In January, Nigeria’s main foreign exchange earner got more expensive than it’s been in a long while, and government officials were rubbing their palms in glee. It was fantastic news after all; crude oil- or more specifically, the Bonny light crude, which Nigeria produces, hit the $70 per barrel mark, raising hopes that the Federal Government’s ambitious ₦8.6 trillion budget wouldn’t flounder at the execution stage. If oil prices stay close to that level, government revenues from crude oil sales (that’s two-thirds of government revenue) will increase, and there’ll be more money to spend on projects and public workers’ salaries. The business of governing will be smoother and less headache-inducing for the people steering the nation’s policy-making and implementation ships.
But there’s something not quite right with the jubilant cheers that greeted news of oil prices edging higher. And we don’t need to look too hard to find out what it is.
Immediate concerns: competitors and gluts
Thousands of miles away, in the Middle Eastern kingdom of Kuwait, the oil sheikhs are also rubbing their hands in glee. But they’re not celebrating Bonny light crude. They’re hailing the arrival of their alternative to our light oil, the ‘
Super light’ crude. First discovered in 2005, this oil grade appears to have qualities that make it attractive to crude oil refiners. A few analysts are warning that this new kid on the block, the ‘super light crude’, could become the favourite of our Asian customers. They might eventually ditch our Bonny light crude for this ‘lighter’ product. The result? Up to 29% of our oil exports will be wiped out. Plus the economic turmoil that would visit the country if such a thing ever happened.
Even if the super light crude warnings turn out to be false alarms, there’s an equally big threat hovering over Nigeria’s petroleum industry just now. It’s shale oil, made in the USA and Canada. Although the threat of Kuwait’s super light crude remains unproven, Shale, by contrast, has already demonstrated its potential to do us harm. Get this: the recession of 2016 was partly triggered by shale oil- or by the USA flooding the global oil markets with it. As the Government of the Federal Republic of Nigeria celebrated oil prices smashing through the $120 per barrel ceiling in 2012 (and swam in the petrodollar oceans that came of it), the Americans were wailing about having to pay ridiculously high prices to refill their cars’ gas tanks. To force prices down, the USA and Canada went to work; they pumped huge amounts of shale oil into the markets, causing a glut (overabundance). Oil became so common, it turned cheap. Prices plunged sharply. Nigeria, having saved too little for the rainy day, was among the hardest hit oil producing countries. Oil revenues nosedived, the ripple effect whipped through every sector of our economy, and we slid into recession.
We’re still recovering from the bleak depths of 2016. But, worryingly, this recovery has not been spurred primarily by serious government policy. Nigeria’s emergence from recession is, in a nutshell,
the result of rebounding oil prices (the price milestone achieved by Bonny light crude in January is an episode of this resurgence). Our undoing has become our saviour.
Meanwhile, shale oil is making a comeback. Although its price-sinking effects were dampened by an unusually resolute OPEC effort to cut global oil supplies, there are signs that producers of shale are pushing larger amounts of their product to the markets. This should concern us, our fragile economic recovery could be shortlived.
Environmental concerns within and without
The immediate concerns for our dependence on oil are troubling enough. The problem is, things could get even worse.
As the global movement away from dependence on fossil fuels gathers pace, more countries are setting strict targets to slash or end their consumption of petroleum products. India has set what one of its ministers calls “an aspirational plan” to have only electricity powered cars sold within its borders by 2030. Norway wants all new cars and vans sold there to have zero emissions. France and the United Kingdom have indicated that they’ll be banning the sale of petrol and diesel powered cars in 2040. Several more countries have set similar goals. If this trend continues, Nigeria- as well as other oil exporting countries -will have to sell something other than crude or refined oil to the world, if they’re going to survive.
The key driving force behind the adoption of energy sources other than fossil fuels is the worry that burning fossil fuels is damaging the environment and heating up the planet. The climate changes this brings about has severe consequences for our world. Climate experts and environmental campaigners have fatally high summer temperatures and deadly winter blizzards on their minds when they plead with governments to abandon Premium Motor Spirit, diesel, marine gas oil and aviation fuel. They’re warning us down here too.
The future that awaits us could be hard to live with, if Nigeria doesn’t break with fossil fuels. Imagine this: fast forward to the year 2050 (not as far into the future as you think, I assure you). Nigeria, with over 400 million people (according to United Nations estimates- more than double our present population) struggling to live in ever-shrinking habitable spaces. They’ll be forced southwards by the encroaching Sahara, and inland by overcrowded coastlines and increasingly restless oceans. This sort of pressing together won’t bode well for the country. Throw into the mix a government too underfunded to maintain law and order (because oil revenues would have dried up)-and we’ll have an absolute disaster on our hands. A perfect storm with ingredients all made from heavy dependence on crude oil in 2018.
What is being done, and what we can do
Something is being done to prevent this doomsday version of the future from happening. Agriculture is a top priority for the government (or so it appears), and there’s a grand plan to put the country on the path to sustainable growth. The
Economic Recovery and Growth Plan (ERGP), formulated by eggheads in the current government administration, seems to be a fine answer to our immediate concerns. Hopefully, our political leaders (or servants) will muster enough courage to make it come alive.
As for government revenues, Federal tax authorities are tightening things up to ensure that more funds are collected from individuals and businesses. The
Federal Inland Revenue Service (FIRS) is trying to modernize and expand its tax systems; the early signs are that its strategy is working. However, there’s still more to be done.
Our future will ultimately be decided by us, the ‘ordinary’ private citizens. Our efforts at adding value to others’ lives through our commercial productivity could be drops that add up to make a wider sea of possibilities- wider than addictive dependence on oil.
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This article was first published on 21st February 2018
ikenna-nwachukwu
Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.
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