Oil and gas reforms should lead to diversification of the economy – Oteh

Reform in the oil and gas industry should not be an end goal for Nigerian development. Rather it should be viewed as a means to an end so that Nigeria’s abundant oil and gas wealth can help to finance its growth and development through diversification of the economy.

Arunma Oteh Vice President and Treasurer, World Bank, made this assertion at the inaugural Phillip Asiodu lecture series with the theme, “The proper role of oil in the context of accelerating growth and development in Nigeria,” at the Nigerian Institute of International Affairs (NIIA), yesterday in Lagos.

“The role of oil in accelerating Nigeria’s development is to provide it with financial resources to make strategic investments to diversify the economy. Success in that diversification requires a strategic vision of the future, establishing sound developmental plans to achieve that vision, implementing the plans effectively and monitoring implementation to ensure that our desired objectives are achieved.”

Oteh defined development as excellence on all fronts leading to a high quality of life for all. She said the true measurement of a developed nation is captured on the human development index where Nigeria is ranked 152.

She stated that even during the periods of our largest windfalls of revenue from oil, the country’s fiscal deficit were probably the largest and the spending of the huge revenue from oil did not drive economic development.

Oteh advocated that a knowledge economy should be the end result of the current reform in oil and gas leading to diversification of the economy.

“Nigeria needs to invest in human capital. Three components of human capital are critical: education, workforce quality and specialized training for researchers and scientists.“

She identified four pillars of the framework of a knowledge economy. The economic and institutional regime in the country proving incentives for the efficient use and creation of knowledge. The education and skills that the workforce needs to create, adapt and utilize knowledge. Third pillar is the country’s innovation system and the final pillar is that of ICT infrastructure required for efficient dissemination and processing of knowledge and information.

Aruma called on the government to establish a strategic vision of what it wants the economy to be in the future and continuously evaluate that vision in the face of a rapidly evolving world. This vision, according to her, must not only combine the objective of diversifying Nigeria’s economy but it must also focus on best practices.

Austin Avuru, managing director of Seplat Petroleum Development Plc, who also spoke at the event, advocated for two key roles oil and gas should play in the economy.  The first role is to provide rental revenue and the second to drive domestic economy.

“What accrues to the host nation is tax and royalties. The oil industry contributes 95% of revenue but contributes only 14 percent of GDP,  that is the risk because the size of your GDP contributes to the aggregate production of all of us who are put to work not just the revenue you earn.”

“The only way to put rental income to work is in galvanizing the rest of the economy and to make savings. At our peak in the 1970s was the same period Norway started its oil and gas industry. By 2019 Norway’s Sovereign Wealth fund is projected to be about a trillion dollars from oil savings since 1972, for a country of 4 million people. Norway is the largest single investor in all the stock exchanges in Europe. Nigeria’s is about 1.2 billion dollars.”

In his remarks, foremost Nigerian economist, Phillip Asiodu said the challenges in the oil and gas industry today has been the same since inception. Successive governments have failed to implement national development plans. He urged policy makers to stick to the priorities in the vision 2o2o plan.