“If you don’t know history, then you don’t know anything. You are a leaf that doesn’t know it is part of a tree. ”― Michael Crichton
The petrol shortage of June 1975 enmerged with a bang. Cars and buses lined up all day in front of fuel starved petrol stations. A petrol shortage in an oil producing nation revealed the State’s lack of control over the economy and the total failure of the 1970-1974 second national development plan. The State response to the shortage was to immediately reduce the import duties on motor fuel with the declaration of the Customs Tariff (Duties and Exemptions) Order, No.3 of 1975. The import duties on all grades of petrol were reduced from 3 Kobo per litre to 0.57 Kobo per litre. Although this action help alleviate the petrol shortage, it did nothing towards eliminating the source of the problem which could be found in the oil policies of the State. These policies were unstable due to the struggles between the technocrats in the Nigerian National Oil Corporation (NNOC) and the bureaucrats in the Ministry of Mines and Power (MMP).
The MMP bureaucrats had links with the comprador bourgeoisie and the foreign oil companies. They favoured the control of the distribution of petroleum products by the comprador bourgeoisie with the MMP in control of the contracts. This would have given them an opportunity to earn kick-back income. MMP bureaucrats called for the decentralization of the petroleum sector and the transfer of technology through the activities of the comprador bourgeoisie. The MMP bureaucrats believed in a free market where State intervention was limited to minimal regulatory functions. Of course, this view help protect their control of access to contracts. NNOC technocrats favoured the transfer of technology through increased State intervention in the petroleum sector. Basically, they wanted the State to replace Foreign Capital as the dominant force in this sector. This would leave NNOC in the driver’s seat. The NNOC technocrats generally supported economic nationalism unlike MMP bureaucrats who acknowledged the dominance of Foreign Capital in the petroleum sector. The disagreement on whether the NNOC or the comprador bourgeoisie should have control over the petroleum product market was principally responsible for the petrol shortages. But, the conflict was more fundamental than this.
The main issue was the role of the State in the capitalist development of Nigeria. Those who believed in economic nationalism generally saw increased State intervention in the production process as the way to capitalist development in line with the strategy of the Federal Government controlling the commanding height of the economy. In short, State capitalism was their path to economic development. Those who favoured the ideology of a free market saw capitalist development in Nigeria as equivalent to the development of the private sector. The conflict between this two viewpoints governed all oil policies in 1974-75. The fight between the two points of view centred on the petroleum sector because of the importance of this sector to the Nigerian economy as a whole. The solution to the question depended on which view was dominant with regards to the FMG.
In June, 1974, OPEC established a new pricing principle during its meeting at Quito. Nigeria set up a 2 tier price structure as a result of this. First, all oil companies could buy Nigeria crude at 55% of the buy back price plus 45% of the tax paid cost. Secondly, NNOC would sell Nigeria crude at the spot market for the buy back price or more. This price structure created a unique situation where the oil companies could undersell NNOC at the spot market. This occurred because a Crude Oil Sales Committee was set up in MMP without the knowledge of the marketing division of NNOC. MMP and NNOC often acted as autonomous entities because of their different viewpoints.
In its December 1974 meeting, OPEC adopted yet another pricing system. Prices were now based on the average government take from the oil companies. From NNOC’s point of view, the new price system meant increased State participation in exploration and production activities and maximum oil revenue. NNOC also supported more direct day to day involvement in the affairs of the oil companies in which the Federal States held a controlling share. Such involvement, argued NNOC, would help its employees gain practical knowledge. MMP saw State participation in oil exploration and production as a long term project. So, it moved very slowly to implement the policies designed to hasten State participation. From MMP point of view, exploration and production activities were best left to foreign companies, with MMP in control of granting exploration and production contracts and licenses to them. Therefore, MMP opposed NNOC’s attempt to centralize all petroleum related activities under its management. MMP argued that NNOC did not process the technological or the managerial skills to handle operations in the exploration, production, refining, transportion and marketing of Nigerian crude.
The conflict came to a head in January, 1975. NNOC protested against the recommendations of the Udoji commission and the Federal State’s white paper which had put NNOC under the civil service pay structure. This meant that NNOC’s autonomy with respect to wages was eliminated. NNOC’s management argued:
“The Corporation will face a situation in which (i) the tickle of trained and experienced staff from existing companies to NNOC will stop; (ii) an increased outflow of the best of our expensively trained staff can be expected; (iii) a flow of staff from the Corporation back to the Civil Service may be expected.”
NNOC’ s methods of struggle included personal lobbying of the members of the Supreme Military Council and the Federal Executive Council, the organization of seminars and conferences led by OPEC representatives and the distribution of reports written by OPEC consultants. NNOC management made little effort to contact the press, the oil workers or the students. The fight over the direction of the nation’s oil policy was thus contained within the ruling circles of the nation.
In the midst of the NNOC protest of the Udoji recommendations, the issue of how oil revenue could be maximized during the first quarter of 1975 surfaced. NNOC supported the OPEC strategy of reducing production and increasing prices. It made a direct appeal to General Gowon, the Head of State, pointing out the ramifications of breaking ranks with OPEC. MMP wanted an increase in production and a reduction of prices. Neither Gowon or the Supreme Military Council could make a decision so they ordered NNOC and MMP to negotiate and arrive at one recommendation. The negotiation remained at a deadlock and no prices were posted for quiet some time. Finally, the SMC intervened and a compromise was arranged. NNOC’s reaction was strong and the management protested the compromise. NNOC made the following demands :
(1) A clear definition of NNOC’s functions;
(2) The establishment of clear lines of authority between MMP and NNOC;
(3) The removal of the chairman of NNOC’s Board of Directors, Mr. Phillip Asiodu;
(4) The immediate appointment of a General Manager for NNOC.
The NNOC management threatened to collectively resign if their demands were not dealt with. The NNOC’s protest was organized by the Manager of the Marketing Division, Mr. Uwam and the Manager of the Exploration and Production Division, Mr. Marinho. General Gowon ordered the immediate dismissal of both men. However, he could not suppress the NNOC demands as other members of the SMC demanded that an NNOC General Manager be appointed by the Federal Executive Council. General Gowon and Mr. Asiodu nominated the manager of the Port Harcourt refinery, Mr. Ordor, for the position of General Manager. According to decree No.18 of 1971, the General Manager was to be nominated by the Federal Commissioner of Mines and Power, Alhaji Shettima Ali Monguno. He was then to be comfirmed by a majority of the Federal Executive. Ali Monguno refused to nominate Mr. Ordor and nominated another candidate to be comfirmed by the Federal Executive Council. General Gowon appointed Mr. Ordor against the dictates of decree No.18, the SMC and the Federal Exeutive Council. According to Brigadier Murtala Mohammed , the appointment of Mr. Ordor as NNOC General Manager was the straw that broke the camel’s back. The July 1975 coup d’etat was underway. Murtala Mohammed became the Head of State of the Federation after the July, 1975 coup d’etat. NNOC was broken and it would not be able to recovery in the next 50 years.
The Coup d’etat and the emergence of new military rulers in July 1975 did not stop the internal struggles of the Nigerian ruling class over its oil and gas policies. These struggles continued all through the decades of military rule. It continued under the civilian rule after 1999 with years of debate in the National Assembly (NASS) over the passing the PIA (Petroleum Industry Act, 2021). It continues today with the plans of the Tinubu administration to make fundamental changes in Nigeria’s oil and gas policies and the PIA so they can enrich themselves, their friends and political cronies. The Nigerian ruling class never learns anything from history.
Izielen Agbon
izielenagbon@yahoo.com
Twitter:@izielenagbon
January 15, 2024.
