A country celebrating 50 years of its Organisation of Petroleum Exporting Countries (OPEC) membership, Nigeria is a clear example that a natural resource such as oil is not necessarily a blessing.
Endowed with some of the world’s biggest oil reserves, plenty of arable lands, Nigeria had the potential to break onto the global stage by aligning with the 12-member OPEC cartel in 1971 to take an active position in decisions on international energy demand and supply issues alongside most of the world’s biggest oil producers.
Nigeria and other OPEC members have over the years collectively agreed on how much oil to produce, subsequently, exert considerable influence over the global market price of oil and, understandably, tend to keep it relatively high in order to maximize profitability.
For instance, in 1973, the cartel was able to influence an oil boom which saw prices quadruple from $3 per barrel to $12 per barrel.
Also, between 2006 and 2009, the price of oil went from $74.59 to $109.25. Again, from 2010 to 2013, the price of oil rose from $84.24 to $100.95.
During these boom periods, most oil-producing countries run successful economies and also learned not to put all their efforts into one basket by intensifying plans for life beyond crude oil, a point Africa’s biggest oil-producing country missed.
For instance, Saudi Arabia, the world’s biggest oil exporter, took full advantage of the sustained rising oil prices to build new cities. The projects were designed to burnish the country’s image, develop a non-oil economy and generate enough employment to maintain social stability.
For the UAE, building an economy less dependent on the ups and downs of the price of oil, but with a skilled workforce in many different industries, is beyond lip service. The country has a development plan for the next 50 years after 2021 called “2020: Towards the next 50”.
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The plan aims to strengthen the country’s investment in future generations with a focus on advanced technology, rely less on oil by diversifying exports and imports, enhance cohesion in societies, improve the productivity of the national economy and build on Emirati values for the benefit of future generations.
In Norway, the government viewed oil revenue not as a source for immediate squandering but as a “transformation of wealth, from a natural resource to financial wealth”, with consideration for the future by upholding an ethical obligation to share oil wealth with future generations.
For Nigeria, the narration is different, policy missteps, wasteful spending and an inability to diversify away from petrol dollars or build a life after oil plan have restricted the country’s economy from attaining its full potential and have rendered it fully susceptible to the renowned “resource curse”.
“OPEC came at the right time for Nigeria who just ended a civil war and put the country on the global map, but the cartel is not responsible for how countries utilised the revenue,” Ode Ojowu, a Nigerian economics professor and a former Chief Executive of the National Planning Commission told BusinessDay.
Despite producing oil in commercial quantities for more than five decades, Nigeria’s oil production has never far exceeded the 2.3 million barrels a day hit in 1979. Its oil output was insufficient to spark a Middle Eastern-style economic miracle back then; it’s woefully inadequate to attempt it now, thanks to an increasing population.
Nigeria has the 19th lowest production per capita among top 20 oil-producing countries in the world; the country produces less than a barrel per 100 people, only China produces lower at 1/3 of a barrel per person.
Comparing this to the Gulf States, widely accepted to be the most oil-rich in the world. Saudi Arabia produces about 28 barrels per 100 people, Kuwait produces 60 barrels per 100 people, while UAE produces 32 barrels per 100 people.
Although Nigeria produces the most oil in Africa, it also underperforms against its African peers with regards to per capita production; it produces less oil per person than Angola and Algeria.
“Instead of cutting waste and leakages, Nigeria racks up debt to replace oil revenues,” Damilare Asimiyu, Head, Research & Strategy at GTI Capital said.
Beyond oil production, the discovery of fossil fuels also led to the dismantling of what little industry there was by opening the floodgates to cheap imports financed by a strong local currency. Countries like Malaysia and Indonesia, which were as poor as Nigeria in the 1960s, have surpassed it in per-capita income after diversifying.
Ghana and Cote d’Ivoire, neighbours less blessed with oil wealth, have been pulling ahead in terms of per-capita gross domestic product in recent years while China, India and Vietnam, who were all poorer than Nigeria as recently as the 1990s are now considerably richer.
“Nigeria’s main challenges are local indiscipline, wasteful spending and glorified corruption,” Ojowu said.
Other industry players say Nigeria periods of oil boom prompted by massive oil revenue inflows led to extravagant spendings, especially on massive non-productive projects, which never ushered in commensurate national economic development.
For example, at a time, Nigeria ordered 20 million tons of cement for the execution of the large developmental construction projects the government had embarked on. The shipment was twice the off-loading capacity of all Nigerian ports combined and hence, the cement could not get off-loaded. Massive amounts of the cement eventually lost binding capacity and became wasted.
“That was just one out of many stories pertaining to the squandering of Nigeria’s oil revenues,” Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies, said.
Despite its huge oil and gas resources—or perhaps because of them—Nigeria has been unable to prevent wide swings in its fortunes.
Nigeria’s inability to swing oil fortunes to economic realities means over 90 million of its citizens live in penury, more than India, which has a population seven times greater.
The coronavirus has only made things worse. Personal incomes are set to fall to their lowest in four decades, pushing an additional 11 million people into poverty by 2022, according to the World Bank. One in three of Nigeria’s workforce is unemployed, among the world’s highest jobless rates, fanning social discontent and insecurity.
Policy blunders by President Muhammadu Buhari have complicated the road to recovery. He came to power in 2015 pledging to create 12 million jobs in his first four-year term; halfway through his second term, unemployment has more than quadrupled.
Buhari, 78, revived an import-substitution drive that was popular when he was a military ruler in the early 1980s, crippling businesses that can’t get goods to survive. He has banned foreign currency for imports of dozens of products from toothpicks to cement, closed borders to halt rice smuggling and refused to fully ease exchange controls.
“When the current administration came to office, people were expecting things to change,” Awodeji said. “But it’s not just this administration that failed. The system is broken.”
