Venezuela, a South American country sandwiched in-between Columbia, Brazil and Guyana. Its major foreign exchange earner is crude oil. Just like Nigeria. A country with so much prospects. Again, just like Nigeria.
That country of a mere 32m people has a crude oil reserve of 300 billion barrels, the highest in the world. Yes, more oil reserve than Saudi Arabia.
Though our oil is of the sweet grade and more expensive, Venezuela is far more endowed as indicated by the above reserve figure. A few years ago, that country was swimming in billions of dollars from the production and export of 3 million barrels of crude oil every day. Now, the country and its oil industry lie prostrate and gasping for breath. Some expert says, export may come down to zero due to infrastructure decay if the present situation persists.
Years of misrule has led Venezuela into political instability and economic shock. Over 2m people have already fled the country as the economy degenerates and hunger spreads like wild fire.
In the last 12 months, inflation has risen by 52,000%. Imagine what that means to the Venezuelan people. You probably can’t. Even if you can, the situation is worse. It is that bad. Some elements in the military have attempted to take advantage of the economic and social chaos to overthrow the President, Mr. Nicolas Maduro. But so far, the strong man remains in power.
“This is one of the worst collapses in history. It happened without an invasion like in Iraq, the breakup of a country like in the Soviet Union, or a civil war like in Libya,” said Francisco Monaldi, a fellow in Latin American Energy Policy from Rice University’s Baker Institute in a Reuters’ report in January this year.
Unlike Venezuela, Nigeria’s oil reserve is estimated to be 36 billion barrels for a population of about 190m (and rising fast by the day). In terms of oil wealth, Nigeria, despite all the noise about it being an oil rich country, is an ‘Economic Lilliputian’ standing next to Venezuela. Yet Venezuela has gone down and the bottom is still not in sight.
If Venezuela is falling hard with all that oil beneath its feet, what would the scenario be for Nigeria if her 36b barrels get stuck in the ground? In the first place, is it possible for Nigeria’s oil to be stuck in the ground?
According to a CNN business report of September 11, 2017,
“Globally, 95% of electric cars are sold in only 10 countries: China (the biggest car market) the U.S., Japan, Canada, Norway, the U.K., France, Germany, the Netherlands and Sweden.”
Incidentally, all of them, either in part or in whole have set official targets for electric car sales and ban of fossil fuel. And the deadlines are looming in the horizon while Nigeria blissfully moves on.
Besides, most energy experts predict that going forward, all things considered, it is very unlikely for oil prices to cross the $100 threshold in the future. Looking back at the chart of crude oil prices from 1950 till date, it is easy to come to the conclusion that the experts are right on the money on their prediction.
Oil is perhaps the most volatile commodity in the world. It is also the easiest to manipulate given its multiplier effect and impact on economies. It is true that crude oil has defied many predictions about the end of its reign. But those predictions failed because more oil reserves kept coming up and technology made it possible to get oil from sources that that were previously impossible.
However, the new threat to oil is not about it running out. It is about it being overtaken by renewable energy. This expected fall is not driven by technology alone. The main driver is the threat to the human race as a result of climate change. This threat is real and it is on us already.
So, like our coal in the Enugu axis, trapped and almost forgotten, our crude oil might suffer the same fate but with consequences far beyond that of the Venezuelan experience. Our population is six times that of Venezuela, while our crude oil reserve is eight times less. If Nigeria goes into economic shock, the humanitarian catastrophe will be unlike the world has ever seen. None of the countries around us has the capacity to absorb refugees from Nigeria.
Nigeria has experienced some mild economic downturns in the last 40 years. The Shagari administration called it “Austerity”. The Babangida administration called it “Structural Adjustment Program (SAP)” while the Buhari administration simply called it “Recession”. I don’t think, government workers will forget the last one, whose effects are still with us.
However, at the 2018 Nigeria International Summit in Abuja, some Nigerian energy experts dismissed the fear about the fall of big oil in Nigeria. They argued that crude oil is used for so many products outside fueling of vehicles. Therefore, Nigeria will do just fine. What they did not address was how many of such products are produced in Nigeria. Besides, the experts conveniently forgot to mention that technology is making it possible to make various products from sources other than the traditional ones earlier know to man. For instance, meat, fish, eggs and even diamonds are now being made in the lab.
Is it too late for Nigeria to make amends that will save it from economic catastrophe? It is difficult to make that call.
At the moment, we are like a student that has “blown” (as they say in our local parlance) two and half hours of a three hours’ exam only to realize he had just thirty minutes to provide the right answers. How fast he can deliver is his own “wahala” to figure out.
What is obvious is that for every year, going forward, that we do what we have done in the past and still doing, the more difficult it will be to escape the bullet.
This piece is not intended to catastrophize a likely situation. It is a simple wake up call, if we still need such call, after several made in the past were ignored.