Truly, real outcomes in today’s Nigeria continue to decry the country’s rich crude oil abundance and energy resources advantage. Touted as the largest economy in Africa, Nigeria’s lower-middle-income economy has remained a sad story as millions of Nigerians continue to remain subdued, often languishing in extreme poverty and lack despite the hugeness of the nation’s endowments.
Nigeria is a mixed economy whose production and revenue economics continue to provoke puzzling thoughts about the truth in the system of investment and rewards.
From all indications, it looks like Nigeria has been programmed to operate at greatly sub-optimal levels beyond the derivatives of its natural resource endowments. With over 606 oil fields – 360 onshore and 345 offshore assets – over 3,000 kilometres of pipeline running through the Niger Delta region and linking 275 flow stations to several export facilities across the country, Nigeria’s abundance in crude oil (10th largest in the world) and gas reserves (top 10 globally) has not translated into sufficient levels of petroleum production and gas supply.
Recent events expose the country’s energy shortcomings vis-à-vis global perception and expectations. Pressured by the ongoing Russia-Ukraine war and the corresponding political and economic sanctions, global crude oil and gas prices have spiked, so have international crude oil prices. Sadly, Nigeria’s inefficient production and supply structure has made it impossible to take advantage of this price uptick; instead, the nation has slipped into a regime of exalted prices and subdued living standards.
While the pump price of petrol in the country has reached up to ₦900 per litre in recent times, changes in diesel prices have recorded a more alarming difference, with constant fluctuation in the prices of petroleum products.
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The existing price hike/fluctuation prevailing in the domestic fuel – petrol, gas and diesel – market has been blamed on current global instances and naira depreciation, which has pushed up the cost of importation and the difficulty for businessmen and importers in accessing foreign exchange for their raw material imports.
These, combined with the country’s awful price of electricity, have led to a heated domestic economy as rising food and energy prices continue to eat deep into Nigerians’ already lean pockets.
With the expensive bills of electricity currently, the Nigerian manufacturers prefer the use of diesel in industrial and manufacturing plants, which utilise the resource to power their heavy-duty generating sets, since electricity supply by the government cannot be relied upon. Besides, diesel is used as fuel by heavy-duty trucks for transportation and by machines that work on large farmlands. This, therefore, means that higher production costs will be incurred as diesel prices increase. Since 70 per cent of Nigeria’s industrial and manufacturing activity relies on diesel to power various utilities, it becomes difficult to produce in this era of heightened power prices, both from diesel costs and the nation’s electricity distribution companies.
This price impulse has generated the expected macroeconomic response in almost every economic sector. For instance, road transit and airfares have skyrocketed in the transport sector. While road users decry the increases in fares owing to the current situation, the airline industry has also been hit, as providers of airline services bemoan the scarcity and inefficiency in airline infrastructure. The price of a return ticket trip within the country now exceeds the price of an international flight from a few years ago.
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Our nation’s inability to provide for its increasing population amid human and non-human resource abundance is a puzzling tale. With sizeable crude oil deposits sitting at various reserves poorly traded at source and the inability to efficiently transfigure the resource into diversified value-added materials for domestic and international consumption, Nigeria’s unique 21st-century economics may never be understood but should serve as a special case study in various higher institutions and business schools all over the world.
As grim as the situation appears to be, all is not lost, particularly in the long term. One sure way of turning the situation around is to overhaul our current oil policy. Precisely, we are advocating a situation in which value addition will hallmark the industry, and as such, the prices of petrol and diesel and other derivatives will be reduced such that the industries and manufacturing outfits will be able to function better.
In all, let us put our resources where they matter most to the masses, curb corruption in both high and low places, avoid wastage, reprice most products produced within (like cement and other essential commodities), improve on existing infrastructure, and above all, give a fair wage that can both take you home and bring you to work. Once this is done, the contradictions inherent in the Nigerian narrative would have been largely defused.
