A former President of the Nigerian Bar Association (NBA), Dr. Olisa Agbakoba, has expressed concern that despite generating over $1 trillion in revenue from oil and gas over the past 40 years, Nigeria still finds itself burdened with a public debt of $91.46 billion (N121.67 trillion) as of March 31, 2024.
Agbakoba, in a report titled; “The Paradox of Nigeria’s Oil and Gas Industry: A Policy Paper,” highlights areas like legal services, shipping, banking, and engineering as potential culprits. This alleged exclusion, he argued, diverts a significant portion of the oil revenue away from the Nigerian economy.
Agbakoba further pointed to weak enforcement of local content laws, which aim to promote domestic participation in the oil and gas sector. Additionally, the incorporation of foreign agreements, tax avoidance strategies, and potential corruption are mentioned as possible contributors to the debt dilemma.
“The $1 trillion earned from oil and gas paints a picture of immense potential. Ideally, such revenue should have fueled significant infrastructure development and economic diversification. However, the current debt situation suggests a disconnect between resource wealth and its utilization.”
Agbakoba proposed a course correction through increased participation of Nigerians in the oil and gas value chain. This, he noted, could involve stricter enforcement of local content laws and fostering domestic expertise across various industry sectors. These measures, he further argued, can help retain a larger share of oil revenue within Nigeria, potentially leading to reduced reliance on borrowing and increased investment in critical areas.
He said: “Over the past 40 years, the cumulative revenue from oil and gas has exceeded $1 trillion, an amount that should have been sufficient to transform the nation’s economy and infrastructure.
“Yet, Nigeria consistently resorts to borrowing, with the total public debt standing at N121.67 trillion ($91.46 billion) as of March 31, 2024, according to the Debt Management Office, DMO.
“There are 36 value chains related to crude oil exploration, with at least seven crucial ones largely excluding Nigerian participation: Legal, shipping, banking, insurance, drilling, oil field services, engineering and construction.
“Over $1 billion worth of legal work is lost to foreign firms annually due to a perception of superior expertise and international experience.”
He added: “Oil rig companies have formed a cartel for tax avoidance, with NIMASA confirming they do not collect tax from oil rigs. This represents a massive loss of potential government revenue.
“The revenue attributable from oil rigs is estimated at N3 trillion yearly, approximately 15% of the national budget. The loss of this revenue significantly impacts the government’s ability to fund development projects and public services. The practice of tax avoidance by these companies creates an uneven playing field and discourages compliant companies,” he added.