Resilience through self-sufficiency in NigeriaMay 18, 2020
Momoh Jimah Oyarekhua, CEO of OMSA Integrated Services, talks to The Energy Year about how the lockdown in Nigeria has impacted business operations and why Nigeria is potentially the most resilient economy in the world. OMSA is a bunker supply, petroleum products trading, marine logistics and procurement company for the oil and gas industry.
How has your business plan been affected by the Covid-19 pandemic?
The pandemic has changed the whole world, and likewise our business strategy has also changed. Obviously, everybody adopts the “wait and see” approach for business today. On our side, it is not any different, as nobody knows when we will come out of this pandemic. We have to stay alive to do business, and that brings us to the issue of safety first. As a company, what we are currently doing is making sure that our staff members are well and that they remain healthy.
Where we operate in Nigeria, we have been in full lockdown for the past five weeks. The lockdown was relaxed a bit this week, although we still advised our staff to remain at home. We do the best we can from home to look after our business, but the situation is not optimal. Of course, this delayed the test round for the OPAC [Omsa Pillar Astex Company] modular refinery, which was scheduled for the end of March.
We are waiting to see what measures the country is putting in place to ameliorate the current challenges and to see if those measures fit into our business model and allow us to schedule a new test round for the refinery. On the other hand, some other important parts of the refinery that were also meant to be integrated got delayed because the related expatriate staff could not travel here due to port and airport closures.
As of today, the modular refinery is about 95% complete. We have some of our technical staff living at the refinery in isolation and doing some work, but the automation and control system will need expat input to be integrated, so that could not be done yet. If the situation normalises, we should be able to complete the installation of the refinery in no time.
How has your relationship with vessel owners been recently?
We actually entered into an advanced stage of negotiations even before the Covid-19 challenge began, but all businesses around the world started to experience losses later. In Nigeria, even if the business is not earning income, we maintain full staff strength and are still paying everyone because we don’t want to lay anyone off. So, we are reviewing our strategy now to see how to approach the future, mostly by seeing what will happen post-Covid-19.
Where do you see more opportunities emerging post-Covid-19?
The truth is that the dynamics of all businesses are changing today. If you look at the bunker supply industry, for example, the International Bunker Industry Association is currently issuing new guidelines. There are many changes that are coming, and we are monitoring all of these changes to make some informed decisions about how to carry on.
All industries have been affected. The refinery business is obviously one to be continued, and it can be managed even if it requires human interruption. On the logistics side, given that the oil prices dropped as well, we are also monitoring what is happening in the upstream.
What sort of opportunities can this crisis present for Africa regarding storage capacity?
Opportunity is one thing; ability is another thing. The income of most African oil-producing countries has dropped, and they are saddled with debt. I think banks in Africa are also going to see some defaults on financial obligations to them. All of this is going to affect the ability of these countries to invest in the type of infrastructure they need at this point. However, this does not stop companies from making projections and looking at the relevance of having a storage system in case there is another pandemic in the future.
Another point to look at is the relevance of oil in 20 years’ time. Renewable energy is coming fast, and environmental cautiousness is becoming more relevant. The UK, for example, set the target of running all cars on renewables by 2050. So, countries such as Nigeria have to think and strategise on the future relevance of oil.
So, the question for Nigeria is whether it should invest more in storage capacity or diversify its sources of income. In my point of view, investing in areas such as agriculture or renewables would make more sense than investing in storage capacity.
What would be a proper and profitable price for Nigeria’s light-sweet crude?
It depends on the world economy. We see a lot in the news about China and the US and their crude utilisation, but this will really depend on how much crude will be sold in the future. We will see trade arrangements between the US and China, but in reality, it is all about politics. Nobody knows what the future price will be. However, I think prices will eventually settle around USD 40-50 per barrel and allow countries such as Nigeria, which derives 80-90% of its budget from oil revenues, to ameliorate economic challenges.
How resilient is the Nigerian economy compared to its peers in Africa?
I recently read an article which stipulated that Nigeria actually has the strongest economy in the world because its people can provide everything for themselves: electricity, transport systems, water and almost everything Nigerians need. The government just gives a little support in these areas, unlike in countries such as the UK and the US.
My conclusion is that we are a very resilient country. I believe we will come out of this strong, but we will obviously have challenges. However, these challenges should be used as stepping stones to make us better and greater than we are today.