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OIL
AS NIGERIA’S WEALTH
By
Mobolaji E. Aluko (2004)
Nigeria ranks highest in contribution of petroleum products
to country exports, and third highest in terms of its contribution
to the GDP. Despite loud government commitments to reduce
this dependence on oil, its annual budgets, inscrutably always
denominated in the foreign currency of dollars rather than
in the local currency of Naira, with oil as the major “financier”,
have reflected an increasing dependence on oil, not less.
In fact, oil has reduced Nigeria to a trading company - Nigeria
Oil & Gas, PLC - with the president as CEO, the state
governors as non-performing members of the board of directors,
and citizens as grumbling shareholders to whom “dividends”
are reluctantly declared periodically.
This
should not be. A return to agriculture with a good associated
road and rail transportation network; a comprehensive energy
policy with renewable and non-renewable sources in the mix,
and stable electricity as a critical factor; a viable iron-and-steel
industry with intermediate tool-and-die facilities; the promotion
of small- and medium scale enterprises; and a more-than-nodding
acknowledgement of information technology (including re-training
of personnel and the use of free/open source software) are
absolutely essential to our rapid national development .
MANAGEMENT
OF OUR OIL WEALTH – A FAILURE OF LEADERSHIP
There
is no arena more glaring in disclosing the lack-luster performance
and sometimes downright fraudulence of our Nigeria’s
leadership over the years than in the management of our country’s
oil wealth.
Nigeria
under colonial Britain discovered crude oil in 1959, and did
not really become an oil country to be reckoned with until
about 1970 when it produced for the first time on average
more than 1 million barrels of crude per day, up from about
0.02 million barrels per day in 1960. By that time, Nigeria
had found itself under military rule since January 1966 after
six years of flag independence from Britain in October 1960.
Nigeria then joined OPEC in July 1971 (daily production average
of 1.53 million barrels per day in 1971) not long after the
1967-1970 Biafra-Nigeria civil war.
The
Arab boycott and its attendant oil price increase in 1973
suddenly made Nigeria to be awash in so much oil money that
General Yakubu Gowon (1 August 1966 – 29 July 1975) once
declared in a Caribbean country that money was not Nigeria’s
problem but how to spend it – and promptly paid the salary
of all the civil servants of that country for that year during
his visit. International oil prices rose through the regimes
of Generals Murtala Mohammed (29 July 1975 – 13 February
1976) and Olusegun Obasanjo (13 February 1976 – 1 October
1979), and hit its peak during the civilian regime of Alhaji
Shehu Shagari (1 October 1979 to 31 December 1983), when Nigeria
really reached its depth of financial profligacy, resulting
in the clogging of our seaports by mainly useless imports
due to corrupt “contractocracy”.
During
Shagari’s rule, Nigeria’s oil production fell precipitously
from 2.30 million barrels per day in 1979 (the highest ever)
to 1.24 million barrels per day in 1983, the lowest since
Nigeria joined OPEC in 1971 (when daily production was 1.53
million barrels per day). Although as evident from Figure
1, oil prices were highest in history during the Shagari regime,
unfortunately they also fell dramatically during that same
period, precipitating a crisis that led to his deposition
by General Muhammadu Buhari [31 December 1983 – 27 August
1985], who in turn was deposed by General Ibrahim Badamosi
Babangida [27 August 1985 – 26 August 1993]. During his
rule, IBB reaped an “oil windfall” of about US$12.2
billion during the Gulf War crisis that still causes ripples
because it has been unaccounted for as disclosed by an adverse
Okigbo report of 1994 that has now gone “missing”
from official records. The oil prices never really recovered
in a stable fashion under the reigns of Chief Ernest Sonekan
(26 August 1993 – 17 November 17 1993), Abacha (17 November
1993 – 8 June 1998), or Abdusalami Abubakar (8 June 1998
– 29 May, 1999), but under former General but now Chief
Olusegun Obasanjo (29 May 1999 to date; re-elected for second
four-year term beginning May 29 2003), it has recovered somewhat
as a result of a series of OPEC cuts, 9/11, the Iraq crisis
and other contemporary circumstances.
We would discover that it is not far-fetched that Nigeria
must have earned up to $340 billion in all of our more than
forty-four years of discovering oil. Yet, in all of these
leadership changes, an oil wealth that should have been parlayed
into substantial and sustained economic development has instead
resulted in very costly internecine strife (for example in
the Niger-Delta), a 70%-dollar-a-day citizenry, and in many
instances a culture of official corruption within a distorted
economy.
CONCLUSION
Without a successful policy of adding value to our crude oil,
and rapid weaning away from our monoculture, our country will
continue to face the paradox of “oil, oil everywhere,
but occasionally no single drop of petrol to put in our gas
tanks!”
That is absolutely untenable, and the skeptical cynic would
be excused if he or she asked what assurance there was that
the additional money that might be obtained from an upward
revision of our quota for oil by OPEC would be wisely spent..
This
essay is not an argument for Nigeria to leave OPEC. Rather,
it is a call that an imaginative and strategic re-thinking
in this crucial sector as absolutely necessary in our country
– and that OPEC might just be the first forum for us
to begin to demonstrate that new paradigm.
I
rest my case.
Dr. Mobolaji E. Aluko, is professor and immediate past Chair
of Chemical Engineering at Howard University, Washington,
DC, USA. He is President/CEO of Alondex Applied Technologies,
LLC, an innovative solutions company.
Source: www.AfricaEconomicAnalysis.org
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