Oil contributes an estimated 93.6% of Nigeria’s foreign exchange earnings, 66.5% of annual revenue, and 10% of gross domestic product.
An Oil rich Soil – Among the World top 20 oil producing countries, Nigeria ranks 7th with a production of 1.87 million barrels per day (1.87 million bpd) as at December 2018. A report on the recent Nigerian National Petroleum Company (NNPC) financial performance document, indicated that the country lifted crude oil worth $51.38 billion between October 2017 and October 2108 alone.
Much a Toil about Oil – Between 1973 to 2018, Nigeria’s crude oil production peaked at 2.48 million bpd in November 2005, had the lowest yield of 680 thousand bpd in February 1983, and an annual average of 1.88 million bpd. With these impressive levels of oil production, however, the Nigerian has the least benefit from the oil. Nigeria’s international stature in oil wealth shrinks seriously, due to a high population of 191 million.
According to Knoema estimation, each Nigerian would be poorer by N223 daily if there was no drop of oil in their soil. But each Gabonese is richer by N2,296 daily though the country produces far less oil.
The Toil Exceeds the Oil – Though Nigeria ranks 1st in crude oil production in Africa, and 7th worldwide, yet, her oil wealth has yielded little or no impact on the standard of living of its citizens. Statistics show that among the top 20 oil producing countries in the world, Nigerian copes with the lowest key socioeconomic indices.
From the top 20 oil producing countries, the Nigerian remains the poorest both in Africa and the world. With Gini index 48.8, she also suffers the highest income inequality in the group.
Oil for few, Turmoil of many – Nigeria’s oil revenue alone is clearly insufficient to drive the country’s economic growth, let alone upturn the resource curse syndrome that befalls third world countries, especially, those who grapple with weak resource governance mechanisms of their commonwealth.
The following problems, hitherto, overwhelm the country’s petroleum-related endeavours:
- Defective accounting and deficit remittances of oil sales by the NNPC, the country’s sole oil company, and its subsidiaries.
- Defensive oil sector administration characterized by the secrecy of operations, lack of transparency and accountability and resistance to international best practices in its operations;
- Devalued oil infrastructures including refineries, pipelines, etc., across the oil value chain;
- Degraded environment and imperilled public health, especially in oil producing communities;
- Dependence on selective patronage to suppress growing restiveness among impoverished people living in oil-producing areas, and partisan propaganda to prevent a radical consensus among the people, rather than paying attention to the problem of delayed emancipation and justice;
- Dependence of the banking system on returns from oil sector credit finance, and the attendant exposure to external shocks from the global oil market, besides the detriment to the growth and development of other sectors, and the dearth of loans especially to Small and Medium Enterprises;
- Dependence of governance at federating units (states, local governments) mainly on oil revenue;
- Dependence of government revenue on volatile external prices of crude oil for fiscal planning, budgets, and public expenditures;
- Depleted sovereign wealth fund;
- Depleting oil reserves;
More Oil for everyone
The recent push for more oil both onshore and offshore, such as the Total Egina ultra deep offshore project, and from the inland frontier basins such as the Lake Chad basin, Gongola basin, etc., may appear valuable, but the heavy financial commitments by the government through the NNPC towards these capital projects may not yield commensurate gains for all the citizens under the present conditions in the petroleum sector.
To reinvent the Nigerian oil sector to birth a socio-economic renaissance requires the following measures:
- Prudent management of public revenue, and intentional deposits into the sovereign wealth fund.
- Popular population control incentives;
- Proactive humane and affirmative overtures to the people in oil producing communities;
- Protective policy for the environment, especially, bordering the oil producing communities;
- Privatization of inefficient public oil merchandise institutions;
- Patriotic interests in oil prospecting and producing deals with international oil companies, etc.;
- Preemptive measures against Crude Oil theft, pirates activities on the seas, sabotage on land supply routes and other which diminish the returns on investments in the oil sector;
- Punitive disincentives for concealment of information on bids, contracts, operational processes, production amounts, supply and other transactions across the entire oil value chain;
- Probity and transparency in the oil business, and accountability from public officials to the people, as matters of national policy and professional best practice, backed by the law;
- Progressive petroleum Industry laws/bills, and effective regulations of the oil sector.