| Without oil, does Nigeria have a future? | Among natural resources for Nigeria as a nation is oil. It has served as major income revenue for the nation since it was discovered over 50 years ago. No doubt, the nation has gained immensely from it.
To the maximum, Nigeria government has explored this area of the economy almost to her detriment. But one pertinent question that Nigeria as nation must answer is, if the world finally finds a feasible alternative to oil, what would become of Nigeria’s economy? Answer: “God forbid, the world will always need crude oil; nothing can replace it, no matter how hard the world tries?”
The sad truth is that oil is the soul and spirit of Nigeria. Take away the oil earnings and the country will go prostrate. As much as 95 per cent of the country's exports are oil and gas, government revenues are almost entirely from oil. Yet, it is not that the country lacks other sources of livelihood, but the easy flow of petrodollars has effectively tamed the ‘Giant of Africa’ and buried its potential.
Last week, Nigeria was overthrown by Angola as Africa’s biggest oil producer, as militants’ operations have crippled production in the oil fields in the Niger Delta.
According to an international rating agency, Nigeria ’s output has been hit by dozens of attacks on oil production facilities, which has increased in intensity this year and removed at least 300,000 barrels per day of crude oil from its capacity since January.
Nigeria ’s oil output has plummeted from 2.4 million barrel per day (bps) just before the militants’ attacks started four years ago and over the last years has averaged around 1.83 million bps compared with a little fewer than 1.80 million for Angola.
While many countries like Nigeria are stuck to oil and would likely experience terrible consequences if demand and prices were to fall in catastrophic proportions, there are quite a number of countries that have taken a long-term view and diversified their economies away from oil.
Before the world finds alternatives to oil, they too are developing alternatives to oil wealth. Experience shows that a period of sustained high oil prices is usually followed by a lull, sometimes brief, sometimes prolonged. The volatility of crude oil prices is always a warning to oil-dependent countries not to box them into the petrodollar corner.
Angola, for instance, is looking far into the future. Having fought a bitter war for ages, the country's infrastructure was in ruins. However, the oil boom has brought about a transformation in the country.
The government has launched a massive project to transform the capital city, Luanda, into a foremost tourist destination in Africa. Public parks and walkways are being created to modernize the city. New hotels are springing up in preparation for the expected boom: five star Intercontinental Hotel and Casino, Hotel Sana, Hotel Luanda, and Skina VIP Inn.
In 2007, Angola’s hotel and tourism business reportedly generated $341 million income more than twice the figure the previous year and an indication that the “future city” plans are on course. No surprise then that Luanda ambitiously sees itself as ‘the new Dubai’. Dubai has long transformed itself from a mono-product economy and has become the model of what to do with oil riches.
The Niger Delta militants are bent on teaching the Nigerian government a valuable lesson not to use and dump or side foreigners that indulge in this habit. The oil war has since moved from the creeks of the Niger Delta to more civilized states like Lagos where the recent attack on the Atlas Cove was least expected.
Resource theorists will see Nigeria as the ultimate case study in the damage oil wealth can do to a country, but they would be shocked to discover the extent of ruin on the country. Whereas other oil-dependent countries are generally regarded as lacking in liberal democracy, Nigeria’s case is compounded by the state of infrastructure.
Other countries, either democratic or not, boast of excellent road network, electricity, quite unlike Nigeria whose refineries do not work, necessitating massive importation of petroleum products for years. Nigeria desperately needs functioning transportation systems, good roads and stable electricity to stimulate the economy for greater performance. The country has clearly not fully utilized its oil wealth to lay a solid foundation for economic diversification.
A future without oil does not mean oil will go out of existence. There will always be oil. In all the talk about alternative energy, the reality remains that crude oil is still the king.
Oil makes up about 40 per cent of the world’s energy use and 96 per cent of its transportation energy (air, land and sea). Paris-based International Energy Agency projects that “distillates (jet fuel, kerosene, diesel, and other gas oil) will remain the main growth drivers of world oil demand”.
Moreover, falling crude prices also make alternatives more expensive. The world cannot do without crude oil in the foreseeable future.
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