Recently, Nigeria marked 50 years as a member of the Organisation for Petroleum Exporting Countries (OPEC). Nigeria is regarded as a strategic stakeholder in the organisation, due to the volume of petroleum products it produces and exports. However, in the past 50 years of its membership, there have been gains and also challenges.
Historical overview
Going by 2018 figures, OPEC accounted for an estimated 44 per cent of global oil production and 81.5 per cent of the world’s “proven” oil reserves, giving the organisation a major influence on global oil prices.
Nigeria joined OPEC on July 12, 1971, which was just a few years, after the discovery of oil at a South-southern town called Oloibiri. That was in 1957. But it did not take too long for the country to come to a consensus that it needed to be part of a multilateral organisation that could protect its interests, and ensure stability in the oil market.
Before some oil-producing nations came together to form OPEC, the oil market was largely dominated by multinational oil companies, and could sway the prices of the commodity to their advantage, but to the detriment of the oil-producing countries at the snap of the fingers.
This enormous power was reflected sometime in 1959, according to records, when the oil companies unilaterally reduced the price of Venezuela’s crude by $0.05 and $0.025 per barrel, and the price of the Middle East crude by $0.18 per barrel, without any care about how it could affect the oil-producing countries.
Although there had been talks among the few producing countries at the time to counter the antics of the multinationals, these actions by private oil companies accelerated the establishment of OPEC.
The singular need to be part of the decisions that directly affected them prompted Iraq to invite the other four countries to a meeting in Baghdad, to discuss issues surrounding oil pricing, which eventually birthed the cartel after a four-day conference.
Although, there are a few persons that reason that Nigeria has no business being a member of OPEC, many stakeholders who are aware of the workings of the market insist that the cartel’s intervention in oil pricing and stabilisation of supply, has ensured that the country earned more from its oil resources.
Aside from that, it is argued that the organisation has offered Nigerians the platform to engage in international administration and has served as a ready source of the country’s energy policies as OPEC research department remains very strong in this regard.
In the last 50 years, Nigeria has produced six presidents of the OPEC Conference, including Shettima Ali Monguno (1972/73), Mallam Yahaya Dikko (1982/83), Dr. Rilwanu Lukman (1986/1989 & 2002), Prof. Jibril Aminu (1991), Dr. Edmund Daukoru (2006), and Dr. Emmanuel Ibe Kachikwu (2015).
In total, the country has presided over 26 OPEC ministerial conferences held in several countries, including President Muhammadu Buhari, who also served as the head of Nigeria’s delegation to OPEC from 1976 to 1978.
In addition, Nigeria has provided four OPEC Secretary Generals, including: Chief M.O. Feyide, Dr Rilwanu Lukman, Dr Edmund M. Daukoru, and the incumbent, Dr. Mohammad S. Barkindo, who was the Acting Secretary General from January 1, 2006 to December 31, 2006, and has been the Secretary General since August 1, 2016.
This amounts to a total of 15 years, of managing the affairs of the OPEC secretariat, on behalf of all its members.
However, it must be said that being a double-edged sword, Nigeria’s relations with OPEC also means that the country has had to adhere strictly to production restrictions, like it is currently happening, despite the temptation to pump more oil.
Although tapered by the current COVID-19 pandemic, amid the restriction of movement and gatherings, both OPEC and Nigeria, recently found a way to mark the country’s 50th anniversary, with Nigeria having joined five decades ago.
Buhari, who has been an active participant in OPEC, having been Nigeria’s oil minister in the 70s, and currently, the de facto oil minister in the country, said that Nigeria’s membership of the organisation has fostered cooperation, and reduced the chaos in the international oil market.
“Nigeria’s membership is important, because without OPEC, the oil industry would have been in a chaotic situation, where the winner takes all. Many countries, like Nigeria, would not have been able to develop their oil industry, due to stiff competition.
“However, the good collaboration between OPEC member-countries has made it possible to accommodate both the weak and strong players in the oil production industry,” he said during the celebration of the anniversary.
According to the President, it must be acknowledged that, being a member of OPEC has facilitated closer relationships and fostered bilateral cooperation in other fields and industries as the countries seek to identify areas where they can be of help to one another.
Gains, challenges
Looking back at the historic day, OPEC Secretary General, Barkindo, noted that being the 11th member of OPEC, with the conference unanimously agreeing to accept the country’s application for membership, it was a seminal moment for the country and for the cartel, with Nigeria being the first sub-Saharan African nation to join the organisation.
For Nigeria and OPEC, Barkindo emphasised that it has at times been a rollercoaster journey, with various market cycles being negotiated, and unexpected events, such as macro-economic uncertainties, natural catastrophes, geopolitics, technological innovations and especially in 2020/21, global health pandemic, threatening to throw OPEC off course.
While stressing that the links and symbiosis between Nigeria and OPEC were too numerous to be mention in their entirety, he said that while the organisation was born on September 14, 1960, 17 days later, on October 1, 1960, Nigeria proclaimed its independence and a new era was entered into.
“The destiny of the two were interlinked from this point in time,” Barkindo noted.
The OPEC helmsman pointed out that since joining the cartel just over a decade later, Nigeria has played a major role in driving the organisation’s focus on cooperation, goodwill, a sense of belonging and unity, and in working towards achieving market stability, conscious of the benefits it brings to both producers and consumers.
“Nigeria enjoys world renown as a consensus builder and deal maker, and it has been clearly on display throughout its five decades in OPEC. Looking back at the story of Nigeria’s 50-year association with OPEC makes me feel both proud and humble.
“I am tremendously proud of how far the relationship has come, and how important the two have been to each other. I have Nigeria in my heart, it is where I am from, but OPEC has also become part of my DNA. And I am extremely humbled to follow in the footsteps of the giants of the Nigerian oil industry and OPEC,” he enthused.
Also recounting Nigeria’s journey in OPEC, Dr. Edmund Daukoru, now a traditional ruler and Chairman of the Nigeria Liquefied Natural Gas (NLNG) bared his mind on the OPEC/Nigeria ties.
Daukoru maintained that there was no doubt that Nigeria has benefited from its membership of OPEC in many ways, including through sharing technical know-how with other members, exchanging views on policies, as well as evolving a better understanding of the global oil market.
“Most importantly, Nigeria’s membership of OPEC has given the country the opportunity to participate in the important goal of the organisation to stabilise the global oil market, which is a requisite for the survival of the industry, and by proxy, the survival of a country like Nigeria that heavily depends on revenue from oil production.
“All these underline the importance of Nigeria’s OPEC membership to the country’s oil development over the past 50 years,” he stated.
Having served as OPEC Secretary-General and conference president in 2006, Daukoru expressed joy that the organisation was able to withstand the storm and contribute its little part to the survival of the global oil industry.
He mentioned that the hosting of the 143rd (extraordinary) conference in Abuja in 2006 was one of the highlights of his days in OPEC, despite the challenges that were encountered, further recalling the oil market crisis of between 2004 and 2006.
“Another important highlight is that the oil industry was facing many challenges when I assumed the presidency of the OPEC conference on January 1, 2006. The challenges actually began around April 2004.
“This had to do with rising oil prices due to a combination of factors, contrary to what the industry usually faces. Prices rose from below $30/b to over $70/b by the second half of 2006, member countries had to make huge investments to raise production in order to cool the market.
“This was a true demonstration of OPEC’s exceptional role that considers not only the interests of producers, but also the interests of consumers,” he explained.
However, Daukoru admitted that OPEC’s position in the oil production business is gradually slipping with countries like the US becoming major oil producers, but added that the role of OPEC in helping to stabilise the oil market remains important and necessary.
“The implication is that OPEC will need the collaboration of non-OPEC producers to enable it to continue playing that role. Hence, the recent ‘Declaration of Cooperation’ will need to be strengthened and widened for the survival of the oil industry.
“This evolution will have to become a permanent feature. In that sense, Nigeria’s role will continue to be important as the largest oil producer in Africa, and to serve as a rallying point for other African producers,” he stated.
In another development, the Minister of State Petroleum Resources, Chief Timipre Sylva has stated that Nigeria’s membership of the Organisation of Oil Exporting Countries (OPEC) has provided critical benefits, especially in the last 50 years.
It would be recalled that Nigeria had joined OPEC in 1971, to among other reasons, play a role in coordinating petroleum policies, secure fair and stable oil prices, ensure efficient economic and regular supply of petroleum to consuming nations and ensure fair return on capital.
Fifty years after being a member, Sylva said in Abuja that the country has played key roles in oil market stability.
“The decision by Nigeria to become a member of OPEC has enhanced the development of the oil industry in the country, enabled the country to influence the growth and contribute to the survival of the industry globally, as well as placed the country among the comity of nations engaged in the noble duty of stabilising the oil market for the benefit of all – producers, consumers and investors alike,” he said.
According to him, the relationship between Nigeria and OPEC has been of mutual benefits to both parties, stating that the relationship has supported the growth of the oil industry in Nigeria through the harmonisation and adoption of relevant policies among OPEC member countries, as well as through the sharing of knowledge and technical expertise.
“Nigeria has also benefited greatly from the efforts of OPEC to stabilise the oil market taking into consideration that the economy of the country is highly dependent on revenue from oil. Nigeria has also contributed enormously to the survival of the OPEC through turbulent times, by lending full support to the efforts of the Organisation to balance and stabilise the oil market,” Sylva said.