By Ediri Ejoh
THE International Energy Agency (IEA), has cautioned oil producing and exporting countries against over-dependence on oil revenue.
In its latest report obtained by Vanguard, IEA stated that there was a great need for oil and gas nations to diversify their economy.
The agency which examined the case of Nigeria, Iraq, Russia, Saudi Arabia, the United Arab Emirates and Venezuela, and others, urged them to cut their reliance on energy revenues.
IEA Director, Fatih Birol, said: “more than at any other point in recent history, I believe there needs to be fundamental change in the development models of those countries.
“When we look at these countries, on average they get more than 70 percent of their government revenues from oil and gas. Those are under pressure from prices, they are under pressure from the amount of oil they export and under pressure from population growth. We think it is different from the past.
“The world’s largest oil exporter Saudi Arabia and the world’s largest oil producer Russia have long been vulnerable to over reliance on oil and gas export revenue, while Riyadh is still recovering from a near financial collapse due to a plunge in global oil prices from 2015 to 2017. With oil prices plummeting from over $100 per barrel in mid-2014 to dropping below the $30 price point in January 2016, the kingdom had to enact first time ever and politically unpopular austerity measures as well as issuing its first international bonds to help offset budget deficits.
“Since then, as oil prices have increased due to the successful Organization of Oil Exporting Countries, OPEC strategy of reducing Organisation for Economic Co-operation and Development (OECD), oil inventory levels to five-year averages, reached late last year, Riyadh has managed to offset the drop in revenue. “However, since oil markets are cyclical in nature, the kingdom could easily find itself in another financial tail spin if oil prices dip again amid weakening oil demand and oil market supply overhang.”
Meanwhile, Chairman, Petroleum Technology Association of Nigeria (PETAN), and Chief Executive Officer of CB Geophysical Solutions Limited, Mr. Bank-Anthony Okoroafor, also called for an urgent shift to other resources.
He said: “We should shift from using oil as just a revenue earner to an enabler for economic growth. Instead of just selling crude, we should be selling refined products and using gas to electrify and industrialise our entire region. An economy powered by adequate electricity and petroleum products.
“Today, about 620 million people in Africa does not have access to electricity. Imagine the economic activity that can be unleashed if we use our gas as enabler for economic transformation instead of as rent seekers.
“We should put more emphasis on weaning our country from over dependence on crude oil sales. Nigeria’s growth potential lies beyond oil revenue but on economic activities enabled with oil; the impact of low oil prices on key economic indicators can be devastating.”