NLNG amendment act: The needed truth

Image: NLNG

The foreign NLNG J/V partners namely; Shell, Elf, Agip were solidly behind Nigeria in achieving a successful financial close that made taking the FID possible. It was a project that was then rated as the single largest project in the continent of Africa. They should be commended. The project is now making waves in the Nigerian economy. Also, despite the fact that the World Bank through the IFC withdrew its shareholding (2%) due to human rights issues, the multilateral agency must also be commended. Its 2% equity involvement provided a strong incentive to the foreign partners to stick with the base project (trains 1 & 2 Defacto IFC participation in any project is virtually a condition sine qua non for obtaining funding from most other main sources of cross-border project finance for developing countries. The sacrifices these J/V partners made at a very trying time for the country should always guide our actions in dealing with the NLNG issues.

I do appreciate and congratulate the management of the NLNG in its concrete effort directed towards actualising the terms of the Bonny MoU signed on November 5, 1998. I was quite involved as the then NLNG General Manager Finance. I am also congratulating the company for forming a mini PPP with FG to construct the Bodo/Bonny road. I have also read about the laudable plan by the NLNG Management to spend N3 billion annually to turn Bonny into a mini-Dubai. I am happy that most of the things I stood for are being implemented. It is also necessary to state here that Bonny people are part of the Niger Delta family. During my tenure at the NLNG, I discovered that they are not selfish people. This can be seen through the speech delivered by the Amanyanabo of Grand Bonny, King Edward Asimini William Dappa Pepple Perekule IX during the MoU signing ceremony in 1998.

He said and I quote, “As a kingdom, they are part and parcel of the Nigerian State and therefore, are entitled to enjoy the basic amenities of life.” Adding that “the seeming disregard, marginalisation and exploitation must be addressed and quickly too. We are in total sympathy with our brothers in other oil producing communities. I want to state that their suffering, degradation and marginalization are all real and so we are, despite our peaceful disposition, suffering the same as our brothers in other oil producing communities. I call on government to pay special attention to oil communities and especially in the Niger Delta……..” A great speech that should be commended by all.

However, I want to state categorically in this discussion that the current NLNG community development plans and programmes have not been inclusive. The other critical and also important communities have been excluded from these programmes. As someone that was quite involved in actualizing the NLNG dream (through trains 1 & 2 and 3), the well-being and progress of the NLNG will always be uppermost in my mind. Equity and fairness should be seen to drive the activities of the company. It is not enough to share few numbers of cows and some cash to these communities during festive seasons. NLNG corporate responsibility projects should also be extended to these communities. They need jobs, electricity (not free though), empowerment projects, capacity building, training, potable water, and other areas of social investments. What I mean can be properly explained by the speech delivered by Dr. T. A. T. Allison, the then Chairman of Bonny Kingdom Development Council during the MoU signing ceremony in 1998. He said and I quote, “We want to be involved. We don’t want handouts. People don’t generally value what you give them free of charge. By the time you give somebody N10, they believe that you can actually have N10 million before you can give that to them. But if you get them involved as part of generating this N10 or in managing this N10, he will use it more effectively.” The communities that have been excluded include Amadi-Ama, Ogbunabali, and the GTS communities which include Obiafu, Obite, Rumuji, Ndele, Soku and Cawthorne channel. Amadi-Amaand Ogbunabali are hosts to the NLNG Base office (sharing common boundary) and the new head office which is under construction. Amadi-Ama also shares its major fishing area (Amadi creek) with the NLNG. The Amadi creek was heavily used in transporting heavy construction equipment loaded in barges to the construction site in Bonny Island. The other communities also mentioned above are located along the NLNG Gas Transmission System (Pipelines). These communities are also looking on to NLNG for projects that could also transform their communities into at least semi-mini Dubai.

My advice to the Federal Government is that the current development model in the Niger Delta involving the triparty namely, the state governments, NDDC and the Ministry of Niger Delta should be reviewed in the new Niger Delta initiatives. The model is not yielding the desired results. I am pleading that the President should use the opportunity offered by the new initiatives in the Niger Delta to do away with the old model that can best be described as business as usual. It is simply not working and will not douse tension in the oil region. The oil companies should be brought on board through creating an SPE as illustrated on the chart. They have legitimate responsibility in getting directly involved in the projects that are meant to mitigate the adverse effects of their activities in the oil region. The backlog of under development caused by neglect since the early years of oil discovery is very significant. The trio should go back to the Willink Commission related issues and develop a model that would fast-track the mitigation of the issues raised in the report. The operators should not delegate their legitimate responsibilities to NDDC by contributing 3% to fund its budget. Honestly, I am looking forward to a New Niger Delta where oil companies will be regarded as friends rather than enemies. I have proposed a project financing structure that can enable the operators invest in the downstream to actualize their direct involvement.

The initial funding tranche of $5billion can be sourced from the project sponsors, multilateral/Bilateral agencies, local banks, international commercial banks, Export Credit agencies etc. It is time to separate apples from oranges. I am not discussing these issues under corporate social responsibility (CSR) which is completely a different programme based on philanthropy. The issues I have raised are based on corporate responsibility for its activities which have adversely affected the environment and socio-economic life in the oil region. The triparty consisting of the State Governments, NDDC and the Niger Delta Ministry should concentrate on those development issues which led our colonial masters to set up the Willink Commission in 1957 and adopt a PPP arrangement that can attract the likes of Julius Berger to deliver quality projects in the Niger Delta by applying part of the funding from the 13% derivation and receipts from the ecological fund. This is the legitimate responsibility of the triparty. It is the main reason behind creating the NDDB which has been replaced by the creation of the NDDC. We must use this window provided by the FG new initiatives in the Niger Delta to put right many things that have gone wrong and had developed into a jinx in driving successful development of the Niger Delta. I see this initiative as an opportunity for the President to establish a development model that will have a lasting economic and social value on the present and future generations of the oil region. This will put a stop to the ever recurring discussions among the Niger Delta communities that the oil is a curse to them. The NDDC Act should be amended to expunge the 3% contribution from the oil companies and invest it in directly sponsored projects by the SPE established by them. The new development model will create more jobs in the area and also stimulate local economies. The FG should no longer delay the actualization of the Brass LNG. The OK LNG project should also be brought on board.

In concluding this discussion, I would like to state as follows: Skills acquisition programmes in the Niger Delta should mainly be targeted at the oil and gas industry. In terms of comparative advantage in Agriculture, I would like to state that the Niger Delta States (especially those in the riverine areas have very little advantage due to issues relating to pollution and extensive landscape covered by mangrove swamps and water. Fishing is no longer a viable occupation for those communities whose landscape is dominated by water and oil pollution which also adversely affect the farming communities. The accepted industry practice is that companies operating in the upstream sector should also have their presence in the downstream investments in the areas such as LNG, Refineries, Petrochemicals, Fertilizer projects etc which are meant to mitigate the adverse impact (pollution) of their activities especially in the area of massive job creation and stimulation of local economies. Every major investor in the upstream should be asked to also invest in any of the above mentioned projects. This is a more viable and permanent route to stimulating local economies, creating massive employment and dousing tension in the oil region. For the benefits of the industry players, it would be appropriate to mention here that “10 – 20% of the capital cost of many new projects in the chemical, oil and other related industries are being devoted to environmental protection”. (CIMA – Hand book of Management Accounting 2004 GEE). This provision should take care of all the issues highlighted above. The current industry performance reporting model should also be improved to aid top level decision making. The parts played by the industry in contributing to driving the economy and the positive impact on society in the areas of tax, social investments, environmental sustainability, reinvestments and SDGs are under-reported. I believe such reporting if improved, will add value to stakeholders’ satisfaction and lead to the industry image enhancement.

Iringe-Koko is a chartered accountant.

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