that had ties with countries that colonised Nigeria and many other nations in Africa.
According to him, it was the era of the oil majors and resource concessions in Nigeria and most oil producing developing countries received insignificant returns on the resources and capital. “Some of these concessions were acquired under ridiculous terms and vexatious circumstances. The majors were the determinants of what accrued to Nigeria from its oil resources,” he noted.
Nigeria’s entry into OPEC, according to Ughamadu, interestingly, largely reversed this concession phenomenon and catapulted the country from concession syndrome to active participation in the management of its oil resources. “OPEC gave Nigeria the much needed impetus for change in the oil industry. This inspiring change gingered it to restructure its relations with foreign countries and firms operating in the oil sector propelling it to acquire more control over its resources.
“This, in turn, encouraged the country to establish and own an indigenous national oil company, the NNPC. The NNPC was also saddled with monitoring and supervising the international oil companies (lOCs),” he said. He maintained that the NNPC and the ministry of petroleum resources have since then, churned out relevant protective policies and guidelines on the operations of the oil industry.
For now, it’s apparent that the marriage between Nigeria and OPEC in the last 50 years, has been largely symbiotic, but how long this coalition will last, given the growing resentment for fossil fuels, the very basis of the relationship, remains in the realm of conjectures.