Obasanjo faces serious challenges in Nigeria

On his arrival in power in Nigeria, Olusegun Obasanjo, received in his hands a country in a devastating situation: huge debts, high rates of poverty, ethnic conflicts and grave economic situation in his country, which was ranked, in the 70s, among the thirty richest countries of the world, and today one of the poorest countries.

It’s enough to know what was announced by the Conference of the fight against poverty, which took place last January in the Nigerian capital Abuja: 60% of the population lives below the poverty line, while the Health sector, which is a measure of well-being and prosperity, 90% of babies are born at homes for lack of service in the hospitals and 10% of children die before reaching the age of 10 because inadequate health care.

According to reports from the World Economic Forum in Davos and the Harvard Institute for International Development, Nigeria's debts amounted to 30 billion dollars, while the country is ranked second to last in terms of competitiveness among 23 African countries, because of corruption, political instability and deteriorating infrastructure.

Other reports also indicate that the number of banks operating in Nigeria is declining while industrial investment fell 50% in the first half of 1998, which shows a lack of investor confidence in the Nigerian economy.

Obasanjo is facing a major challenge facing the deterioration of agriculture sector, which absorbs 60% of the workforce in the country and contributes with about 40% of GDP. This deterioration has a negative impact on the social and political stability in the country. The Nigerian president has to give bonuses to farmers, especially in the cocoa growing areas in the south-west.

The reform of the oil industry is also one of the main challenges before Obasanjo: Until recently, Nigeria was one of the largest producers of oil and the largest exporter of black gold in Africa, it has even in third place in terms of production within the Organization of Petroleum Exporting Countries "OPEC", after Saudi Arabia and Iran, with production rising to two million barrels per day. Nigeria also has four refineries with total capacity of 445,000 b/day of petroleum products, which is twice the country’s need of these products. However, Nigeria is an oil importer and it cannot even secure its fuel, due to political corruption and administrative regulations.

This contradiction goes back to the era of Nigerian President Sani Abacha. While Nigerians queued up for several miles before the gas stations in order to obtain their needs, the Abacha regime caused a shortage of petroleum products. They left deliberately damage the refineries to justify the import of petroleum products from abroad by five companies, four of which were managed by Abacha himself. These companies were transferring production of Nigerian refineries off the sea so that prices increase by two or three times more than the price on the world market and then return these products in the country to sell and the price difference was

transferred to personal accounts of the responsible of firms and of course Abacha.

After the death of Abacha, his successor, Abdel Salam Abu Bakr, has promised to reorganize the oil sector in Nigeria, where oil exports account for 90% of national income. To this, Abu Bakr did not name an oil minister and took on charge, in person, the supervising of this sector. He also appointed a personal adviser to manage the sector and formed special committee to reform it.

With the accession of Abu Bakr to power, global corporations like Mobil, Shell, Agip, Chevron, Texaco and Elf began to occupy the place of the Nigerian National Petroleum Corporation (NNPC) in the importation of petroleum products.

The NNPC had 57% stake in each joint venture established with international companies, but it has always miscalculated its expenses and failed to meet its obligations, which has triggered serious financial disputes with foreign partners and caused deterioration of the sector’s infrastructure. This led the Nigerian president to compensate foreign companies in order to comfort them. Also, he replaced the system of joint ventures with production sharing contracts, a system favored by foreign companies.

Experts believe that Obasanjo is expected to introduce several reforms, including liberalization of prices, even partly, knowing that any abrupt change in the system of Niger's oil sector will, in case of failure, will be like a political suicide and a certain social upheaval. Obasanjo should also launch a campaign against severe fuel smuggling to neighboring countries, estimated at about 300,000 b/day.

The president of Niger must also address some regional issues concerning oil sector as the dispute with Cameroon on the "Bakassi" island, rich in oil. Another issue addressed is the troubles in the Niger Delta in the south-east, a region that produces 70% of Nigerian oil and is considered as one of the poorest regions in the country. Local communities in the delta require a redistribution of the oil income, in a way to receive a portion of these revenues. They also demand more respect for the ecology in this region.

The difficulty of the equation is the desire of the Nigerian government to secure the production zones to develop the sector without using repressive policy applied during the reign of Sani Abacha, a time which has made Nigeria a pariah by the international community. Abuja would be forced to revive the Development Committee of the mining regions to rehabilitate infrastructure in the oil sector in the country, despite the reputation of this committee as a tool of corruption during Abacha’s era.

Despite the time, money and the enormous political work necessary to reform the oil sector in Nigeria, the conditions are met to realize it after the announcement of the end of the freeze of Nigeria’s membership in the Commonwealth starting June 1st, 1999, which coincided with the lifting of sanctions imposed on Abuja by the European Union .. So, Obasanjo will succeed to put this sector, which represents the backbone of the Nigerian economy on the right way?

This article was written for the weekly edition of the economic newspaper "al-Alam al-Yom" (The world today)