The price of crude oil fell to US$36 a barrel recently and even at that Nigeria is even finding it difficult to sell its sweet crude oil. This is because of a glut in the global market due mainly to the fact of overproduction in Saudi Arabia where a nation of around 12 million is producing almost 10 million barrels of crude oil a day. This is also coupled by America’s self-sufficiency in energy because of its tremendous shale oil and fracking gas production. The USA used to buy about 60 percent of Nigeria’s production. It is today not buying any oil from Nigeria. In fact there is serious talk in the USA that it should begin to export oil. The USA is now so comfortable that it refused to allow a consortium of Canadian and American companies complete a trans-American pipeline that would have been taking crude oil across America to the Gulf coast from Canada.
The refusal ostensibly was based on environmental considerations but in actual fact this was because the USA can now afford to play the environmental card because it does not need additional oil to compete with struggling American oil companies. The fact is that this project has merely been mothballed and would be resuscitated in the future particularly if the Republican Party wins the presidential election next year. Leaders of the party deny that the global environment has been abused because of industrial processes and therefore needs no abatement measures being taken. This is in the face of overwhelming scientific evidence. The import of this for Nigeria is that we have not seen how low the price of crude oil will drop. The slowdown in Indian and Chinese economies and consequent reduced demand for Nigeria’s export of hydrocarbons has created a buyers market and crash of oil prices. These two huge markets in Asia are critical to oil price regime.
The oil-producing Middle East is right at their backyard and transport costs compared with costs in transporting African oil is lower. Furthermore, Iran is coming into the global market in 2016 in a big way following the agreement of that country with the international community to put a hold on its hidden nuclear weapons programme. Russia, the other big oil producer needs all the money it can get from oil to maintain the illusion of a major power and its military operation in Syria and because of these, it is producing as much oil as its capacity can bear. Current estimates put its production at about nine million barrels per day. There is therefore oversupply of the global oil market.
What is to be done? If the Saudis can be persuaded that its strategy of driving aground American shale oil and fracking gas production is not working as expected even though some small companies have folded up, then appeal can be made to that country to reduce its oil production. This is a big If, because this desert kingdom and its innumerable princes have gotten so used to trillions of dollars of oil money for its political stability that it will be a Herculean effort persuading them to change course. OPEC should be persuaded to meet in extraordinary session to cut production. Countries like Mexico and Russia should be invited to coordinate their oil production with that of OPEC to save the industry in the interest of the global economy because at the end of the day, if the countries depending on energy production collapse economically with resultant political ramifications, the whole world will be destabilized. Cheap oil may be good for some but at the end of the day it is not good for the global economy. The world needs in the short term, huge financial resources to operationalize the COP 21 global agreement on climate change recently worked out in Paris. Critical to that agreement is innovation and adaptation and every country will need resources to carry out these mechanisms.
We have been talking about economic diversification in Nigeria for decades but the easy oil money has dulled our collective brains. Now the chicken has come home to roost. Serious diversification and clean technology-led industrial production will take time. Our agriculture, neglected over the years of easy money cannot be revived by a wave of the hand. Even the ballyhooed solid minerals sector will need all effort at organization, correct legal regime and attraction of direct foreign investment. In spite of all these obstacles and impediments, we cannot just lie down doing nothing waiting for better times to come in an uncertain future. We must do something. A campaign to rationalize the use of foreign reserves must begin. Mbonu Ojike in the 1950s asked Nigerians to boycott what is boycott-able. We have to embrace that philosophy now. It will come with a cost. This is where communication comes in. Government at all levels must explain to Nigerians that the time of easy life has come to an end. No more champagne, red and white wine, brandies and whiskies, fancy suits and shirts. This is the time to make our tailors work and whoever is ashamed to wear made in Nigeria clothing must be ready to look for funds outside available scarce resources. The ministry of information and culture and indeed all ministries must help the president to pass the message to all Nigerians to be patriotic. Those who brought down the economy through outright looting and wastage of foreign reserves must be tried and jailed. Punishment must be sure, certain and swift. No more prevarication and wringing of hands about what to do about corruption. Whatever has been collected from looters must be made public and those involved publicly shamed. This is the only way to prevent recovered money being looted again as appears to have been the case in the Jonathan administration.
Critics who are going around about Buhari not performing must be challenged to tell us what they would have done in face of a global economic meltdown we are facing where in Greece the rate of unemployment is 60 percent and the situation in southern Europe and the Balkans generally is just slightly better. While everyone agrees there is need for responsible opposition, but no one must be allowed to misinform our people that the president does not care or love his people or that he is punishing a section of the people because he is a hard man and an uncaring soldier! This uncouth criticism must be confronted head on. This government is our last chance to get it right. The difficult time we are facing is the right time to put us on the right trajectory so that when good times return we will be well set on a path of frugality, rectitude and integrity rather than on the path of waste, stealing and squander-mania which previously prevailed. In this regard all branches of government must show the light so that the people can find their way. The recent splashing of billions of Naira by the Senate to buy SUVs is not the right way to lead and the decision should be rescinded. This is also not the time for anybody to be agitating for any form of salary increase rather we should all be helping government and thereby ourselves to build a strong country with a virile and sustainable economy. Nigerians must learn to work and work hard. An economy based on unbridled importation of all sorts of junks from India and China and Indonesia is not a sound economy. We must learn to produce what we need. We must not want what we cannot produce. An economy based on trading of other people’s goods is no economy. The time of political and economic frivolity is over – whether we like it or not!
NATION
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