Thursday, June 24, 2010
When Nigeria’s Oil Dries Up…
Since the discovery of the hydrocarbon natural resource, otherwise called crude oil, in Nigeria and the commencement of its exploitation in 1956 at Oloibiri in the Niger Delta area after half a century of exploration, there is no doubt that this natural resource has played an important role in the life of the entity called Nigeria.
Upon the discovery by Shell D’Arcy Petroleum, actual production began in 1958 from the company’s oil field in Oloibiri in the Eastern Niger Delta. And by the late 1960s and early 1970s, Nigeria was said to have attained a production level of over two million barrels of crude oil per day.
Since 1960, the country’s economy witnessed an average of five per cent increase annually with per capita income said to be above $600. Export of agricultural commodities such as cocoa, palm produce, groundnuts and rubber alongside other solid minerals reportedly boosted income.
However, from the mid 1970s, oil became a deciding factor in the Nigerian economy. The structure, nature, productivity and competitiveness were consequently altered.
According to government sources, crude oil from then on began to play a dominant role in the Nigerian economy and at different times accounted for between 80 and 90 per cent of the country’s gross earnings.
However, the discovery of this hydrocarbon resource is not without its own prices, as subsequent governments in the country neglected those resources that had served as the mainstay of the economy prior to the discovery of oil.
The 1970s saw a huge rise in the price of oil in what was generally called the oil boom era, and since then, both government and private individuals had focused on the oil business. Nigeria, within a short time, became a mono product economy depending entirely on revenue from oil for its development needs.
It was also posited that the discovery of the hydrocarbon has turned out a ‘cause’, as the huge revenue realised from it over the years has not translated into improvement in the lives of the people, neither did it translate into the development of infrastructure in the country.
The irony of the situation was that despite the trillions of dollars realised from oil in the past four decades, the country has not made much progress in terms of development. In fact, Nigeria is a case study of a nation with great opportunities that were blown away.
Some experts have even described Nigeria as “metaphor per excellence for a failed development experience”. Ambassador Princeton Lyman asked whether Nigeria is not losing in terms of economic influence, strategic importance, and global relevance.
It is no longer news that Nigeria’s oil reserves are fast dwindling; experts have put the country’s known oil reserves at 31 billion barrels. The reports have become a source of worry for the regulatory and monitoring agencies in the country including the Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR) and the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC).
Studies have also confirmed that hydrocarbon deposits have life-span and can be negatively affected if there are fewer activities to extend the life indices –through intensive exploration – to augment the resource base.
However, the sad news is the reports that Nigeria’s crude oil will dry up by the year 2040 – this is 30 years from now.
Realising the enormity of the problem that would arise if Nigeria’s crude oil suddenly dries up, there have been clarion call on the authorities to look for a way out of the impending disaster.
The question then is: what next when our oil dries up? Where do we go? Where are we going to start from?
These are the realities that every Nigerian must be ready to face in few years time, if the predictions of the experts come to pass.
Minister of State for Finance, Remi Babalola, while delivering a paper recently during the second annual Oba Olashore Lecture at the Obafemi Awolowo University (OAU), Ile Ife, said “the pervasive poverty in Nigeria is connected to oil wealth, but not caused by natural resource endowment. The misery or hopelessness index, whether quantified as $1 per day or $2 per day adjusted for purchasing power parity is a cocktail of poor leadership, unimaginable public choices, mis-governance and maddening corruption.”
Babalola, at the lecture, added that the waste and degradation of natural resources in developing countries are often traceable directly to government policy failures.
These failures, according to him, cause resource depletion that cannot be justified by whatever societal gains that may be achieved by such depletion; as forests disappear, petroleum and mineral resources are squandered, land erodes, water systems deteriorate and wildlife becomes scarce, we can almost always find a faulty government policy lurking in the background.
“The depressing conclusion often reached is that the unsound policies are simply the result of greed, ignorance, short-sightedness, corrupt tendencies and incompetence of persons in position of trust,” he added.
The Minister also identified transformational leadership, physical infrastructure development, macroeconomic stability, rule of law, accountability and transparency, government reforms, enhanced human capital development, and employment-oriented development strategy among others as very fundamental for the prosperity of the nation.
However, countering the experts’ position, the National Association of Petroleum Explorationists (NAPE) said Nigeria would not run dry of hydrocarbon, at least not by 2040.
NAPE, a body of geoscientists in Nigeria, made its position known through its immediate past president, Victor Agbe-Davies, stressing that the paradigm of exploration has now shifted from onshore to the offshore, where, he claimed, larger chunk of crude deposits are found.
Although he admitted that some oil wells have dried up onshore in recent years, he maintained that such oil wells could still be made productive with the aid of some modern technologies.
Agbe-Davies stated that there is a gradual shifting from the conventional to the unconventional methods of exploration.
The former NAPE helmsman maintained that the oil production on Agbami oilfield, an offshore platform operated by Chevron, is over 200,000 barrels per day, which is about 10 per cent of the total daily oil output from Nigeria.
However, a petroleum engineer, Bayo Alamutu, argues that it is high time that Nigeria started to diversify its source of revenue, whether there is a threat of our oil drying up or not.
He particularly rooted for increase in investment in the agricultural and power sectors, “which would allow for preservation of some crude resources that the country is endowed with.”
It is a simple logic, according to him, that whatever has a beginning must have an end. “What I am very sure of is that Nigeria’s oil has a life span, whether 100 years or more; the resources will dry up one day. So the best we could do to the generations yet unborn is to preserve the resources and invest in other revenue earning sectors.”
Executive director, Marketing MIX Communication, Muyiwa Akintunde, while baring his mind on the issue, said there is a huge potential in agriculture and tourism that the nation is not tapping right now because we are beclouded by oil revenue.
“Look at the Tsonga example in Kwara State by the Zimbabwean farmers. We have arid land that turns out huge yield. With micro-industries to support this project, we will enhance local and export markets.
Tourism should also be given a boost. Nigeria remains a preferred tourist destination despite the image problem. Next to agriculture, tourism is the next revenue earner for the state of Israel, despite the troubles in the Middle East,” he said.
In his own contribution, the chief executive officer of Portion Consult, Mr. Temitope Ajayi, said: “It means we are finished economically since oil accounts for more than 80 per cent of our national revenue.
“But the good news is that most nations without oil are moving forward in all indices of development. What we need as a country is human capital. The greatest resource for any nation is the human resource. Nigeria must take this seriously and invest massively in the education of its citizenry. India is the largest exporter of softwares and makes more money than we make from oil. Nigeria should begin to develop other non-oil resources like agriculture, tourism etc.”
Managing director of Wundermann Nigeria Limited, Maurice Ukpong, said 2040 is just 30 years ahead.
Said he: “In 30 years, if the prediction comes to pass, we are doomed as a nation. The prediction should therefore be a wake-up call for our leaders to immediately set in motion policies and needed political will to explore and exploit other vast natural resources in abundance that remain largely untapped in this country.
“Since the oil boom of the 70s, successive leaders in this country have focused attention only on exploitation of oil and gas resource while abandoning other natural resources.
“Despite the sad reality that the oil reserve will not last forever, government is paying lip-service to other sectors of the economy with potential to generate same, if not more, to our GDP annually as oil and gas. It is high time we went back to the (South) East’s palm oil and rubber, the North’s groundnut pyramid, hides and skin, and (South) West’s cocoa era of the 1950s as well as harnessing vast potential in renewable energy source such as solar and hydro resources.”
Expressing worry at the situation, the chief executive officer of Ashton and Layton, Gbenga Adebija, said this is the time Nigeria needs to start planning for this eventuality by developing alternatives and moving away from a mono product economy.
His words: “It is crucially imperative that massive investments are made in other sectors such as agriculture and solid minerals, so that the country can begin to reap the benefits by the time our oil reserves dry up. Year 2040 is just an estimate; it may dry up before then. Besides, most industrialised nations have already started eliminating their dependence on oil. So, even if we had an endless supply of oil, our major customers will no longer patronise us and oil revenues will drop.”
Deputy president, Nigeria Labour Congress (NLC), P. A. Adeyemi, told Sunday Independent that this could be mere speculation, as he is not sure it is grounded in any research work.
He, however, wondered why the issue should give any one cause for worry, as the oil has never impacted on the people, adding that those in government were only concentrating on oil, thereby becoming very lazy and wasteful.
“Oil has become virtually a curse. When you compare us with those not producing oil, you will see that they are putting on their thinking caps. If oil is going to dry up, let it dry; after all we existed before oil came. We were making do with agricultural products like groundnut pyramid in the North, cocoa in the West, timber in the then Midwest etc. The threat that oil will dry up will only make us face reality; that there would not be much for them to steal again and what we would then have would be well allocated.
“I am not afraid and it is not something one should panic over. It will only make us go back to the drawing board and do something good with ourselves,” he told Sunday Independent.
Former chairman, Port Industry Anti-Corruption Standing Committee (PIACSC) of the Port Consultative Council, Val Usifoh, said: “I don’t entertain any fear about the oil drying up, as Nigeria has potentials and only needs focus and good leadership. If oil dries up, we still have lots of gas. Are they not all natural resources?
“Oil resources may dry up, but our ports will remain. It is not late to diversify our economy. Agriculture and services should be the main focus. Services include ports, Information Technology (IT) and related services. That is where we are a bit lagging behind and the world is moving forward.
A Lagos-based publisher, Deba Uwadiae, said if the prediction comes to pass, Nigeria will have no choice but to go back to the era when the Federal Government depended on the palm oil, rubber, cocoa and groundnut pyramid, which were the major sources of revenue for the country in the 70s. It is certain that one day it will dry up; but before then, Nigeria may face little problem because government and Nigerians are not prepared for such eventualities.
Secretary-general, National Union of Air Transport Employees (NUATE), Comrade Gideon Ogbuji, on his part, said the so-called experts are not God. As a result, he does not believe in their predictions. He said that even if crude oil in Nigeria dries by 2040, that will not be the end of the country.
He said: “The country will continue to exist even if their prediction comes to pass.”
He argued that it will give Nigeria the opportunity to go back to agriculture that has been neglected for a very long time, and that Imo and Enugu, for example, have gold the Federal Government should look into.
President, Nigeria Internet Group, Lanre Ajayi, said: “If the forecast by experts that oil reserve will dry up in 2040, Nigeria needs not be afraid, if only she can begin to invest and develop other sectors of the economy.
“Apart from oil, there are several other sectors that could be developed that Nigeria could depend on.
Japan, for instance, does not have oil, yet the country is doing well, being the biggest car manufacturer in the world today. The Japan Toyota brand of car is selling like hot cake and the country has over the years remained the largest car manufacturer, earning so much from it.
“Japan also has the biggest electronics company called Sony Electronics. The country is surviving from these investments without depending on oil.
South Africa and Kenya have developed their tourism sectors so well that they attract huge amount of money to their economies.
“Nigeria needs to develop her tourism, agriculture and IT sectors and stop depending on oil as the only source of revenue.”
For Chris Uwaje, president, Institute of Software Practitioners of Nigeria, Nigeria’s oil wells drying up is not an issue.
Said he: “Today, the world is talking about renewable energy that will drive economies. Nigeria should begin to think of new technologies to develop. Nigeria should develop her knowledge base and invest in capacity-building than over-relying on oil. Things are changing worldwide and Nigeria must change with the world. Oil will definitely cease to exist someday. Nigeria should begin to think of alternative sources of revenue.”
But the methodology of the ‘experts’ seems to be lost on the president, Association of Telecom Companies of Nigeria (ATCON), Dr. Emmanuel Ekuwem.
“I do not know the method used by the experts in concluding that Nigeria’s oil reserve will dry up in 2040, whether empirical or theoretical. One thing that is sure is that Nigeria cannot depend on oil as her main source of revenue generation for ever, because oil will not flow for eternity. Nigeria must learn to use her bounty to invest in tomorrow. Nigeria should begin to invest in Information and Communication Technology (ICT). America, for instance, said in the next 10 years, it would cease to depend on foreign supplies of energy. It is currently investing in renewable source of energy. Nigeria should think of what to invest in that would sustain the nation other than oil. Nigeria should invest in local content development, hardware and software, as well as support small-scale business among Nigerians,” the telecom expert advised.
Government, in the view of David Aluofe, a staff of TT Consulting, must at least try to diversify the source of revenue, maybe go back to the initial area, which is agriculture.
“We should invest much in agriculture, so that they will empower the people. When people are empowered and if there is a form of mechanised farming, there will be surplus of food.
“Initially, people know that concentration of our revenue in one area like oil would bring problem because we are too dependent on oil hence there are crises all over; Niger Delta people are yearning for more revenue.
“But if it is agriculture, every state has its own potential. In the West, you talk of cocoa; in the East, talk of palm oil; in the North, you talk of groundnut and so many things. So, each area should at least develop on what they (its people) do best.
“If the oil eventually dries, there will be a serious problem because people’s eyes have been opened to oil because of the windfall, the revenue coming from it. So, I think government should develop agriculture, spend so much on agriculture, but I doubt if we can realise the same money coming from oil from agriculture.
“However, we can be food-dependent instead of importing rice and other food items from other countries of the world,” he said.
Material Control Manager, CIV Build Nigeria Limited, Lateef Olatunji, argued that Nigeria has not been managing the oil revenue well. “So, the problem and the fear is that by the time the oil dries up, what becomes of the Giant of Africa. Nobody can say for now until there are government policies over it to move to other areas. I know that there are some other mineral resources in the country, which have not been harnessed. So, there is hope in that area, but the main is to go to agriculture because the nation that can’t feed itself normally, the people will not be effective,” he said.
Managing Director, Treasure Land, Ehi Kate Osieme, advised the authorities to act now, not when the oil is already off. “It is what we should do with the oil when we still have it that matters a lot not when there is no more oil; when there is no more oil, we are as good as useless. We should face agriculture and go back to our first love, which is agriculture.
“The priority now when we still have the oil is to actually do things that our next generation, the youth, will benefit from. If the youths are well equipped, if they are well trained, if they have good facilities, they will become good leaders tomorrow. But if they don’t bring the youth up now, our tomorrow is going to really be a problem,” he added.