Godwin Nnanna is the investigations editor for Business Day, Nigeria's leading financial daily based in Lagos. He has been a journalist since 1997 and has won a number of international and local journalism awards for his writings. Godwin has spent the last week at PERC as a Media Fellow, exploring free market environmentalism and property rights. His research at PERC focuses on the Niger Delta and the persistent issue of gas flares and oil pollution.
Q: What is a gas flare? How frequently do they occur?
A: Gas flaring is essentially the burning of the gas that comes with the crude oil that we make gasoline from. It is often the cheapest and easiest thing to do to associated gas during exploration, but obviously not the best thing to do. In the oil producing region of Nigeria this is a common practice despite the fact that we have had laws against it for over three decades. In most oil producing communities in the delta, the flare tunnels are quite ubiquitous endlessly pumping out huge toxic flames into the air. You see them everywhere exploration activities take place, some on farmlands, others right behind the houses of the villagers. Some are laid on the ground, others mounted like huge Olympic torches. To think that this has been the order for over 40 years is worrisome, very worrisome indeed.
Last October, I did a story after visiting the region titled 'Legacy of waste' chronicling how a nation with the world's sixth largest gas deposit continues to waste such a huge economic product because of a lack of genuine commitment on the part of the stakeholders.
Shell, the leading explorer in the region records that there are about 110 flare locations in the region. I don't know how true that is. All I can say is that there are enough to make Nigeria the worst culprit among OPEC nations.
Q: What are some of the associated risks of gas flares? How much gas is lost every year?
A: They have very terrible health implications for the communities. You see all kinds of strange ailments when you visit these places. You observe people with all kinds of tumor, bronchitis, respiratory and eye problems.
Figures vary but estimates are that Nigeria loses between $3 to $10 billion annually to this act. Again, I am not sure of the figures, but imagine what $5 billion could do for the economy of the Niger Delta suppose that's the figure. The price of gas has been on the rise and yet we continue to waste such an important energy source in a country where many people cook with firewood and where electricity is hard to come by.
Q: Gas flares were outlawed in 1979, and yet they continue to occur. Why is this?
A: Weak institutions, corruption. We are not saying over-regulate, we are simply saying ensure that basic environmental standards are conformed with. There are global best practices and it makes good business sense to conform to them. I’ve been reading two books since my arrival here. One of them is Why Nations Fail by two Cambridge professors, one from MIT and the other from Harvard. As I read that book, I reflect on Nigeria. The authors alluded to the fact that the key distinguisher between prosperous nations and poor ones are institutions. Where institutions are weak, poverty is endemic. Obviously, the argument of these professors won’t be surprising to anyone who knows the Nigerian situation.
Q: How does the Nigerian federal government control resources?
A: The revenue from oil goes to the central government from where it is shared. The center retains a portion while the rest is shared among the 36 states that make up Nigeria. The oil producing states get slightly more because of a derivation formula that gives them an additional 13% for the oil produced from their communities. This has been a subject of huge debate over the years in Nigeria. While the oil producing states want more, others states are saying “no, what you have is enough”.
Q: What are the effects of this centralized control?
A: One of the biggest injuries oil has inflicted on the Nigerian system is that it has created a large dependency culture. Most of the states do nothing but wait for monthly allocation from Abuja. Same with the local governments. This has crippled innovation and the results are obvious in the huge unemployment and poverty rates in these states.
Nigeria was not always this way. In the 50s and 60s when oil wasn’t much in the scheme of things, the regions thrived on the basis of their agricultural strengths. Each region had its comparative advantage and there was deliberate effort to build on it. You might have heard of the Kano groundnut pyramid in the north, and the cocoa and palm oil production in western and eastern Nigeria respectively. These regions were economically strong on the basis of what they produced. Today, except perhaps for Lagos, I doubt if there is any state that can survive without oil money. No prosperous nation anywhere in the world that I know or have read about operates such a monolithic economy.
Q: How can these gas flares be put to better use? What will need to occur to turn this pollution into economic prosperity?
A: We must reduce the flares drastically if they cannot be entirely stopped. I read a BBC report recently that went by the title 'Nigerian gas profit up in smoke'. There is a huge energy deficit in the country and it is time genuine commitments are made to solve that problem.
Power is the key to stimulating entrepreneurship. At the moment we are a 'generator generation'. Every average Nigerian, as a matter of necessity, makes an investment into a generator no matter how small. So we have the biggest market for generators. Visit any place in Lagos and you'll see a block of four flats with at least four generating plants. Some households have 2 or 3. It is not so even in some smaller countries in the region. I lived in Accra, Ghana for almost 5 years without needing to buy a generator, but in Lagos, everyone owns one. You can achieve real economic development this way.
Nigerians are very entrepreneurial; all they yearn for is basic infrastructure. This presents a challenge as well as a huge investment opportunity. We've seen in states like Lagos, attempts to forge public-private partnerships in infrastructure development. That needs to be expanded. Such opening up is required in many other sectors. One of our challenges is that we have so much government yet so much less of the basics that that institution ought to do partly because of too many leakages.
Q: What have you taken away from your time at PERC?
A: I think what strikes me about PERC is the philosophy I see at work here. Here is a group of people who essentially see opportunities in places where many out there see huge problems. I have been covering the environment for a while and the widely held perspective out there is that economic growth and the environment don’t go together. PERC thinks differently. I had a chance to speak with Dino Falaschetti and I like his perspectives on one of his papers “Growth is Green,” which in many ways is an expansion of the concept of free market environmentalism for which PERC is known. This is a thought pattern that isn’t common. The other thing quite fascinating is the warmness of the people here. It’s remarkably amazing.