The Monetary Policy Committee (MPC) sounded the warning during its 120th meeting last week. The Central Bank of Nigeria (CBN) committee said Nigeria risks slipping into another recession.
All key economic fundamentals point in that slippery road. The oil and gas sector, from where 80 per cent of revenue that sustains the economy is derived, has maintained a consistent decline.
The National Bureau of Statistics (NBS) in its second quarter 2018 Nigerian gross domestic product (GDP) report said daily oil production averaged 1.84 million barrels, from about 2 million barrels in the preceding quarter.
Although projected daily production capacity in successive federal budgets since 2015 has always been about 2.3 million barrels, never has the target been met. The output has dwindled from a peak of about 2.05 mbpd in the first quarter of 2016.
Real growth in the oil sector, the NBS report revealed, decreased by 8.34 per cent in the quarter, from -18.72 per cent points recorded in the previous quarter, about -7.48 per cent points drop.
Overall, the oil sector contribution to total real GDP in Q2 2018 stood at about 8.55 per cent, down from 9.04 and 9.61 percent in the corresponding first and second quarter of 2017.
To jumpstart the process of sustainable economic recovery and help increase the oil sector contribution to overall GDP, the MPC demanded the urgent passage of the Petroleum Industry Bill (PIB).
But, the PIB passage has lingered for nearly 18 years since 2000. The long delay is setting Nigeria on the highway to replicating Venezuela's oily crisis story that is well documented.
Sadly, our politicians are busy playing politics with an issue capable of determining the country's future.
Venezuela's Crash From Grace To Poverty
Venezuela's over 300 billion barrels of proven crude oil reserve, the world's largest, accounts for 25 per cent of the combined 1.2 trillion barrels estimated reserves of the 14-member Organisation of Petroleum Exporting Countries (OPEC).
Despite rising crude oil prices at the international export market above $80 per barrel, Venezuela is in deep distress.
In 2017, the Venezuelan Central Bank said the once buoyant oil economy contracted by nearly 200 per cent, with over 90 per cent of its over 32 million population living in poverty.
OPEC data showed a decline in Venezuelan daily oil production at about 2.3 million barrels in 2015, from 2.9 million barrels in 2013.
Latest data from TradingEconomics.com show the figure dropped further to about 1.4 million barrels in August 2018, with inflation climbing from over 82,000 per cent in July 2018 to over 200,000 per cent.
Those who could not cope with the cruelty of hunger and disease as a result of the crisis have fled to join the legion of illegal immigrants to Latin American neighbouring countries like Brazil, Chile, Colombia, Ecuador and Peru.
Experts familiar with the distressing Venezuelan experience say this could have been averted if successive administrations were more circumspect, transparent and accountable in the management of the resource.
But, an opaque governance structure transferred the wealth from the industry into the hands of a few individuals in the corridors of power. The country's oil wealth hardly impacted the lives of majority of the population.
In 1998, Huge Chavez emerged the Venezuelan leader. His dream was, ostensibly, to redistribute the oil wealth to reverse the inequality in the country.
At the time Chavez arrived, crude oil price was less than $20 a barrel. By 2008, the price climbed astronomically above $140 a barrel.
With Venezuela's average daily production capacity at 2.4 million barrels, it meant there was surplus oil revenue from exports.
Oil accounted for almost 97 per cent of all export revenue, which Mr Chavez deployed to pursue social welfare agenda to the benefit of the poor.
Apart from subsidies on various essential services, like free health and education, Mr Chavez transformed Venezuela into one of the world's most subsidised economies.
For a start, Mr Chavez nationalised the oil industry, government took charge of allocation of oil licenses, exploration and production, also oil export and refinery operations.
The entire oil industry value chain was government business through the state-owned oil and natural gas company, Petróleos de Venezuela, S.A.
With the government, transparency, accountability and good governance died first.
The increasing focus on oil wealth meant the neglect of other natural resources, like natural gas, iron ore, bauxite, aluminium and gold. Worse still, there were no new investments to boost output in the oil industry.
By March 2013 when the Chavez administration ended, crude oil price dropped slightly to above $100 a barrel average. But, that was the beginning of Venezuela's race to the bottom.
The new administration of Nicholas Maduro sought to continue where his predecessor stopped. By 2015, crude oil price had dropped below $32 a barrel. By January 2016, the price had hit the bottom at about $22.48 a barrel.
By then, the flow of oil revenue had virtually run dry. Government could barely fund education and healthcare. Those things the people took for granted fizzled, taking new meanings.
Today, even with oil above $80 a barrel, the Venezuelan story is one nobody, least Nigeria, can ill-afford.
How Nigeria Mirrors Venezuela
Nigeria's situation may not be the exact replica of Venezuela's, but, with oil as the common denominator, analysts say there is a basis to compare.
Nigeria, like Venezuela, is one of the world's leading producers of hydrocarbon in OPEC. Until recently, Nigeria topped the oil producers in Africa, in terms of proven crude oil reserves.
Latest OPEC data on world's crude oil reserves put Libya ahead of Nigeria. Out of about 1.2 billion barrels of all OPEC member countries, Libya accounts for 4 per cent (48.4 billion barrels) against Nigeria's 3.1 per cent (37.45 billion barrels).
However, in terms of daily oil production capacity, OPEC crude oil production data show Nigeria still towers above others, with about 1.73 million barrels, against Libya's 926,000 barrels as at August 2018.
Regardless, Nigeria's current production capacity still falls below its projected 2.3 million barrels target in successive federal budgets since 2016, during which only 1.56 million barrels per day were realised, in 2017 (1.76mbpd) and 1.73 mpbd as at August 2018, according to OPEC records.
Oil production is impacted directly by rig count deployed in daily drilling operations. OPEC's monthly oil market report for September 2018 showed Nigeria's oil rig count declined from 35 in July (the highest since 2015) to 33 in August.
The decline is not affecting production alone. New investments are not spared. Chairman/Managing Director, Chevron Nigeria Limited, Clay Neff, said new investment's in Nigeria's oil and gas industry declined by about $21billion (20 per cent) before the arrival of Buhari administration.
In 2017, the NBS, in its third quarter 2017 Nigerian Capital Importation Report, said foreign direct investment inflow into the oil and gas industry slowed drastically by 91.56 per cent, from $190.39 million in the second quarter to $16.07 million.
Although about $85.62 million was recorded as capital importation in the first quarter of 2018, the NBS said the figure dropped to about $24.85 million in the second quarter.
The NBS said the new level is the least in seven consecutive quarters, since 2016. The drop represents a decline of 90.64 per cent, from $171.63 million recorded in the third quarter of 2016.
In sum, experts say, the industry lost over $150 billion over the last decade from revenue losses and lack of investment.
The declining output in the industry tells the story of festering rot and years of neglect of a sector that account for more than 80 per cent of government revenue.
At inception in 2015, President Buhari promised to reverse the declining trend. He announced the removal of fuel subsidy, which was a drain pipe for NNPC.
From a retail pump price of N86, the removal of subsidy drove the price to the current ceiling price of N145 a litre.
Today, with the nation's four refineries still in a parlous state, importation of petroleum products by NNPC has continued unabated.
Despite the massive subsidy component as a result of the difference between landing cost and retail pump price, NNPC is allowed to recover the cost in multi-billions for political expediency.
PIB: Unending Hope
The hope to fix the rot in the industry was on the passage of the PIB. For over four decades, operations in the industry was regulated by the provisions of the Nigeria Petroleum Act.
Although a subsidiary legislation reviewed the Act in 1990, a decade later by 2000, most of its provisions became outdated and archaic with time.
A Joint closed-door plenary of the House of Representatives and Senate
A comprehensive overhaul of the Act became inevitable. The Oil and Gas Sector Reform Implementation Committee was constituted to draft PIB in 2008. A revised version of the Bill was presented to the National Assembly in 2012.
The 7th National Assembly made motions without movement. At the end of its session in 2015, the PIB was not passed. The outgoing 8th Assembly took over the Bill and owned it.
The draft Petroleum Industry Reform Bill submitted by the Minister of State for Petroleum Resources, Ibe Kachikwu, was split into four parts to facilitate speedy passage.
The Petroleum Industry Governance Bill (PIGB) was established to provide the legal and governance framework. The Petroleum Industry Administration Bill (PIAB) will guide the removal of the opacity in the industry and promote a transparent and efficient management of exploration and production operations processes.
The Petroleum Industry Fiscal Bill (PIFB) will deal with the fiscal terms, by way of tax regimes and contractual terms.
The Petroleum Host and Impacted Communities Bill (PHICB) will focus on the rights and opportunities for local benefits, in terms of restitution for environmental and social costs of resource extraction activities.
Proposals/Prospects Of Bill
Proposals in the draft bill included NNPC's restructuring, by splitting it into independent commercial entities, namely refineries (downstream), Nigerian Petroleum Development Company (NPDC) Limited (upstream) and the joint venture (JV) assets. NNPC's roles would be transferred to the proposed National Petroleum Company (NPC).
A new independent regulatory authority, Petroleum Regulatory Commission (PRC), will be formed by merging the Department of Petroleum Resources (DPR), Petroleum Products Pricing Regulatory Agency (PPPRA) and Petroleum Equalisation Fund (PEF).
Three commercial entities, namely Nigeria Petroleum Assets Management Company (NPAMC), National Petroleum Company (NPC) and Nigeria Petroleum Liability Management Company (NPLMC) were to be incorporated.
The NPAMC will manage production sharing contracts and back-in rights provisions, while NPC will be in charge of current NNPC joint ventures with international oil companies (IOCs) upon incorporation.
Funding for the PRC will be through 10 per cent of revenue retained from collections on behalf of the federal government, in addition to the appropriation from the annual budget approved by the National Assembly.
In addition, the PEF will collect five per cent levy on all fuels sold and distributed within the federation, subject to appropriation by the National Assembly, while NPAMC and NPC will be funded by appropriation for the initial capitalization and subsequent financing.
The PRC will ensure strict implementation of environmental policies, laws, regulations and standards as it pertains to oil and gas operations as well as promote the healthy, safe and efficient conduct of all petroleum operations in an environmentally friendly and sustainable manner.
Also, the minister of petroleum will be stripped of absolute power to incorporate other entities to assume and manage some of the liabilities of the NNPC, while his regulatory functions would be transferred to the PRC composed of a nine-man board with a fixed tenure.
The federal government will divest 10 per cent of its shareholding in the NPC within five years from date of incorporation; additional 30 per cent to be further divested within 10 years, to give Nigerians opportunities to own a stake in the national oil company.
The PRC will be subject to the Public Procurement Act. Although a corporate governance code defined for the Nigerian Stock Exchange will be for NPC, it will not be subject to the provisions of the Fiscal Responsibility Act 2007 and the Public Procurement Act 2007.
Buhari Withholds Assent
By June 8, 2018, the National Assembly transmitted the final harmonised draft of the PIGB to President Buhari for assent into law.
However, on July 29, Mr Buhari, in his communication to the leadership of National Assembly, announced his decision to withhold assent to the Bill.
The decision stirred the political cauldron. The insinuations were many. Some said he withheld assent, because doing otherwise would whittle down his powers over the oil industry.
Others claimed he would unwittingly be giving the National Assembly the opportunity to take the credit, since the PIGB did not come as an executive bill.
On August 29, presidential aide on National Assembly matters, Ita Enang, clarified the president's decision was based on some legal and constitutional concerns.
Mr Enang said the president was not comfortable with the proposal for the Petroleum Regulatory Commission (PRC) to retain 10 per cent of all revenues collected on behalf of the federation from petroleum industry activities, in addition to its regular allocation in the annual budget.
The PRC will have the regulatory functions of three existing institutions, namely, the DPR, PPPRA and Petroleum Inspectorate of Nigeria rolled into one.
Mr Enang said the president also criticised the proposal allocating to the Petroleum Equalisation Fund (PEF) five per cent levy on all fuels sold and distributed in Nigeria.
Retaining a total 15 per cent revenue, the presidential aide noted, would "unduly increase the funds available to the two agencies to the detriment of the Federal, States and Local governments as well as the Federal Capital Territory".
"If the bill is passed as it is, the two agencies will have too much money and not much will be left for the three tiers of government to share.
"No agency of the federal government should be made to behave as if it were the supervisor or the owner of the federal government itself," Mr Enang noted.
Politicising PIGB Passage
For the Executive Director, Spaces for Change, Victoria Ohaeri, the president was right on both points to withhold assent. He describes the intention as noble.
But, Ms Ohaeri said giving operational independence through a special statutory funding mechanism is necessary for PRC to exercise its mandate, the proposal was superfluous.
"Singling out the PRC for special revenue retention does not differ significantly from the existing arrangement whereby the Nigerian National Petroleum Corporation (NNPC) exercises excessive discretion over remitting revenues to the treasury, and how to spend the funds it keeps.
"Permitting the PRC to retain 10 per cent of its revenues will take Nigeria back to the pre-PIGB reform era where the NNPC not only withholds, but also provides little or no explanation for revenues running into billions of petrodollars every year," Ms Ohaeri argued.
Role of National Assembly
What about the National Assembly's role? At the time the president withheld assent, the National Assembly was getting ready to go on vacation.
Considering the importance of the bill, critics say members could still have reviewed the president's concerns and make amends while on vacation. But, they did not.
Rather, the Bukola Saraki-led National Assembly appears content on politicising the PIGB passage for selfish reasons, many would argue. The lawmakers seem determined not to allow the Buhari administration take the credit for the PIGB passage.
But, experts agree Nigeria cannot afford the sustained decline in the petroleum industry as a result of the uncertainty the delay in passing the PIGB has created in the minds of existing and prospective investors.
The only chance for recovery and avoid a slip into the Venezuelan situation is to set politics aside and do the needful.
In the word of the Managing Editor Petroleumindustrybill.com, Adeoye Adefulu: "The passage (by National Assembly) and assent by Mr President to the PIGB is important to send a signal to the market that this government is serious about the oil reform agenda.
"The uncertainty created by the lack of passage of the reforms have significantly affected investments in the Nigerian oil and gas sector."