Home Be Informed OIL AS NIGERIA’S WEALTH

OIL AS NIGERIA’S WEALTH

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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 LEADERSHIPThere 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