Economic Confidential, June, 2009
Crude oil and Nigeria’s failed development
By Moses Braimah
By the year 2010 Nigeria will be 50 years old as an independent nation. Compared to other countries that are within the same age bracket, same high population, but with far less per capita income, it is clear that we have not made the type of development politically and economically our founding fathers had hoped for.
So many fundamental developmental challenges like weak electoral system, poor infrastructural base, corruption, insecurity and uninspiring leadership in most sectors have continued to plague our progress.
Many of our leaders do not realize that nature knows no pause and development, and attaches her curse on all inaction (Johann Wolfgang von Goethe). Also, that the growth and development of people is the highest calling of leadership (Harvey S. Firestone).
It is a shame that despite the huge financial resources from crude oil which we have ‘undeservedly’ earned over the years we have not been able to build our nation due to primitive accumulation of wealth and serial corruption, maladministration and mismanagement of our collective wealth.
Prof. John Beddington, UK Chief Scientist, warned recently that, “By 2030 the demand for resources will create a crisis with dire consequences. Demand for food and energy will jump 50% by 2030 and for fresh water by 30%, as the (global) population tops 8.3 billion.”
As a nation, do we realize this? Our over reliability on income from crude oil export whose other diverse opportunities have not been well exploited to develop the economy is a big shame. Crude oil and gas exports accounts for more than 98% of our export earnings and about 83% of federal government revenue, as well as over 40% of GDP. It also provides 95% of foreign exchange earnings, and about 65% of government budgetary revenues.
It is on record that Nigeria has about 159 oil fields and 1,481 oil wells. Proven reserve is over 31 billion barrels, majority of which are in the Niger Delta. The story is the same with natural gas. Its reserves are well over 100 trillion cubic feet. Majority of this gas is flared off and it is estimated that Nigeria losses 18.2 million dollars daily, though, it is reported that concerted effort is being made to stop the flares.
Nigeria’s total petroleum refining capacity is 445 million barrels per day (70,700,000 cubic metre per day) from its four major oil refineries only about 30% of installed capacity its been utilized whenever any one of them ever works.
For over 15 years now, Nigeria remains one of the world’s biggest importers of refined petroleum products. Several billions of naira is spent annually on subsidies which has become another source of fraud, where large amount of money is salted away through either over invoicing or deliberate application of voodoo calculation in the arrival of what the actual subsidy per litre is. With the increasing and unbearable cost of subsidy, we are now faced with the new government policy of deregulation after several years of playing the ostrich. Inconsistency of policy laddened with mafia-like corruption and conspiracy has plagued the development of this sector.
I can still remember one of the policy thrust of Obasanjo was for Nigeria to refine, at least, 50% of her crude oil export. For some funny reason, this path was not pursued as anticipated. Imagine if this policy had been pursued vigorously the kind of impact it would make in the economy. At the last count, we would have nothing less than the 50 mega refineries with petrochemical companies that would provide thousands of jobs directly and indirectly, Nigeria would earn at least 10 times what we presently get from exported crude oil. Fuel scarcity would become alien to this clime, smuggling to neighbouring countries would disappear and tax returns to different levels of government from this source would increase in the same...