home » Featured » Nigeria – Not broke but needs fixing

Nigeria – Not broke but needs fixing

Nigeria is Africa’s largest oil producer and a major world oil producer. However, despite its hydrocarbon wealth, the country’s socio-economic development remains stunted. Ian McInnes explores the issue.

To Nigeria, oil is its very lifeblood and, according to the International Monetary Fund (IMF), oil exports account for more than 95% of its total export earnings and approximately 40% of Nigerian government earnings. The nation is producing around 2.4mbpd of oil, making Nigeria the no. 1 producer in Africa and ranking no. 10 in the 2010 oil production league as compiled by the US Central Intelligence Agency (CIA). Nigeria’s oil reserves of around 37bnbbl are largely concentrated around the Niger River Delta and offshore in the Bight of Benin, the Gulf of Guinea and the Bight of Bonny with offshore exploration concentrated in deep- and ultra-deepwater. The US imports around 8% of its oil needs from Nigeria and ranks no. 5 on its oil importing list behind Venezuela and ahead of Columbia. In terms of natural gas, Nigeria is thought to have the largest reserves in the whole of Africa but lacks the infrastructure to exploit nearly 5.3tnm3. With especially coal, tin and other commodities to exploit, Nigeria could and should be the economic powerhouse of Africa.

Sanusi Lamido Sanusi, Governor of the Central Bank of Nigeria, speaking as a guest speaker at the 5th Annual Hijrah lecture of the Lagos State’s House of Assembly, on the theme “Societal Reformation: The role of Muslims,” really cut to the chase of just why Nigeria was not what it should be. “We are an oil-producing country. How come 90% of our people are living on less than US$2 a day? How come 70% of our people are living on less than US$1 a day? How come we have so many women dying in child birth? How come we have so many children that are out of school? How come life expectancy is down to 55 or 54? What has happened to us? We need to ask what have we done?” said Sanusi. The bank governor went on to call upon Muslims to speak up about immorality and corruption.

The two major religious groups in Nigeria are Muslims and Christians with Muslims in the majority. Not surprisingly, in this day and age, there are problems, including one of the most recent incidents that occurred on Christmas Day 2011 when Islamist militants were reported as killing more than two dozen people in three church bombings in a repeat of Christmas Day 2010 attacks. The Boko Haram Islamist sect claimed responsibility. The sect has been accused by Nigerian security forces as trying to provoke a sectarian civil war amongst the two religious groups, which they report, actually get on together pretty well. Incidents like church bombings will undoubtedly stoke the fires of conflict unless both groups turn on the insurgents.

In Transparency International’s 2011 report on corruption perception, Nigeria slipped down the rankings from 2010 to 143 out of 183 nations that were surveyed. With corruption reported in the media at almost every level of Nigerian government it is difficult to see any easy fix for the troubled country. And, pundits for predicting events of 2012 may well include some kind of Arab Spring spreading to Nigeria in their portfolio. Indeed the president of the Nigeria Labour Council (NLC), Comrade Abdulwahed Omar, issued a statement recently in which he said that, “The NLC warns governments at all levels that any decision to impose the peace of the graveyard in the country will lead to unfathomed consequences. We need to remind our political leaders that what led to the North African uprising and the now fabled Arab spring which swept through 21 countries was a Tunisian fruit seller who immolated himself. Nigeria is not immune to popular uprising and its consequences.” Aside from corruption, the NLC is unhappy about the loss of fuel subsidies, job losses via the merging of government corporations and the reintroduction of toll gate fees on roads.

Riven by the threat of sectarian civil war, corruption, lacking in infrastructure, especially power generation that require investments of tens of billions of dollars a year for years to start getting the country up to speed, there is also the problem of how to address capital flight. Towards the end of December 2011, Ernest Nwapa, executive secretary, Nigerian Content Development and Monitoring Board, told lawmakers in a speech that Nigeria had lost US$380bn and 2m oil and gas jobs during the last 30 years. “The industry exported 2m job opportunities and suffered an estimated capital flight of about US$380bn during the 30-year period, with over 95% of industry annual budget expended abroad,” Nwapa said. Nwapa continued that the trend could be reversed by 2020 if particularly, marine vessel and rig ownership strategies proved to be successful. However, while oil and gas companies regard Nigeria as being corrupt and especially, unstable, as there have been many attacks on oil and gas facilities in the Niger River Delta, it is highly likely that companies and investors will, overall, adopt the position of, “take the money and run.” Offshore operations are perhaps safer but bring their own problems as illustrated with Shell trying to control what has been described as the worst oil spill in a decade from its Macondo well.

Energy companies are going to be reluctant to invest heavily into a nation that could be subject to civil strife. In Libya, it seems that energy facilities came off lightly during the civil war and oil and gas companies could even benefit from being from being on the spot to bid for new energy contracts. However, how lucky will investors feel? Nigeria has been through a bitter civil war before from 1967 to 1970, which has been described as a political/ethnic affair with the discovery of oil in the east of the country possibly one of the catalysts.

With a country that has so much and could be so great, it does strike one as odd that austerity has a place when so much growth could be achieved. As to whether that growth can come into being without applying the adage of, “break it up and start again,” amid a massive upheaval does look doubtful.

Share and Enjoy:
  • Print
  • Digg
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Blogplay
  • LinkedIn
  • StumbleUpon
  • Twitter

No Responses

Leave a Reply

Make sure you enter the * required information where indicated.

You must be logged in to post a comment.