*Monetization of its gas can really develop Nigeria
Aziza Albou Traore, a media agency CEO put through a call to business a.m. from the United States. It’s the third time she’ll be doing so since the newspaper went digitally live a year ago, and in its unique Financial Times salmon (pink) print edition, just six months ago. She said leading energy lawyer and pan-Africanist, NJ AYUK, who is the Founder and Chief Executive Officer of Centurion Law Group and the Africa Energy Chamber of Commerce, and who’s worked on a number of oil and gas projects in Nigeria, wanted to have an exclusive interview with business a.m. from US. We accepted and assigned BUKOLA ODUFADE to undertake the task. Ayuk is a well-known dealmaker in the petroleum and power sectors and the co-author of Big Barrels: African Oil and Gas and the Quest for Prosperity.
As a strong advocate for local content in Africa, we have not seen a growth across the continent, it is mostly countries working individually, countries are not partnering to drive local content integration, why have we not seen that?
What I think has happened is that we have had a nationalistic impulse in most countries where everyone is focused on themselves, where everyone wants to do it themselves, and I think that has killed the idea of creating stuff. So for example, if I’m trying to work on an oil and gas project in Nigeria or Ghana, and there is no Nigerian service providers, because the most money in the oil and gas industry is in service providing and when there is no Nigerian service provider, the next thing the foreign investor does is to go to Europe or America, and you continue to hear that there is no African who can do this job, nobody can do this job, so they go abroad and bring foreign talent. By doing this, it kills the local market. That is why I’m a big proponent of the regional content, I call it regional content. I’ll explain using an example, it means Nigeria first or Ghana first, and if you don’t find the service provider or product in Nigeria or any other host country, you can look in the region, like West Africa, looking at Ghana, in the case of Nigeria or Equatorial Guinea or Ivory coast. So you go African wide, then Europe and America. And by doing so, what happens is that it gives full integration with Africans doing cross border transactions, Africans working amongst themselves, so part of that is not just building local and regional content but African wide capacity. Today, Nigeria has evolved a lot when it comes to local content and service companies, but then Nigerian companies sometimes have to really fight to compete around African markets, so it makes more sense. When you see, for example, going to Uganda or South Sudan, the Ugandan, Kenyans are more likely to be mentored and prepared well for the oil and gas industry. I think regional content creates that drive and passion in young Africans to be who they want to be because they would have people who look like them to look up to. So, we have to start to regionalize local content to ensure that our regional communities are doing well. You might want to have really big LNG production facilities in one or two different places but without regional content, it can’t happen. So we can’t be one country or community, we have to look regional wide.
The fact that African countries have common interests in terms of infrastructure, investments, and Africa not keying into regional content is killing trade too
Of course, it is killing trade. Right now, we are talking about the African free trade agreement, and every country is trying to sign on, but how can we trade together when the biggest revenue stream, which is oil and gas, 95 percent of that revenue, is going to Europe, China, and the west? That makes more sense. Right now, basically Nigeria gets out South African companies, South Africa shuts out Nigerian companies, Angola shuts out every African company and they bring in companies from North America, who have no partnerships and no policy or preparations in building real capacity. We have to be very careful at looking just locally, there is a big difference between local content and corporate social responsibility. Some companies come in and say we spent one hundred thousand on corporate social responsibility, that is not local content, it is about economic justice, it is about economic empowerment of people that have been left outside the industry. And Africans have not really been the right participants and beneficiaries of the industry, unless they get in, get contracts, develop themselves, and really being true participants in their resources; because that is the only way Africans can get the true sense of participation.
As a pan-Africanist, there are basic problems facing African economies like uncertain regulatory frameworks, unaccountability, and others, and in your book, Big Barrels, you proffered solutions. Have any African countries embraced the solutions you provided?
I think we make a mistake by trying to find perfection from a government by saying this government has perfected the model. I don’t believe in looking for a perfected model, within Africa. I believe in looking at perfect examples. So, if we are talking about gas, we look at what Equatorial Guinea that is neighbouring Nigeria has done with gas monetization, with almost 2-3 trillion standard cubic feet of gas; and you have to ask yourself this question, why can’t Nigeria with 197 trillion standard cubic feet of gas replicate the same thing? It doesn’t say Equatorial Guinea is one perfect country, but then, maybe we can look at what Nigeria has done in the past with local content, and empowering local companies and really creating a framework for local companies to drive the oil, and why Angola can’t do the same. I think our biggest failure is that we look for countries that have gotten it all right. And the truth is that you don’t find oil in Cape Town or in the most beautiful places. You find oil in difficult, tough places and we have to go in and find solutions.
Yes, we lag behind in accountability and regulatory frameworks. I don’t blindly say Africa is doing well, of course not! But the issue is that we have to challenge our government, our leaders and hold them accountable. I don’t expect someone to come from America or Europe and train my people on how to read and write, I think that is the responsibility of our government to create proper frameworks. So what I advise is that maybe we keep some of the money we get out of oil and use it to create a petroleum training fund so we train the next generation of oil workers and entrepreneurs so that they can replace the current professionals. Integration without preparation is frustration, and you might see in the industry but you have to replace oil workers with the right kind of skill set. So, the question is that the skill set that the guys in America or Europe train their children for five, six or seven years, let us create those kind of institutes to train our young people in Africa to have the right skills, so that they can become the next hope; because if we don’t train our people, we are going to lose a whole generation and can’t manage our resources.
You talked about Equatorial Guinea changing its natural gas industry through monetization. Coming down to Nigeria, with gas reserves of over 190 trillion standard cubic feet, would you say you are disappointed or optimistic about the state of natural gas in the country?
Well I would say I’m disappointed; I’m disappointed in what Nigeria has done. I wrote an article where I talked about Nigeria not necessarily being an oil country. When most people talk about Nigeria, they talk about oil, that’s wrong, Nigeria is not an oil country, it is a gas country and with all the problems you have in Nigeria, the monetization of gas can really develop Nigeria and fast track the country. Think about it, 190 trillion standard cubic feet of gas, and Nigeria is doing nothing. Why do you still have power outages in Nigeria when gas can be used to power the country, when Nigeria can use the gas for transportations, for petrol-chemicals, and you are not going to build or industrialize Nigeria with generators. You can’t run industries on generators, so to look at a country that suffers from chronic and constant power outages, it is a problem. It is not just bad for businesses, it is bad for citizens. And to make matters worse, it is being flared, so Nigeria has a lot more to do. The Nigerian state owned oil company, NNPC itself said the country has lost $710 million in 2016 alone just when it comes to gas flaring. So the questions is this, why are there no investigations, why is nothing being done, and Nigerians have been left with just empty words from leadership and business community. A country with so many smart people, how can Nigeria afford such losses? That is just in 2016, what of 2017?
Yes, and it is on the increase. According to a report, gas flaring in Nigeria increased by four percent in 2017.
Well, if it has increased, then there is nothing left to say. I mean just think about it, Nigeria is having serious financial crisis, it is no secret, and so billion dollars are being lost in that industry, the country remains extremely vulnerable to commodity price variations. So of course, I’m disappointed; this is Africa’s powerhouse, Africa’s biggest economy, so it has to lead. Nigeria’s ministry of petroleum resources did their own estimates and said investment opportunities in the entire value chain can be up to $50 billion, yet that sector remains under developed. And so it is not really something I’m proud of because it is a country with a lot of smart people, a lot more is expected. What president Buhari did with the gas commercialization programme, which was to find solutions was a good step, but what is needed is to really redefine the gas industry to create value. And this is just the gas being flared. What of the gas being captured and not being used. So I think the natural gas can really boost the economy, and it is something we have to look at.
NNPC also reported that oil and gas companies owe $14 billion in fines for gas flaring between 2008 and 2016 and it is so low which is why they are willing to pay $14 billion in 8 years and not get worried. But look at the health problem Nigerians are facing due to flared gas. Look at the health issues in Niger Delta, look at how their rivers and streams have been polluted, their fish are dead. The people also matter, so it is all about us creating a legal enabling environment and also showing political leadership, showing that we can turn our nightmare into something beautiful. It is imperative to act quick and decisively because it should no longer be used as political football, it has to become a real life issue for Nigerians, if you don’t do that, we are telling this generation that they don’t really matter and selling short the Nigerian dream, and as a non-Nigerian, it is something we look at with dismay because this is our giant and we have to see our giant really responding.
I agree with what you have said, that the Nigerian government should be more decisive, because each government comes with its policies to create thousands of jobs and change everything, but at the end of their tenure, no results.
I think that is the challenge, it is time for us to start questioning government. The problem is that if we don’t question government on what we do in office, then we are going to be in a difficult situation. We are looking at a continent that is changing everyday and what is our generation doing. We have technology and social media which can be used to really galvanize activities, and ask for change, not by fighting but by continuing education process, continue the educational streak, and show that we can turn this around. Don’t forget, revolutionaries like Patrice Lumumba all died in their 40s, but what is our generation doing in making sure that Africa’s resources are developed to benefit us because we can change the story. Because we have to change the narrative of this resource curse; if we don’t, we are still going to be the world’s laughingstock. So, instead of using gas to develop our economies and having our brightest and brilliant run the economies, they are going to be caught in the Sahara Desert and the Mediterranean Ocean dying, trying to go to Europe to be treated as second class citizens. The solution is to take that gas, monetize it. Do you know how much billions of dollars we spend importing fertilizer for farms in Africa? Do you know how much billions of dollars it cost to buy diesel and fuel to power our generators? Do you know how much we spend on generators? When we can have clean energy through gas, when we can turn the gas around and power the whole country. So it is not a matter of gas prices, the truth of the matter is that the prices are good. Look at today, we are talking of Brent prices at $74; if you invest in Nigeria’s gas economy, you are going to do well because Nigeria is ripe, this is the right time and if there is a better time to really make this work, it is now.
You are also an investment expert, and financing oil projects requires huge funding from usually banks, but since the oil price crash, we have seen a drop in investment in the sector, how do you convince financiers to invest in African oil and gas projects despite the wave of caution in the industry?
I advise a lot of African players and the first thing I say is cut your coat according to your size. If your company is making $20 million a year, you have no business trying to take on a $10 billion project. For example in gas, you can do a small scale LNG project or refinery. Not like what Dangote is doing. Dangote has the finance and luxury to do a big refinery so what I’m getting at is that there are Nigerian banks that can finance $40 million projects. When you look at countries like Nigeria, Ghana, Angola, the power of these economies lies in the small businesses; because these small businesses are the true champions of the economy. Whenever there is a recession or Africa suffering from depression, multinationals just fire people and walk away but the small businesses have a strong community sense, but they need to be empowered. So there is financing, but the issue is that we have to create bankable projects – looking at things like is it bankable, is there a market, do we have regional content, can we work across border, where all our people can come in and benefit from it? Right now, yes the financial market is tight, and African countries and companies are vulnerable to predatory lending where loans are given at high interest rate, which means the companies are basically out of the businesses. So, profit margins become very low, and African companies are just working for the big financial houses, so you have to caution that. At the end of the day, you can’t have an economic justice in the name of investment.
You said small businesses make up the bulk of trading in Africa, but is it just financing from the national level, do small scale business have access to international financiers?
They do. I have come across many companies that help finance small businesses, for example, AfreximBank is always willing to give financing. You know, it comes from both sides, you can’t just walk into a bank, whether it is a Pan African bank or a big bank like Barclays or Standard Chartered without being prepared, you have to be prepared to provide everything to them and one of the key issues that we have not dealt with, because you have no business going to the bank to ask for a loan when you don’t have a business plan, so you have to prepare yourself to meet the terms and conditions of the bank. Another thing is, going through that process, you have to be prepared to compete and participate with other players in the industry and it makes you look at your business from a different point and that is really important.
Where does the bulk of financing coming into Africa come from?
Right now, you will see a lot from China. China is putting a lot of money on the continent. Oil and gas and commodities are seeing more investment coming into the infrastructure area, agriculture is booming with Indians coming to look at Africa’s agricultural sector. China’s population is also high with two billion people and are big on agriculture too. So, giving that Africa has vast fertile land they are looking at investing in that area but the question is, what are we as African doing to participate? How can we participate because there is hunger in Africa, there is unemployment in Africa, so, we see a lot coming out of Asia right now, the traditional colonial partners from Europe are suffering so much with their crisis that they go to China to get funding for their African project. So, we have to take a look at it from a different perspective to see what needs to be done.
On the NOPEC issue, as an advocate representing OPEC on this, as a lawyer you understand where both parties are coming from, is there no middle ground?
They have to find a middle ground, but the question you have to ask yourself is why should United States use domestic legislation and demand in African countries because African countries have the majority in OPEC. The other issue is that, when you start using government laws to stifle the market, stifle ingenuity and creativity, you are asking less of your people, you are saying that “I will use my laws to get others to comply with me [that’s] playing with the market”. As Africans, we are told all the time to play within the rules, work hard, let us go out there and develop something, and then someone comes and changes the goal post, changes the rules when you are just getting up. The issue is why should you be so selfish, because if Nigeria should sell oil at $10 per barrel, it is bad for Nigeria, it is bad for the Nigerian economy; it is bad for Nigerian businesses. If you want to have us not being slaves and refugees in Europe and America, our own economies have to stand and match up so we don’t have economic migrants and have our people being able to do well in their own community. I think there is always a middle road, the middle road you find in OPEC and non-OPEC and American concern is that the Americans want a lot more oil and cheap oil. The middle ground is doing a massive investment in exploration of natural resources and identifying these resources, whether it is monetizing gas, then you will see more production because you will never have more production without exploration. There is something I will like to bring to your attention, Iran produces four million barrels of oil and President Trump sanctioned them, so imagine if you take four million barrels out of the market, then there is scarcity of oil, so, you say why should Nigeria send their produce to Iran? Why should Congo, Angola, Nigeria and Libya be paying for their U.S decisions to go to Iran? Nigeria doesn’t have any problem with Iran, but someone put sanctions on Iran and then said: “Oh my God, prices are going up,” but you took four million barrels off the market. Of course, if you take four million barrels off the market, prices are going to go up and if you keep threatening Venezuela that you are going to bomb them tomorrow, they do not have infrastructure, so how are they going to build more infrastructure to bring oil into the market; of course, prices of oil will go up. People do not work well with the threat of being bombed, they just move away. So on Monday, I say I am going to bomb the platform and on Tuesday, I tell you to walk out of the platform, which one is which? So I think you need to have some stable rational leadership that is going to look at the world from a point of saying, “Iran, have an agreement with the United Nations, let us monitor it, let us do what is right to keep the compliance.” But now you are pulling everybody away from the market.
One of the aims of the African energy chamber which you are part of is to build a strong domestic trading market, and according to the AOP, African countries are building coalitions, are we going to see more of that, is domestic trading amongst African countries going to increase?
We are going to see more because what was reserved for Americans and Europeans is no longer exclusive. Now Africans are saying we can also do this. There is going to be more trading in Africa, you are going to see more and that is one of the reasons why we did the Chamber because we felt the need to give African countries a voice. We felt African countries don’t have a voice; we don’t really know what is going on in our economy. For example, European companies are stimulated to come to Africa to do business, but African companies are facing insurmountable odds to survive. So the question is, who is communicating the struggles of the African companies that want to have a seat at the table and want to really become profitable in the African market? It is our continent, we do not have anywhere else to go; so we have to really engage the leadership and support them when it is difficult and call them to order when they are going wrong. So we look to encourage dialogues between businesses and leadership, we also encourage dialogues between African leaders because we cannot abandon the big companies. So we work with them to transfer technologies, work with them to grow the economy.
What are the challenges you have faced from pushing African companies’ agenda?
The challenges are just making sure that people know the idea and getting support from leadership as to what these companies have to offer and what they are. That is the challenge sometimes, because we have not really done our best to educate our people; but I think it is also important that we don’t look at the challenges, and consider the people without jobs, because it is on us to create a job revolution and if we don’t, we are in trouble as a continent. So, I am not worried about the challenges, I always knew it would never be easy. I have been very lucky to have built a great firm, but the question is what are you okay with doing well? Are you just okay because you can work in a room with people you never dreamt of? But I think you are truly fulfilling your purpose to the people, when you know that you can create something so people who never dreamt of having a seat at the table can have a seat at the table. That is what matters today because the Africa we have can only be shaped by us and that only comes by what we do, day in day out, because you can still make money and do a lot more good, it is about creating an opportunity so that children who grew up in a poor neighbourhood like mine can believe in themselves.
Are you currently working on any projects in Nigeria?
I am working on some very interesting deals in Nigeria. Nigeria is very close to my heart, I think if I was to be born again, I will be a Nigerian. If I was given a Nigerian passport, I will accept it even though I know people are running away from that passport. I think there are a lot of good Nigerian companies doing well and Nigerians do not show a lot of respect for their companies. We have done some work for Sahara, we have done work for Delta, we have done work for Oando and Atlas Petroleum, and we have worked with various Nigerian companies. In Equatorial Guinea, a Nigerian firm built a 60 million-compressor project and a world class project that nobody ever gave them a shot. That is what many people do not see because we look and appreciate what we have among Nigerians. You see people who were never given a shot, they just woke up and decided, “look, I will give myself a shot and demonstrate that I may not have my shot coming, but that won’t be the end of me”. There are a lot of good stories about Nigeria that people do not hear, enough with the bad stories. There is strength among them and there is a desire to go out there and get things done, that is the Nigeria I know, that is what I see in Nigerian companies and that is what I love about them. Anytime I have an opportunity, I think they can go a long way because I want my son and my daughter to look up there I say these are people that I can emulate, entrepreneur making it from nothing and should be given a lot more credit than they get.