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How Oil Aggravated Uncertainty in the Nigerian State

Nigeria is the making of European imperialism. The country is the most populous in Africa, and one of the ten most populous countries in the world. However, Nigeria’s most diverse feature is its people. Hundreds of languages are spoken in the country, including Yoruba, Igbo, Fula, Hausa, Edo, Ibibio, Tiv, and English. The country has abundant natural resources, notably large deposits of petroleum and natural gas. Although, it bears scrutiny if for no other reason than to understand how and why this nation became as it is today.

The West African’s coast is low-lying with lagoons and sandy beaches. There is a high plateau of extinct volcanoes in the centre of the country and a mountainous area along its border with Cameroon. The British colonial era in Nigeria was relatively brief, lasting only six decades or so, depending upon the part of Nigeria, but it unleashed such rapid change that the full impact was still felt in the contemporary period.

Ground Nut Pyramids in Kano, Nigeria. Image: Wikipedia

Agriculture was the major source of her foreign exchange earnings through the exportation of cash crops such as rubber from Delta State in south-south region; groundnut, hide, and skin produced by the northern region; cocoa and coffee from the western region; and palm oil and kernels from the eastern region of the country. The expansion of agricultural products as the principal export earner and economic conditions changed. The 1920s and 1930s saw worldwide economic crises which caused the price for those things produced in African countries raw materials and cash crops to drop sharply. At the same time the prices of goods imported from Europe skyrocketed. Correspondingly, the development of infrastructure resulted in severely distorted economic growth that has subsequently collapsed.

The Impacts of Colonialism on Modern African Economy

 

After the Geological Survey of Nigeria was established in 1919, it focused mainly on mineral and geological surveys, geophysical investigations and the development and maintenance of water supplies. In 1947 the Geological Survey was reorganised and the responsibility for the construction and maintenance of rural water supplies was transferred to the Department of Public Works. While close relations were maintained with oil company exploration parties, the Geological Survey never adopted oil exploration as one of its aims and never became closely involved in any serious exploration for oil between 1903 and 1956. Oil was discovered in Nigeria in 1956 at Oloibiri in the Niger Delta after half a century of exploration. The discovery was made by Shell-BP, at the time the sole concessionaire. Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 Bpd.

First commercial oil discovery was at Oloibiri, Niger Delta. Image: Rhys Jones

In the late 1960s, the discovery of petroleum in commercial quantities caused oil to replace cocoa, peanuts, and palm products as Nigeria’s major foreign exchange earner; and in 1971 Nigeria became a member of the Organization of the Petroleum Exporting Countries (OPEC). The sale of this resource would seem to offer attractive opportunities to generate national income and raise living standards. As an internationally traded commodity that attracts foreign exchange, oil is a quick source of capital accumulation. Huge revenues are realized from the wide differential between unit production costs and economic rents, royalties, petroleum taxes, oil exports, etc.The economy suffered, however, from the 1972-74 drought and rising unemployment as farm workers flocked into the cities.

Nigeria’s predicament began with the OPEC crisis of the early 1970s, which led to significant changes in the world oil market as the price of crude oil skyrocketed from $3 per barrel to $12 per barrel in 1974. In the wake of the oil boom, the Iranian revolution of 1979, and subsequently the Iraq-Iran war that began in 1980 both contributed in further increasing the price of crude oil from a $14 per barrel in 1979 to $35 per barrel in 1981. Consequently, corrupt civilian governments siphon off the profits from the oil boom of the 1970s, and faced economic collapse in the 1980s.

The Backdrop on Reduction of Crude Oil Shipment in Nigeria

 

The defeat of Biafra in 1970 at the end of a brutal civil war in which more than one million people died, was followed by years of military rule – broken only by a four-year spell of democracy and ended by elections in 1999. Military rule suppressed long brewing grievances among the various ethnic groups, but by the 1990s restiveness had begun to boil over in the Niger Delta.Troop deployments repressed leaders and massacred several Ijaw and Ogoni in bloody battles. The conflict continues to this day over the control of oil resources. Once dominated by the military, Nigerians have become disappointed in the civilian rule initiated in 1999, due to the increasing poverty, ethnic strife, religious intolerance, declining standards in health and education, and a stagnant economy.

A gas flare looms over the community of Akaraolu, in the Niger Delta. Gas flares, with constant noise, ash, and noxious fumes are just one of the negative effects on oil-producing areas of Nigeria.
Image: George Osodi/Panos for Oxfam America

The discovery of crude oil in Nigeria is a mixed blessing. It came with economic growth and infrastructural development, though some of the projects were abandoned and the funds for those projects embezzled. The major disadvantage was the destruction of the environment, especially the aquatic environment, which affected fishing, the primary source of livelihood of the indigenous population. The country owned over 36 Bbo proven reserves, according to the Oil and Gas Journal. Oil brings billions of dollars in export revenues annually into the country. Yet the Nigerian people remain some of the poorest in the world. Global poverty projections released by The Brookings Institution in 2018, based on data from the World Poverty Clock, shows that Nigeria has overtaken India as home to the largest population of people living in extreme poverty, with 87 million citizens living on less than $1.90 a day compared to India’s 73 million. More than 70 in every 1,000 babies die before their first birthday, average life expectancy is less than 46 and only 33% of the population have access to adequate sanitation. The amount spent annually on health services is $23 per head, contrasting vividly with over $6,000 per person a year spent in the US.

Fuel Price Upswing Aggravate Economic Hardship of Nigerians

 

Equally amazing in a country that exports 2.5 million barrels of oil a day, is the fact that only about 40% of Nigeria’s total population – 10% in rural areas – has access to electricity. Nowadays, Nigeria is Africa’s main oil producer. With 18 operating pipelines and an average daily production of over two million barrels in 2019, Nigeria is the eleventh largest oil producer worldwide. The petroleum industry accounts for about nine percent of Nigeria’s GDP and for over 90 percent of all export value.

With a maximum crude oil production capacity of 2.5 million barrels per day, Nigeria ranks has Africa’s largest producer of oil and the sixth largest oil producing country in the world. N​​igeria appears to have a greater potential for gas than oil. Nigeria’s gas production in the year 2000 was approximately 1,681.66 billion scf, 1,3715 billion scf was associated gas ​and the rest 310.16 billion was non associated gas. Nigeria produces only high value, low sulphur content, light crude oils – Antan Blend, Bonny Light, Bonny Medium, Brass Blend, Escravos Light, Forcados Blend, IMA, Odudu Blend, Pennington Light, Qua-Iboe Light and Ukpokiti.

In 2017, the Nigerian bureau of Statistics noted that, domestically oil forms about 16% of Nigeria’s energy use. The nine top oil producing states in Nigeria are:

  • Akwa Ibom- the largest oil producer with 31.4% (504,000 BPD)
  • Delta – 21.56% (346,000 BPD)
  • Rivers – 21.43% (344,000 BPD)
  • Bayelsa – 18.07% (290,000 BPD)
  • Ondo – 3.74% (60,000 BPD)
  • Lagos – 2.64% (40,000 BPD)
  • Edo – 2.06% (33,000 BPD)
  • Imo-1.06 % (17,000 BPD)
  • Abia-0.68% (11,000 BPD)

Consequently, there is a crucial demand for diversification of the Nigerian economy from its present crude oil–dependent arrangement. Nigeria has vast mineral wealth and the capacity for large-scale agricultural development that can provide substitute revenue streams for the country’s economy. The country also has the potential to derive much of its energy from renewable energy sources, such as solar and wind. The government needs to develop a plan for phasing out of oil and transitioning to a carbon free economy.

In addition, Nigeria is endowed with rich natural ecosystems and cultural diversity that could be harnessed to drive economic diversification. As well as, transforming the resource curse requires the government to redefine its role in economic transformation and its strategic relationship with the business sector. Furthermore, utilizing entrepreneurship to drive economic diversification would require education reform. Pedagogy must be enterprise-oriented, such that inspire creativity and innovation.

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