Nigeria’s oil and gas sector is, and has been for many years, a glaring paradox. The reasons for this are well known. We are the ‘12th largest producer of petroleum in the world and the 8th largest exporter, and have the 10th largest proven reserves’. Yet, we import the majority of our petroleum products. We have been producing oil for over 50 years and earn no less than 80% of our foreign currency from the sale of oil, with the sector ‘accounting for 40% of GDP’. Yet, our nation is plagued by abject poverty, unemployment, poor education and poor infrastructure and our per capita income remains one of the lowest in Africa.
In the 1970s we became excited by the black gold and the ‘easy money’ associated with it. Since then, we have become a mono-economy; one overly reliant on an oil sector which in turn is dependent on an unpredictable global market economy. As a nation we produce only 4,000MW of electricity on a good day, and yet our wealth is not in oil, but in gas, a cheap source of fuel for power generation. Our agriculture sector which continues to provide the largest contribution to our GDP imports the vast majority of its fertiliser and is nowhere near realising its potential. Imagine what the demand for fertiliser will be with the mechanisation and expansion of the agriculture sector. Again, as with electricity generation, the main requirement for the production of fertiliser is gas.
Our manufacturing sector which in 1980 contributed 14% of our national GDP has declined to the extent that it contributes only 4% to GDP today – a travesty in an economy with a fast growing population and an emerging middle class with money to spend on consumer goods. At the peak of its production in the 80s, there were up to 250 different textile operations in Nigeria providing jobs for approximately 350,000 people directly, with uncountable numbers of people employed indirectly. The main reason given for the failure of the manufacturing industry is poor infrastructure and the lack of reliable electricity supply for which the oil and gas sector can provide a solution.
Recently, the Petroleum Industry Bill and the removal of the fuel subsidy generated a heated national debate. Government says it is committed to seeing the passage of the PIB and for many in the oil and gas sector, the PIB would go a long way to correcting majority of the anomalies in the industry. It is our hope that the PIB is not abandoned just as many past programmes and policies that were aimed at restructuring and diversifying the economy were. Government has already passed the Local Content Act which is aimed at promoting indigenous participation in the oil and gas industry and benefits are visibly accruing from the promulgation of the Act. But beyond implementing the Local Content Act, there needs to be an on-going collective effort to support and encourage increased and active participation of local/indigenous core investors and engineering/contracting firms in the industry.
As these policies that will guide the future development of the industry are debated and finalised, we must keep asking ourselves how best the oil industry can be used to impact other traditional industries and drive national development. What contributions can we make to ensure that our market structure corrects the existing fiscal imbalances where our cash outflow is much higher than our cash inflow? What partnerships can we offer toward the establishment of the type of education that can provide the requisite skill sets needed to domicile the expertise at home in the coming years? Much of our revenue is lost to high cost of foreign experts and technology that we have not developed locally. What role can the oil industry play in building the infrastructure that can allow for a thriving manufacturing industry?
Fundamentally, we need an integrated oil industry that will be powered by technology and innovation. We need to tap into the gas market and generate electricity that would power our industries. We need to redefine the downstream sector and expand into renewable energy sectors. We must not relent in the search for a sustainable solution to the environmental issues in the Niger Delta which continue to impoverish millions of Nigerians. We need a business model that will localise the revenue in the industry and help us insure future barrels at a healthy price.
We just cannot as a nation continue to rely on one main revenue-generating source of income. It is pertinent to diversify and it must involve growth led by the non-oil sector. Sustainable national development that is stimulated by oil and gas activities must focus on developing the following areas: Education, Technology, Health, Agriculture and Infrastructure.
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