Other than water, oil is likely the single most important natural resource in the world. Its discovery, extraction and trade have been responsible for many wars, political instability and ecological tragedies. Even so, it is responsible for the wealth of countless individuals, nations, and corporations and impacts the global economy as no other resource in modern history. As with many other natural resources, many have argued that its supply is finite, exhaustible.
Its exhaustibility has been the bone of contention for many decades. For instance, aggregated data suggested that the world will run out of oil “very soon.” The Reserves-to-production ratio (RPR or R/P), as of the year 2011, suggests that Venezuela has a reserve lifespan of 107 years; Russia 21; and the US 10. (RPR is the amount of known oil reserves divided by the amount of use per year.) But in more recent times, there have been contrary indications which seem to suggest that the world will “never run out of oil” because of several factors, i.e. the discovery of new oil wells; unaccounted or unproven reserves; and the availability of new technology for extraction purposes.
It was estimated that Nigeria would run out of oil sometimes between 2052 and 2077. More than the “Dutch Disease” and the rentier nature of the Nigerian economy and the attendant wastes, theft, and bunkering and corruption that is associated with the oil business, the fear of “what would happen” should Nigeria run out oil dominated the discourse in certain quarters.
In addition to the fear of running out of oil, there was a second question: What if western governments and scientists discover and perfect alternative energy sources such as Biofuels, solar power, and wind-aided energy. The consensus was that oil, as we know it today, may have far less significance globally and that such a scenario would impact the global economy – especially of countries like Nigeria that relied heavily on the sale of oil. Perhaps it was in this context that the World Bank Country Director in Nigeria, Ms. Marie Francoise Marie-Nelly, said: Nigeria needed “to prioritize non-oil sector for sustainable development in the future.”
But as we approach the end of 2014, none of the previous arguments and debates (in the case of Nigeria) seems to matter much. What seem to matter — and what have jolted the Nigerian economy and the Jonathan government – is the realization that the United States would no longer be the reliable partner it has been for more than four decades. There are several reasons why both countries have been reliable friends and partners all these years; but chief amongst them is the steady supply of Nigerian oil to the US market. But this has not been the case since April 2014.
According to a news report, “only 4.5 million barrels of Nigerian oil arrived at U.S. ports, down from a record high of 40 million barrels seven years earlier. And by July, the spigot was shut off completely. Over the next six weeks, not a single drop of Nigerian light, sweet crude arrived in the U.S. – all of it replaced at Gulf Coast refineries by fracked oil from fields like the Bakken formation in North Dakota and Eagle Ford in Texas.” Consequently, “Nigeria became the first formerly flush oil producer to essentially lose its entire share of the U.S. market, leaving it scrambling for new customers, less able to fund its internal war on terror and less important to the U.S.”
But what does all mean for this and future governments in terms of its economic wellbeing? How would this reality – assuming it continues – affects the ability of government to carry out its social, political, economic, national security and foreign policy commitments? But more than the aforeasked, how would it affect the citizens? Already, unemployment and poverty is already at an all-time high; and there is rising inequality, crumbling infrastructures and high deficits in terms of basic human needs. These and other questions and consequences would certainly come to the fore.
However, how this government, and the public sector reacts, would determine the short and long term effect of America’s disengagement from the Nigerian economy. Already the government is hinting at austerity measures. A clearer picture of costs and consequences should emerge in the next couple of weeks. Until then, a few questions would suffice: First, what manner of austerity measure would the government institute, and would such measures negatively impact the stability of the Jonathan administration?
This question is appropriate because, if the burdens are too great to bear, it could trigger widespread unrest that might lead to the sacking of the government. In which case, “the collapse of Nigeria in 2015” may come to fruition. These are perilous times! Speaking of austerity measures, would the three branches of government be willing to make the kind of sacrifice they would be beseeching the general populace to make? For instance, would the president sell of virtually all of his planes and helicopters and fleet of cars? Would members of the National Assembly agree to sixty percent or more reduction in total compensation?
Second, assuming the Nigerian government is unable to find markets to absorb the “American lose,” would this be the catalysts that eventual convinces decision and policy makers to diversify the economy? In spite of the economically foolish and politically senseless approach of successive governments, it may eventually dawn on the private and public sector that the country could thrive without oil. And third, after four decades of bunkering and day stealing of oil and related resources would this force the government to pluck the holes, prosecute offenders and do a proper accounting of its lootable resources?
Indeed, more questions could be asked, and several more scenarios could be contemplated. In closing, however, one wonders what a loss in revenue would mean in terms of the war against Boko Haram and other groups and trans-national challenges. In all of these, one thing is very clear: However goes Nigeria goes Africa – or at least the West African sub-region. A weak, crumbling and failing Nigeria would definitely weaken the political and economic space of its neighbors and ultimately, the region’s security and stability.
Now, is this a hopeless situation for the Nigerian government and its people? Not necessarily! Nigeria has good alternatives, but these are alternatives that call for a mature and purposeful leadership.
