Nigeria’s oil price drop, a blessing in disguise -By Smart Amaefula

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Nigeria’s oil price drop, a blessing in disguise  -By Smart Amaefula


When in January 15, 1956 oil was first discovered in Oloibiri by Shell Darcy, we were like the utopians. With her level of awareness, Nigeria is still insensitive in realising that crude oil is a finite natural resource. During the good days of oil boom in Nigeria, we could applaud the GDP growth but the fact is that the economy is not growing at par with the increasing population of Nigeria that needs resources to match it.

Consequently, the rate of energy consumption has inevitably driven the increasing demand for energy world over. Also, the demand for energy is speedily growing in areas where there are either no national electricity grids or where grids are erratic and weak. Nigeria falls into this category of countries or regions.

Recent publication in national dailies have indicated that the US did not import any oil from Nigeria in July 2014 for the first time since 1973. Also, it is well known that the United States, Europe and Japan have reduced their consumption of oil since 2008 by around 10 per cent or four million barrels per day, due to improvement in energy efficiency, low gross domestic product. From the Business Day’s fact sheet, Nigeria held the 12th position in the league of highest producers of crude oil in the world. The country’s production quota has generally been put at 2.2 million barrels per day. In 2009 for example, her oil production quota as agreed by OPEC was 1.6 million barrels per day. Nigeria as at end of 2012 could only realize about 2.1 million barrels of oil per day, as against the targeted production level of 2.5 million barrel per day, leaving her with a shortfall of about 0.5 million barrels per day.

A more recent claim by Department of Petroleum Resources has tried to pacify Nigerians, that the discovery of shale oil by US and other countries will not affect Nigeria’s oil.

Why should we care about other countries’ new inventions when we should be discovering our own sources to give us local satisfaction and a comparative advantage? Narrowing the threats to Nigeria’s oil price-drop to shale discovery of other countries is rather myopic. Economic experts believe that the continuous drop in the price of crude oil would affect Nigeria’s 2014 budget benchmark price of $77.50 per barrel. Nigeria’s revenue is about 90% dependent on crude oil. If the drop in crude oil price continues, it means that, Nigeria will be ushered into another level of austerity which initially afflicted her during the early 80’s.Will Nigeria’s oil ‘last forever’? We ought to remember that our current and prospective buyers are diversifying into innovative discoveries of alternative sources of energy to meet and satisfy their energy thirst. For example, the US and China are going into Shale oil. Whether Nigeria denies or admits the effects, all the news hovering around oil drop is not a good one for Nigeria but a blessing in disguise. This is because, it is only situations like this that Nigeria responds or reacts to. Other than that, Nigerian’s lack of self-initiations subsists. What all these enumerated challenges and threats mean to Nigeria’s oil is, we should begin to ask what other alternative sources of energy could drive economic investments in Nigeria.

For sometimes now, Nigerians are equally worried that even the cheap oil that the nation depends on may soon be set aside due to the real possibility that the world will move on to new alternative energy source. When we Nigerians look up North and South poles and find out we do not have partners to ‘play oil ball’ with, we will be compelled to think of alternative sources of energy. If or when that happens and crude oil attracts less attention, what will be the consequences for Nigeria’s economy? While these are legitimate concerns, they also present a great opportunity to transform the environment and by extension the economy.

Energy consumption goes hand in hand with industrial production and with increase in personal wealth. This correlation of energy consumption with economic development points out a basic disparity between societies. Countries that can afford to consume great amount of energy continue to expand their economies and increase their levels of living. There is a gap between those without access to energy or those unable to afford it in terms of their economic prospects and those of the developed countries growing ever greater.

It is time we desist from paying lip service to diversifying the economy from the non-oil sector. Even the shale oil is not preclusive of Nigeria and can be invested in by Nigerian governments. Nigeria can start now to exploit the natural infinite resources at her disposal such as the sun and wind, especially the solar energy, due to its ubiquity.

The euphoria of being blessed by oil exploitation in Nigeria has gone superfluous that nobody is any longer excited about it. Nigerian government should embark on a multi-pronged approach towards pursuing her energy needs that will ensure sustainability, energy efficiency and at the same time help as a climate change mitigation strategy.

Oil block licensing has rather become a bazaar in Nigeria. Huge signing fees are exchanged as though the players in the game were soccer stars. But is there any hope for Nigeria? Yes! But if only we are willing to embrace innovative approaches to meeting our energy needs. Nigeria’s best option is to invest hugely into renewable energy. It is however the direct capture of solar energy that is seen by many as the best hope of satisfying a large proportion of future energy needs with minimal environmental damage and maximum conservation of earth’s resources. Nigerian government should take the renewable energy policies seriously and not bury them in paper work and cumbersome bureaucracies. For example, we have seen and appreciate that the Federal ministries of environment and power have marshaled out so many plans to go renewable, including the renewable energy projects by the Energy Commission of Nigeria. However, what Nigerians need is action. The plans are all in the pipeline while votes are allocated in annual budget to the projects since inceptions. The policies have not translated into actionable projects. “No one lights a lamp and puts it in a place where it will be hidden, or under a bowl. Instead, they put it on its stand, so that those who come in may see the light” (Luke 11:33 NKJV). If these agencies are viable, we want to see them through verifiable results.

There are so many benefits associated with the usage of renewable energy. Nigeria has been afflicted with acute energy deficit for decades. Millions of households and businesses are still depending on generator plants for their electricity needs. According to rural poverty portal, about 90% of Nigerians live in the rural areas and so, do not have access to electricity. The rural dwellers and a lot more cottage industries across Nigeria depend on wood fuel as their cooking heat source. This wood fuel has health implications and burning creates more atmospheric Carbon dioxide (CO2) to contribute to global warming. The Rural Electricity Commission with about N8.2 billion in annual budget has become a drain pipe of public fund as the commission cannot account for implementation of their mandate in a visible form than we, reading it in the papers. The lack of access to power is leading to urban surge as well, through rural-urban migration to put unbearable pressure to Nigeria’s big cities. The demand for power will certainly increase as Nigeria’s population increases. Imagine 170 million Nigerians and about 60% of the population is still waiting for power. The question is; when will they get it? What else can the government do for them?

It is not surprising that lack of access to energy is affecting livelihood and lowering quality of life and also affecting the economy. From World Bank’s fact sheet, 70 per cent of Nigerians live on less than US$1.25 a day. This is upon the country’s economic 90 percent dependence on oil.

Let the oil price continue to nose-dive and let the deniers of the threats continue to deny it. They are no more Nigerians than all of us. It is a matter of time for us Nigerians to realise that the drop in oil price is rather a blessing in disguise. But it will be a shame if Nigeria continues living in her utopian world of being ‘Giant of Africa” while these other smaller countries rather forge ahead to become the mouse that roared.