By Oise Ihonde
NIGERIA! Now that the proceeds from oil have abruptly run dry, it is time for us Nigerians to wake up from our slumber and face up to the position we should have occupied in Africa albeit globally.
It is disheartening to hear people speculate on when oil prices will return to levels that will rescue our national debt.
This will not happen. Barring a war of global proportions that would superficially escalate the price of oil, that era of high prices is over. Oil and gas, just like every other industry follows the simple laws of demand and supply. It is not the classical high supply with low demand. Presently, the countries that hitherto imported oil have turned producers/suppliers. Consumers have turned into suppliers. A situation that has given rise to a glut in the market.
Our founding fathers would cringe to discover how little we have advanced after so many years compared to the progress they made in so few years. It is disheartening to live in such an age where mediocrity is a height that is a feat to attain.
Recurrent expenditure is at an all-time high while Gross National Income (GNI) is at an all-time low when measured against the population index.
The problem is quite simple for the economists out there:
When you have single export economies such as Venezuela, Angola, and Nigeria that are overly dependent on oil to the detriment of development in other sectors, the crash is inevitable. We are at that point.
The solution, though, is also just as simple:
We need to cut our losses.
carry out a resource optimization exercise;
diversify into local processing of selected natural resources.
READ ALSO: Need to prudently channel resources
The top natural resources for possible diversification in Nigeria include:
Natural Cocoa Butter
Crude Palm Kernel oil
The primary Nigerian national product for export is still crude oil (note: not refined…methane, diesel, Jet A-1, petrol, etc more on this later).
Remarkably, the premier natural resource Nigeria is gifted with is human capital and to top that, Nigerians are the most educated black people with the widest global spread.
Education would be a natural catalyst to this human capital development. Paid research would easily show what form of education would be optimal to complement current global demand in various sectors. However, human capital has been the most undeveloped, and under-researched resource the country has.
On the contrary, for comparison, let’s look at Malaysia that is equidistant from the equator. Both countries have just about the same Natural resources and capacity for the same agricultural produce. Malaysia’s top export for 2019 was Integrated circuits/microassemblies (human capital), raking in as much as Nigeria did from crude oil in the same period, both at just over $40 Billion. The next highest export for Malaysia was Processed petroleum oils, then Solar power diodes/ semiconductors and finally Malaysia’s pride…PALM OIL of which they exported $8.3 Billion worth. It is farcical to note that in Nigeria export of cashews, coconuts, brazil nuts fell by 40% in the same year to a mere $112 million.
But there is a big problem that might have slipped past you
Nigeria Exported $ 0 vs. Malaysia’s $44 Billion worth of Integrated Circuits and microassemblies
Nigeria Exported $ 0 vs. Malaysia’s $8 Billion export of PROCESSED Palm Oil. Nigeria is now a net importer of this commodity (we all know the story behind this)
In the same 2019, Nigeria Imported over $7 Billion worth of processed petroleum oils whilst Malaysia EXPORTED $15 Billion worth of processed petroleum oils
The major problem is the fact that Nigeria has ignored the factor that made all developed economies what they are…Processing Capability. For example, Switzerland is the world’s poorest in Natural resources, but have local processing capabilities that have made them world renowned…Machinery (from imported steel), Chemical/pharmaceutical Products (from imported raw materials), Unwrought Gold (mainly from Africa, including Nigeria!) and of course the world-famous wristwatches (made completely from imported metals).
If Nigeria were to carry out annual feasibility studies to determine which natural resources to process locally with government backing, the future would be very promising.
Ihonde an Energy Analyst writes from the U.S