50 YEARS AFTER, OPEC GAINS STILL EVADE NIGERIA

 In Investor News

A country celebrating 50 years of its Organisation of Petroleum Exporting Countries (OPEC) membership, Nigeria is a clear example that a natural resource such as oil is not necessarily a blessing. Endowed with some of the world’s biggest oil reserves, plenty of arable lands, Nigeria had the potential to break onto the global stage by aligning with the 12-member OPEC cartel in 1971 to take an active position in decisions on international energy demand and supply issues alongside most of the world’s biggest oil producers.

Nigeria and other OPEC members have over the years collectively agreed on how much oil to produce, subsequently, exert considerable influence over the global market price of oil and, understandably, tend to keep it relatively high in order to maximize profitability. For instance, in 1973, the cartel was able to influence an oil boom which saw prices quadruple from $3 per barrel to $12 per barrel.

Also, between 2006 and 2009, the price of oil went from $74.59 to $109.25. Again, from 2010 to 2013, the price of oil rose from $84.24 to $100.95. During these boom periods, most oil-producing countries run successful economies and also learned not to put all their efforts into one basket by intensifying plans for life beyond crude oil, a point Africa’s biggest oil-producing country missed.

For instance, Saudi Arabia, the world’s biggest oil exporter, took full advantage of the sustained rising oil prices to build new cities. The projects were designed to burnish the country’s image, develop a non-oil economy and generate enough employment to maintain social stability. For the UAE, building an economy less dependent on the ups and downs of the price of oil, but with a skilled workforce in many different industries, is beyond lip service. The country has a development plan for the next 50 years after 2021 called “2020: Towards the next 50”.

The plan aims to strengthen the country’s investment in future generations with a focus on advanced technology, rely less on oil by diversifying exports and imports, enhance cohesion in societies, improve the productivity of the national economy and build on Emirati values for the benefit of future generations. In Norway, the government viewed oil revenue not as a source for immediate squandering but as a “transformation of wealth, from a natural resource to financial wealth”, with consideration for the future by upholding an ethical obligation to share oil wealth with future generations.

For Nigeria, the narration is different, policy missteps, wasteful spending and an inability to diversify away from petrol dollars or build a life after oil plan have restricted the country’s economy from attaining its full potential and have rendered it fully susceptible to the renowned “resource curse”.

“OPEC came at the right time for Nigeria who just ended a civil war and put the country on the global map, but the cartel is not responsible for how countries utilised the revenue,” Ode Ojowu, a Nigerian economics professor and a former Chief Executive of the National Planning Commission told BusinessDay.

Despite producing oil in commercial quantities for more than five decades, Nigeria’s oil production has never far exceeded the 2.3 million barrels a day hit in 1979. Its oil output was insufficient to spark a Middle Eastern-style economic miracle back then; it’s woefully inadequate to attempt it now, thanks to an increasing population.

Nigeria has the 19th lowest production per capita among top 20 oil-producing countries in the world; the country produces less than a barrel per 100 people, only China produces lower at 1/3 of a barrel per person. Comparing this to the Gulf States, widely accepted to be the most oil-rich in the world. Saudi Arabia produces about 28 barrels per 100 people, Kuwait produces 60 barrels per 100 people, while UAE produces 32 barrels per 100 people.

Although Nigeria produces the most oil in Africa, it also underperforms against its African peers with regards to per capita production; it produces less oil per person than Angola and Algeria. “Instead of cutting waste and leakages, Nigeria racks up debt to replace oil revenues,” Damilare Asimiyu, Head, Research & Strategy at GTI Capital said.

Read more at: https://businessday.ng/business-economy/article/50-years-after-opec-gains-still-evade-nigeria/?login=success

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