Nigeria found it difficult to squeeze out N2.45 Trillion which represents 23.7% of its 2020 budget owing to the Nigeria’s debt profile of over N24 Trillion. Its crude oil reserves of 36 billion barrels (36,972 x 1,000,000) is ranked second largest in Africa, the eighth largest among OPEC nation and the 10th largest in the world.
In the same vein, Nigeria’s gas reserve of 5,675 billion cubic meters ranks as the 8th largest gas reserve in the world. The country also ranks highly as an exporter of Liquefied Natural Gas (LNG).
It is then sad the explanation that one of the three biggest economies in Africa is almost entirely dependent on crude oil. Over 65% of government revenue comes from the Oil sector which also accounts for approximately 80% of FX earnings.
Nigeria has gained handsomely over 60 years of oil production compared to the likes of United Arab Emirates who haven’t been “in the game” for as long as Nigeria. However, the UAE has been very bold and aggressive in its quest to diversify their economy, even though it is still quite reliant on the oil sector.
Back to Nigeria, with all of the riches amassed from the oil sector, Nigeria remains at the bottom in terms of development. The efforts to diversify the economy is still very tame and relatively unattended to by the government. Or at least not in the manner a government who realizes their most dependent resource oddly contributes shy of 10% to the GDP. Despite an increased revenue between 2010 – 2014 when the boom in the sector saw high prices of crude, the proportion of people living below the national poverty line in the country rose from 34.1 between 2000 and 2006 to 46.39 by 2017.
Now within the period of the oil boom (2010-2014), more attention was given to climate change and rightly so. The earth is suffering from the continuous usage of resources that are not reusable or renewable.
What is Climate Change?
For those not too knowledgeable of it, Climate change (or global warming), is the process of our planet heating up. The changing climate will actually make our weather more extreme and unpredictable. And as these changes intensifies a lot of places would become wetter and animals and humans as well would find it hard or impossible to adapt to their changing climate. Has anyone wondered why the rains are intensifying in Nigeria? One of the main causes of climate change is fossil burning (our oil exploration activities: e.g. gas flaring, down to the CO2 emission from your SUV, yes you!)
Anyway, back to our conversation, the Paris Climate Change Agreement in 2015 was so huge and it signaled the most ambitious effort by the world leaders to tackle a “big threat” to mankind; Global Warming. A breakdown of the agreement is that the world (including Nigeria, who was represented in the meeting) would be less dependent on fossil fuels (i.e. crude oil) in sectors such as energy production & transportation.
Also, agriculture, deforestation, waste disposal amongst other sectors would have reformative changes. Achieving the goals set out in the Paris Climate Change Agreement in a timely manner would see demand for products bore out of crude oil reduce while research, development and production of their “greener” replacement emphasized (increased competition for oil producing countries like Nigeria).
This in turn would reduce the global demand for crude oil and petroleum products. For Nigeria, an oil producing country who is a party to the agreement, not only does this signal possible reduction in demand of our oil (which are so heavily dependent on), it potentially means reduction in exploration activity for new oil fields and reduction in production. However, the most recent estimates show that Nigeria is responsible for 490 metric tonnes of GHG emissions (CO2 equivalent) annually, just over 1% of global production.
If as a Nation we can point to what we’ve learnt from the collapse in oil prices, it would be the vulnerability of the Nigerian economy and the welfare of its people to variables in the international environment that affect the demand and supply of crude oil and dictates the price of crude oil.
Factors such as technological advances, disruptions and innovation (hello, Elon Musk!), and energy security (hello, Shale oil) are out of the control of Nigeria, and calls for urgent diversification in wealth sourcing for the nation. Interestingly, on a side note, our budget deficits have been heavily reliant on revenue from selling oil which we have agreed to produce less and is universally less demanded for, and our debt is also optimistically going to be serviced from the Billions and Billions of petrodollars we stand to earn.
But in reality, we had the billions and billions in 2014 and by 2015 when the oil prices plummeted, the nation was ushered into a double dip recession which we haven’t truly recovered from. From 2016 – 2018, unemployment has doubled and inflation rate increased over 50%. Our minimum wage of N18,000 has a better FX value than the proposed increase to N30,000 in real terms.
Furthermore, close to half of the 200 million people in Nigeria live in poverty and another 6 citizens are at odds to join the poverty population of the country every minute. In the space of 6 years, Nigeria went from one of the most promising economies to the poverty capital of the world. Recent performance rankings place her among countries with low human development with HDI score that is lower than the averages for oil-exporting countries and Sub-Saharan Africa. If trends are to be held to heart (which they should) and we don’t diversify and prioritize climate change in our efforts, the world would leave us behind, in abject poverty nonetheless.
Based on the current climate change numbers, Nigeria has the potential to save up to $1 billion annually from climate change mitigation and adaptation strategies and harness the potential to create 300,000 jobs, produce 600,000 MT of LPG per year and generate 2.5 GW of power from new and existing IPPs if Nigeria takes advantage of the gas flared as approximately 700mmscf/d is flared at 178 flare sites. For instance, the sanctions from gas flared by oil companies the Nigeria has an annual worth of up to $1.7 billion. Between 2008-2016 Nigeria lost $14.298 billion of potentially uncollected fines.