PRESIDENT Goodluck Jonathan recently launched the Federal Government agenda tagged Gas Revolution: Rebirth of Nigerias Industrialisation. He attributed the initiative to his administrations aggressive and forceful disposition to industrialise the economy. While the Jonathan presidency is a little over one year old, it is an integral part of an elected administration that soon after taking office summed up its mission as economy, economy and economy. It was therefore ironic to launch this economic agenda at the tail end of the administrations four-year term at a time political campaigns seeking the renewal of the Presidents mandate were being wound up. It is estimated that US$25 billion will be required for the full implementation of the gas masterplan that encompasses gas gathering, production and processing; gas transmission; gas distribution and provision of gas end-user facilities. While the administration about six months ago set gas-to-power tariffs in order to facilitate gas supplies to independent power plants and manufacturing firms that own gas-fired electricity generators, the present plan focuses on firms that use gas as feedstock to produce low-end plastic and packaging products as well as high-end products like methanol, fertilisers and other petrochemicals. At the launch, so-called binding memoranda of understanding (MOUs) were signed by the NNPC and firms from Saudi Arabia and India. A Saudi firm, Natpet, plans to invest $3.5 billion over the next three years to construct a petrochemical plant. An Indian company, Nagarjuna, proposes to build two fertiliser plants at a cost of $2.5 billion. We doubt that the implementation of the gas masterplan of this size would be wholly left to foreign direct investors and therefore suspect that the MOUs harbour an undisclosed element of NNPC counterpart funding and commitment in kind. And being international protocols, the MOUs may require the approval of the National Assembly. Will the country suffer any penalties if these binding memoranda fail to earn legislative consent Do the MOUs accord the local content law due recognition and dispense with all forms of waiver Also do they have provisions for remedies in case any parts of the MOUs infract any sections of the Petroleum Industry Bill if and when it becomes law Besides both foreign firms, two companies already firmly established in the oil sector Oando and Agip entered into agreement to plough $3 billion into a gas central processing facility (CPF) for turning wet gas from oil wells into usable dry gas for various gas end-user projects. The masterplan envisages the installation of five CPFs ultimately. Additionally, Chevron undertook to deliver 175 million cubic feet of gas per day once the pipelines and infrastructure are in place. Who among NNPC, Natpet, Nagarjuna, Oando, Agip and Chevron will lay the pipelines and emplace the required infrastructure All the questions above point to loose ends in the publicised programme. Let it be stressed that the programme seeks to revive industrialisation. Indeed, like the proposed projects, the NNPC refineries were themselves anchor and seed petrochemical plants which once upon a time turned out polypropylene, carbon black, fertiliser among other chemicals, but they failed in this line subsequently. But apart from the private sector bent and predominantly foreign direct investor ownership of the planned industrial projects, what steps has government taken to shield the industries from the fate that overtook the forerunner petrochemical effortThat is important because private ownership and control are no guarantee for success. Government has not sincerely appraised its policies down the years and continues to bury its head in the sand. Nigerias harsh industrial environment has consumed over 800 private sector manufacturing companies including textile firms whose collapse Mr. President attributed to the high cost of fuel. The post mortem is incorrect. Worldwide fuel costs increasingly have a uniform ceiling with other critical factors determining the competitiveness and survival of industries. Among the benefits of the envisaged gas-driven industrial revolution is the creation of over 600,000 direct and indirect jobs. This is reminiscent of the seven million jobs promised under NEEDS 1 (2004-07) which did not materialise. In fact, there has instead been persistent economy-wide job contractions ever since. It is incontrovertible that faulty government policies have made it impossible to translate Nigerias abundant supplies of oil and gas into a comparative advantage in energy. Without sincere self-examination with a view to reversing the wrong policies, government has chosen to woo foreign investors with trade-offs that in themselves will not guarantee success. For example, now that government has set and indexed gas tariffs to world price of fuel oil, gas end-use investments that have access to cheap foreign credit might at best churn out a line of products at the prevailing world price. But the intermediate products must be utilised by other enterprises in the production chain. These are mostly small-scale businesses that provide most of the jobs and which must confront lending rates which are from three to six times the level in competitive economies, inflation running at least four times the rate in focused economies and a mismanaged or ever-depreciating naira as against stable currencies in successful economies.These factors are responsible for the high cost of production in all sectors of the economy. That development, experience has shown, heightens importation particularly smuggling no thanks to the apex banks faulty handling of foreign exchange. And as with the dead manufacturing firms and pervasive unemployment, the employment and production expectations from the touted gas revolution agenda will be actively frustrated by pet official faulty policies. In effect it should be taken as an article of faith that the gas revolution initiative, like all government economic programmes since the late 1970s, will not bear the desired fruits until the administration with sincerity of purpose first adopts correct fiscal and monetary measures, the precondition for conducive and competitive production conditions to take root as in focused economies.
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