• Saturday, July 20, 2024
businessday logo

BusinessDay

Failed policies, wasteful leadership mean oil windfall bypasses Nigeria

Rising appetite for oil for cash loans traps Nigeria’s next-generation

The surge in oil prices this year should have been great news for Nigeria.

According to Bloomberg, Africa’s biggest crude producer, which relies on the fuel for more than 80% of its export earnings, saw output slump in the second quarter — just when prices peaked.

Things got even worse in July as production plunged to 1.2 million barrels a day, the lowest in more than three decades.

The government blames widespread pipeline vandalism and oil theft by criminals who operate mini refineries along the creeks of the crude-rich Niger Delta for the lost output. It plans a security upgrade similar to that used by Saudi Arabia’s Aramco.

But it’s not just waning production that’s keeping Nigeria from taking advantage of the oil bonanza.

Nigeria’s medium term expenditure plan, METP is based on a warped official exchange rate that is at best unrealistic and which ensures that the three tiers of government are starved of the Naira revenue they badly need.

Worse still, the budget office projected a dire fiscal future for Africa’s biggest economy if it doesn’t end gasoline subsidies that it estimates will cost 6.72 trillion naira ($15.7 billion) next year — more than the government is expected to earn in tax revenue.

Read also: Nigeria’s oil projects seen at risk over PIA timelines

Apart from a debilitating high level of crude oil theft that requires participation or complicity by the high and mighty in Nigeria to flourish, a wasteful petrol subsidy regime ensures the fuel consumption numbers are as opaque as they are unbelievable.

President Muhammadu Buhari’s administration has repeatedly floated the idea of ending the subsidy, but never follows through.

Cheap pump prices are popular in Nigeria — and expected — so it’s unlikely to be touched ahead of presidential elections in February.

The industry has also left a scarred environment.

Shell, long the country’s most dominant oil company, claims bunkering is partly to blame for interminable spills.

A Bloomberg exclusive report found that a $1 billion cleanup, heralded in 2019 as the most ambitious initiative of its kind anywhere in the world, is making one of the earth’s most polluted regions even dirtier.

In Nigeria, the resource curse is living up to its name