In Nigeria, the oil and gas sector plays a significant role in the economy, contributing about 65% of government revenue and over 85% of total exports. The country also has a largely underdeveloped mining sector, which makes up less than 1% of the country’s GDP. There have been growing calls for the Nigerian government to exploit the vast gas reserves found here, which could diversify the economy and lower the current dependence upon oil. Nigeria offers other excellent investment opportunities for global extractive industries including mining of solid minerals.
Nigeria is the most populous black nation on Earth and often called the “Giant of Africa.” This name comes from the vastness of its land, the diversity of its peoples and languages, and its oil and other natural resources. With a GDP estimated at $477 billion in 2022, Nigeria is at the top of the ranking of the richest African countries, ahead of Egypt and South Africa. Located on the west coast of Africa, Nigeria is endowed with abundant mineral resources occurring in over 500 locations spread across the 36 states of the federation and the federal capital territory, Abuja. In 2021, Nigeria was the number 30 economy in the world in terms of GDP (current US$), the number 52 in total exports, the number 50 in total imports, the number 163 economy in terms of GDP per capita (current US$) and the number 126 most complex economy according to the Economic Complexity Index (ECI). The top exports of Nigeria are Crude Petroleum ($41.8B), Petroleum Gas ($8.52B), Special Purpose Ships ($1.25B), Cocoa Beans ($779M), and Refined Petroleum ($667M), exporting mostly to India ($9.07B), Spain ($6.7B), United States ($3.69B), France ($3.32B), and China ($3.05B). The top imports of Nigeria are Refined Petroleum ($11.3B), Wheat ($3.32B), Cars ($2.42B), Packaged Medicaments ($972M), and Broadcasting Equipment ($934M), importing mostly from China ($21.9B), India ($4.75B), Netherlands ($4.58B), United States ($4.42B), and Belgium ($2.34B).
Though, resource extraction is the most important sector of the Nigerian economy. The most economically valuable minerals are crude oil, natural gas, coal, tin, and columbite (an iron-bearing mineral that accompanies tin). Petroleum, first discovered in 1956, is the most important source of government revenue and foreign exchange. Most of the oil output comes from onshore fields in the Niger delta, although an increasing proportion of the crude is produced at offshore locations. There are oil refineries at Port Harcourt, Warri, and Kaduna. Nigeria has been a member of OPEC since 1971. Nigeria has some of the largest natural gas deposits in the world with over 206.5 trillion cubic feet of proven reserves. Apart from petroleum and natural gas, Nigeria is richly endowed with a variety of Natural Resources raging from precious metals various stones to industrial such as Barites, Gypsum, Kaolin and Marble. Most of these are yet to be exploited. Statistically, the level of exploitation of these minerals is very low in relation to the extent of deposit found in the country. One of the objectives of the new National Policy on Solid Minerals is to ensure the orderly development of the mineral resources of the country.
Meanwhile, the Constitution of the Federal Republic of Nigeria 1999 (as amended) section 44 (3) and item 39 Schedule II of the Exclusive Legislative List vests the control and management of the natural resources and hydrocarbon operations on the federal government for the common good and benefit of the citizens. In 2021, Nigeria was the world’s sixth-largest exporter of liquefied natural gas (LNG). The country’s exports of natural gas rose by 14% and accounted for 9.24% of total exports in the first quarter of 2022. The country recorded an average daily oil production of 1.49 mbpd in the first quarter of 2022, lower than its daily average production of 1.72 mbpd in Q1 2021 and 1.50 mbpd in Q4 2021. Also, in Q1 2022, the oil sector accounted for 6.63% of total GDP down from 9.25% in Q1 2021 and 5.19% in Q4 2021. In Q4 2020, the petroleum sector contributed 5.87% to Nigeria’s GDP and accounted for approximately 90% of GON income.
Nigeria is superabundantly rich in crude oil and has reaped billions of petrodollars. The country is the United States’ largest trading partner in sub-Saharan Africa. This is largely due to the high level of petroleum imports from Nigeria, which supply 8% of U.S. oil imports nearly half of Nigeria’s daily oil production. Nigeria is also the fifth-largest exporter of oil to the United States. In 2010, Nigeria ranked the 13th largest trading partner of the United States. Two-way trade in that year was valued at more than $34 billion, a 51% increase over 2009, largely due to the recovery in the international price of crude oil.
India, Spain and France, were the biggest buyers of crude oil produced from Nigeria’s oil fields in the Niger Delta in 2018, according to the Nigeria Natural Resource Charter (NNRC). NNRC promotes policy reform of the Nigerian extractive sector using its 12 economic principles known as ‘precepts’ as a guide. The three countries bought crude oil worth N764.88 billion; N522.12 billion; and N500.31 billion, respectively from Nigeria in 2018. The total monetary value of crude oil bought by the three countries was worth N1.787.31 trillion. Also, five other countries – South Africa, Netherlands, Indonesia, Brazil and United Kingdom – bought oil worth N1.298.45 trillion, while the United States and Canada bought oil worth N400.66 billion from the country within the same transactional period. India is the highest importer of Nigeria’s crude oil, purchasing N764.88 billion worth of the commodity; followed by Spain with N522.12 billion and France, with N500.31 billion respectively. Other buyers are South Africa, Netherlands, Indonesia, Brazil and United Kingdom, valued at N335.28 billion, N276.37 billion, N256.3 billion, N226.2 billion and 206.3 billion respectively. United States and Canada bought crude oil worth N201.65 billion and N199.01 billion respectively.
In the interim, the Netherlands has recently overtaken India as the biggest buyer of Nigerian crude oil, marking a change in the dynamics of the West African nation’s energy exports. Data from the National Bureau of Statistics showed the Netherlands, bought Nigerian crude oil worth N2.5 trillion in the first nine months of 2023, while India’s imports from Africa’s top producer was valued at N1.6 trillion. Indonesia and France occupied second and third positions as they purchased Nigerian crude worth N1.72 trillion and N1.65 trillion respectively as of September 2023.
Nigeria is a member of the African, Caribbean, and Pacific (ACP) countries, a cartel-like association or economic bloc that is linked to the European Communities by signatures on the Lomé Conventions and the Georgetown Agreement. The nation produced a total of 121,204,122 metric tons of minerals in 2021. During the same period, the nation’s total mineral production, measured in millions of dollars (excluding diamonds), was 49,411.
Exhibit 1: Production of Mineral Raw Materials in Nigeria.
There have been growing calls for the Nigerian government to exploit the vast gas reserves found here, which could diversify the economy and lower the current dependence upon oil. The ninth-largest natural gas reserves on earth have been verified as existing here. Without a doubt, oil will continue to be crucial to creating wealth and expanding the Nigerian economy. However, to ensure stable, sustainable growth and benefits for the maximum number of people possible, it is preferable that a more diversified set of exports are developed, together with the development of the mining industry. These resources have significant economic importance and are used in the production of various industrial products. The government and private sector should invest in the exploration and exploitation of these resources to boost the country’s economy.
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