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Now that Nigeria’s oil has “expired”

Grimot NaneThe myth that the Government of Nigeria (GON) will only come to its senses or Nigeria will divide into smaller nations when its on-shore and off-shore petroleum resources have “finished,” has been mercilessly debunked.

Nigeria’s oil has instead “expired” as a tradable commodity in the eyes of its hitherto big buyer, the USA, even though there is plenty left in the ground. Nigeria has been taken unawares. The eyes of the Nigerian Big Men are now clear. What are they going to do now?

Coal was once the most important primary source of energy to the industrialised world and even though the world still has great reserves of it, its value is now quaternary to the global economy. Nations that depended on coal exports for significant revenues saw their solid carbon resource “expire” in their very hands. Nigeria is now facing a similar situation; her oil is not needed that much anymore.

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There are many implications of this expiration of Nigeria oil as an export commodity. Firstly, from a socio-economic angle, things are going to get excruciatingly harder for the ordinary and even the very well-off. Without oil money how is the GON going to run the state and distribute or redistribute economic resources like it has done for decades? The $1.25 dollars a day and worse may become a way of life for so much more Nigerians for a very long time. Recently, some incurable optimists were hailing Nigeria as the next economic miracle waiting to happen.

Secondly, the GON has been perpetually advised and encouraged to diversify its economy since the 1970s. The GON was never committed to creating savings from oil revenues which needed to be at least 25% of GDP to attain good long-term growth. Instead, the GON has operated a “spend and incur debt” policy for the nearly $1 trillion it has earned from oil.

The reason is simple. The theft of oil money by Nigerian public servants has been so intoxicating that economic alternatives to oil export were never taken seriously, and if attempted, never sustained. The senseless missed economic opportunities to grow the economy by the invariably rapacious Nigerian public servants will now be very evident, creating widespread national anger never seen before.

Thirdly, increasingly there is international pressure for American and European oil companies to clean-up the massive and long sustained pollution and ecocide they are responsible for in the Niger Delta. In innumerable acts of public relations, lobbying, bribery and defiance of court judgements, in Nigeria and overseas, it is evident the oil companies do not want to pay for the clean-up of the mess they have created while simultaneously making enormous profits. One of the drivers of this pressure is ‘how can these oil companies continue to profit and pollute the Niger Delta?’ As Shell Oil has demonstrated, withdrawing from onshore oil extraction is the most convenient way out of the clean-up demand.

Fourthly, the expiration of Nigerian oil maybe a signal that the time for the Yugoslavia-type fractional disintegration of Nigeria has arrived. Most will agree the oil (generated-wealth) is the only glue that is keeping Nigeria together, besides covert neo-colonial intervention. The expiration of such glue would mean another much bloodier civil war or, hopefully, peaceful separation. Nigeria’s major ethnic groups are watching and thinking.

All hope is not lost though. The hope Nigeria still has that it will continue to export oil as a major source of national income is twofold. On the one hand, officials can hope that the USA is bluffing in order to get Nigeria to leave OPEC in order to buy its oil at much cheaper prices and in much larger quantities. Under such arrangement Nigeria will sell more oil but make less money. This is the most likely scenario of hope for Nigerian oil.

On the other hand, Nigeria will have to sell its oil to numerous Small Buyers in complex and uncertain trade arrangements which may necessarily bring about major fluctuations in oil revenues. It is very convenient in terms of stable trade arrangements to have one or a few Big Buyers.

The Big Lesson for the GON is that if you do not prepare for change, change will catch you out; Nigeria has been caught out.

  • PERSPECTIVE is published every Monday. Dr. Nane is an errant scholar and economist. Follow him on Twitter: @Grimot


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