Nigeria has been awash with oil revenue since the 1960’s. What it did with the massive cash, estimated at $1.6trillion and how much of it was stolen is a matter of public record. However, in the next 20 years, Nigeria will pass through a fiery economic crucible as never before witnessed.
First, the latest upward trend in oil price is not a new normal, according to the International Energy Agency (IEA). That body projects that oil price will hover between US$50 and US$70 between now and 2040. In other words, the era of oil selling above $100 per barrel may be firmly behind us. In fact, the latest outlook by one of the oil majors, BP, is that oil may peak in the 2030s. Most analysts appear to agree with that projection.
Current global crude oil demand is about 99.3mb/d. This is expected to increase to about 111mb/d by 2040. However, the increase will mainly come from Africa and the Asia-Pacific region. Demands from the United States and Europe will not only decrease but change in terms of where they take most of their oil from.
US demand for African oil is expected to drop from 1mb/d in 2016 to zero in 2040. Already, US demand for Nigerian oil has been doing some dangerous dance between 3.92mb/d and 10mb/d for a while now. For instance, in the month of March this year, US demand for Nigerian crude dropped precipitously by a whopping 62%.
Reports indicate that going forward, US refiners would prefer to buy “dirty or heavy crude” from Latin America at a cheaper prices as they have the capacity to refine such oil.
Africa’s crude oil supply to Europe will remain fairly steady to 2040. But will be under severe pressure from supplies from the Middle East, Russian and the Caspian region.
The greatest global increase in demand for crude in the next 20 years will come from the Asia-Pacific region, rising from 21mb/d in 2016 to 30mb/d in 2040 with the Middle East will supplying about 75% of it. Russia and the Caspian region will take most of the balance 25% leaving Africa with very little to pick up.
Demand for crude will also increase in Africa due to rising industrial development. For Nigeria, a big chunk of its production may be taken up by domestic consumption, assuming that industrial development spikes. Otherwise, our crude will sit in our reserve just like our coal.
Why would oil peak earlier than projected? The explosive surge in renewable energy, the production of electric vehicles (EVs) and the growing concerns about climate change are the major reasons.
Why should the presidential candidates care, think and talk about these projected developments? They mean one and only one thing for Nigeria, a monstrous foreign exchange earnings “heart attack”. As things stand today, there is nothing that will prevent that devastating meltdown from happening.
It is unlikely, that the country will survive what is coming. Recall what has happened to the Federal government and most States of the Federation in the last two years due to low oil prices . Sadly, what is ahead is going to be far worse. If you want to know what it would look like, simply turn your attention to the Latin American country of Venezuela where inflation has hit over 200,000%. But unlike Venezuelans, Nigerians will not have anywhere to flee to for refuge. Those who hold up agriculture as a possible saviour are living in a fantasy. Going back to ancient agricultural practice will not cure the upcoming meltdown.
So, why are the presidential candidates not addressing their minds to this doomsday scenario? It all about politics not leadership. Politicians think of their term in office and do not give a damn about the next generation. Isn’t that why the country is whete it is after making over $1.6 trillion from crude oil exports over the years.
No country is ever built on today’s political consideration. Whenever those in power don’t look far ahead, their people will suffer from a shipwreck. Nigeria is a few years away from a shipwreck.