By Peter Osalor
WE are faced with realities that oil cannot do it alone anymore, going by the current oil price. It is evident that Nigeria does not produce oil directly. We do it through joint venture patterns like Exxon Mobil, Shell, Chevron, and Agip. Their production cost per Barrel is about $20, after deducting production cost, the profits are then shared 60: 40 between Nigeria and the oil major. At $100/ barrel, with a production cost of $20/ barrel; the gross profit left the oil companies deduct their cost by $80 per barrel, which would then be split between the companies and Nigeria at 60: 40 ratio. This means that at $100 per barrel Nigeria gets about $48/ barrel (60% of the $80 gross profit per barrel) which translates to about $40 billion per year.
At the current oil price of $30 per barrel, the gross profit is only $10 per barrel after deducting the $ 20 per barrel production cost. Remember that Nigeria takes only 60% of the gross profit. What that means is that Nigeria gets $6 per barrel, which translates to about $5 billion per year at 2.3 million barrels per day.
Shift from oil dependency
The economic situation of Nigeria as a result of this is in a dilemma. Where do we go and what shall we do? This is the question millions of Nigerians are asking. The answer to this question is a shift from oil dependency to agriculture. Our entrepreneurs and government should focus their investment on Agriculture.
Nigeria spends about $10 billion a year on the importation of agricultural and forest products. This is about 19% of our total imports. While it is noble for the Buhari government to be making the case for Nigerians to look inwards, talk alone will not do the job. We cannot eliminate the $2.2 billion per year we spend on animal products and derivatives if we rely exclusively on Fulani herdsmen that have to walk across the whole country looking for grass for their cattle. We cannot eliminate the $1.5 billion per year we spend on the importation of wheat alone if we do not resuscitate this sector. Wheat farmers in Northern Nigeria can produce all the wheat Nigeria needs if the policy is enacted to support them by introducing varieties that can enhance yields from the current 2 tons per hectare to global benchmarks of 4-5 tons per hectare. Financing has to be provided to the farmers to support the mechanization of their farms. The government will have to step in albeit temporarily, to create marketing boards that will help establish market exchanges that will ensure that farmers are matched up with purchasers. Instead of creating “grazing corridors” across all of Nigeria as the Agriculture Minister recently announced, Nigeria should be working to mechanize and commercialize the work of Fulani nomads. The nomads roam the country looking for grass for their cattle. However, grass can be farmed year-round along the banks of the Niger and Benue, in Northern Nigeria. And those millions of youth that the government plans on giving N5, 000 per month as unemployment payments can be gainfully deployed to support these agricultural initiatives.
If our entrepreneurs and youths are involved in agriculture with the full support of government both at federal and state level, the economy will boom, there will be jobs, food for local consumption and more for export for foreign exchange generation.