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Kolmani Oil Discovery: The Thin Line Between Prosperity And Paradox Of Plenty -By Siyi Umar Saleh

Standing on a thin line, the Kolmani project offers a choice to Bauchi and Gombe states. Proper planning and the subsequent utilisation of the funds to be gotten from the project is the only way the two States can jump to the shiny side of prosperity rather than falling off the thin line to the gloomy side of paradox of plenty.

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The day is Tuesday, the 22nd of November 2022. As early as 6am, you could sense the excitement in the atmosphere of Kolmani, a remote village on the borders of Bauchi and Gombe states. The people were jubilating, waving and chanting solidarity songs as they welcome President Muhammadu Buhari along with other dignitaries.

It’s a reflection of the mood of every citizen of Northern part of the country and the Country at large.

It was an eccentric scene similitude to the one experienced on the 15th January, 1956 when Nigeria first discovered Oil in commercial quantity in Oloibiri village, now in Bayelsa state.

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The occasion is the official flag off of the oil wells of Kolmani (809 and 810 OPL) at the Gongola basin between Bauchi and Gombe states. This is the first oil drilling in Northern Nigeria. It is a historic occasion to mark a breakthrough in the search of oil in the Northern region that started and stopped nearly 30 years ago.

Back in 2016, President Muhammadu Buhari announced that his administration will continue the search. This announcement was trailed by skepticism and criticism with experts calling it as a waste of resources that should have been used for other purposes.

Fast forward October 2019, the Federal Government announced the discovery of crude reserves in commercial quantity in Kolmani. And on 22nd November, we witnessed the flag-off ceremony of the drilling of over 1 billion barrels of oil and 500 billion cubic feet of gas in the Gongola basin. This is indeed a loud call for a celebration to all meaning Nigerians especially when one looks at the occasional disruptions in oil production in the Niger Delta region due to the sabotaging activities of militants. In Kolmani, the Nation now have a lifeline of an alternative means of oil production far away from the Niger Delta to augment such pitfalls.
Naturally, the general perception on oil is the notion that it proffers only prosperity as seen in other oil producing states viz a viz Saudi Arabia, UAE, USA, Canada etc.

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However, there’s a classic theory of ‘Resource curse’ also known as the ‘paradox of plenty’ that often accompanies such resources. This is a hypothesis that describes a situation in which a place underperforms economically, despite being home to valuable natural resources. Scholarships have been carried out to find the reasons to why countries fall into this situation with most results pointing to poor usage of the proceeds, and the leadership instability of the region as the reasons.

God forbid the Kolmani oil discovery is accompanied by its own curse, what do we do to avert that?

But before then, let’s look at…

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The Prospect….

As seen and proven in many places, Oil has the power to transform the fortunes of a people. From being one of the hottest and avoided places to being one of the biggest tourist attractive places on Earth in the space of 60 years, oil has a big footprint in the Middle East! The prosperity stories of oil cannot be complete without the mention of how oil helped in transforming the countries from the region from large masses of deserts to a heaven of skyscrapers and edifices that aim for the sky.

For Nigeria, the Kolmani oil is an opportunity to extend their grip on being one of the biggest oil producing states in the world. Albeit the fact that it hasn’t fully utilised the proceeds into alleviating abject poverty and bringing development to the country.

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For the two states of Bauchi & Gombe, it is safe to say that fortune has smiled upon them through Kolmani! Being from one of the regions with the highest poverty index in the country, this discovery offers a great turning point for their people that none of them ever imagined!

While flagging off the project, President Muhammadu Buhari noted that NNPC Ltd. and its partners have already attracted an investment of $3 billion to this project. At the official Naira-dollar rate of N440, that’s whooping N1.32 trillion! The two states have both proposed their 2023 budgets with the total in the region of N373billion (Bauchi – N200bn, Gombe- N173bn).

For context, the sum of investment already attracted to the project is worth three and a half years of the joint 2023 projected budgets of the two states! This will give you a glimpse of the potentials and the promises that this project entails.

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Accompanying the project flag off ceremony will be the construction of petrochemical refining site with an oil refinery of 120,000 bpd, a gas processing site of 500 million cubic feet per day, and also a 300 MW power plant. Imagine the direct and indirect job opportunities that will be provided to the indigenes of the two states.

Also, with project of this magnitude sited in the corridor, there will be a multiplier and ripple effects that will usher in new wave of economic boom in the other non-oil sector of the economies of the two states. New Hotels, enterprises, academic, research, tech and entertainment hubs will troop in and that will mean more Foreign direct investments (FDI). Land owners and property developers will surely be smiling to the Bank.

For Bauchi and Gombe state governments, they now have a major source of Internally generated revenue (IGR). Because according to the National Bureau of Statistics, they generated a meager of 17.9 billion and 10.6 billion as IGR; that’s 20.1% and 16.1% of their total recurrent revenues respectively in 2021. This is obviously way too little to make an impact in their fiscal performances.

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Furthermore, it is reported that when completed in the planned span of 10 years, the Kolmani project is expected to generate nearly $73 billion or N32.3 trillion at an average global crude oil price of $73 per barrel benchmark.

The newly signed Petroleum Industry Bill (PIB) reaffirmed the agreement that 13% derivation from proceed of oil is to be given to oil producing states. Going by the above statistics, the project will have the two States earning funds that they wouldn’t have gotten in more than a decade from the shrewd FAAC allocations they now get.

This means excessive funds to build more schools, hospitals, roads and infrastructure, spurring rapid development to the states.

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Averting the paradox ….

Not all glitters are gold. This classic adage stands valid on oil transformative powers. It is a dual carriageway. On the other side of that fantastic picture, we painted lies the resource curse. Venezuela, DR Congo and even Nigeria are cited as resources rich nations that have suffered the paradox of plenty, a striking contrast of the enormous prosperity that the discovery of oil offers.

Without looking farther away, the current state of the Niger Delta region is a enough example for us. Despite the region’s contribution to over 70% of the total revenue generated in the country in the last 60 years, the region is still in a state of comatose. The rate of crimes is always on the rise. With environmental degradation that has spilled their waters and carbonised their arable lands; condemning most families down the bottom of the poverty spectrum. Most of the people are left with no option than to join the Militants that sabotage oil production operations in the name of ‘fighting for their people’.

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But their claim is not without substance. The region has suffered enough neglect and nearly absence of governance at both their states and the Federal level. To the average Niger Deltan, the 13% derivation of oil proceeds the Government agreed to pay them is just on paper because he hasn’t seen or felt any of its dividends.

These are the people that will tell you more of a resource discovery being a curse rather than the prospective deal we see!

Coming upwards from the South, a look at Zamfara with their new found Gold and how it has been accompanied by by a surging banditry and inter communal clashes that the country has never seen! I bet most of the indigenous people of Zamfara would give up the Gold for a peaceful night of sleep.

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On the thin line…

So, what will stop the people of Bauchi and Gombe states from plummeting into the shallows of the resource curse?

For the two state governments, they should see this moment as the one of the most important in their history. Because any agreement they sign will in turn be a judgement for or against them by posterity. The rights of the people should be given the optimum priority during negotiations.
While delivering their respective speeches, the Governor of Gombe, Alh. Inuwa Yahaya said assured that they have learned from the mistakes of the Niger Delta on the environmental degradation Oil has caused on their land disclosing that they have since hired the services of consultants that is advising them on what to do. While his counterpart, the Governor of Bauchi state, Sen. Bala Mohammed assured that his state has planned modalities on ground in ensuring that all the necessary support needed from the state’s end for success of the project is provided. These are promising and great signs to begin with.

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Next, I will suggest that they unite to set up a Joint Development Zone (JDZ) to harness the maximum benefits from this discovery. Arrangements should also be made on how to put all the derivation funds into delivering welfare and Development for their people.

Furthermore, they should be careful on not becoming a petrostate. Other sectors of the economy that are synonymous with the two states should never be abandoned but continue to receive equal attention.

Proceeds should be invested in areas like Agriculture Tourism that will in turn yield profits simultaneously. This will help them to plan on sudden shocks on the prices of crude oil.

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Standing on a thin line, the Kolmani project offers a choice to Bauchi and Gombe states. Proper planning and the subsequent utilisation of the funds to be gotten from the project is the only way the two States can jump to the shiny side of prosperity rather than falling off the thin line to the gloomy side of paradox of plenty.

I here, hope and pray for the former!

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