The Secretary-General of the Organisation of Petroleum Exporting Countries (OPEC), Mohammad Sanusi Barkindo, just before his sudden demise last week, warned that a bleak future awaits the oil and gas industry if nothing is done urgently to address the challenges confronting the industry. His warning was contained in a keynote address he delivered at the recent oil and gas conference titled: “Funding the Nigerian Energy Mix for Sustainable Growth,” held in Abuja.
According to Barkindo, the global oil and gas industry, including that of Nigeria, is currently beset by severe challenges, which are threatening investment potential in the sector. The identified problems have been worsened by the emerging geo-political developments in Eastern Europe, and elsewhere, especially the ongoing Russia/Ukraine war, the resurgence of COVID-19 pandemic and inflationary pressures. It is likely that the challenges will herald uncertainties in domestic and international commodity markets. There are fears fragile economies like Nigeria might experience another wave of recession. That is probably why a number of countries, and multilateral institutions are pursuing stringent policies aimed at accelerating the energy transition and thereby altering fundamentally the global energy mix.
In addition, the late OPEC scribe reminded government of the organisation’s recent perspective on world oil output, and the dangers ahead. The dire situation calls for collective action as an estimated investment of $11.8 trillion will be needed in the upstream, midstream and downstream sector within the next 23 years. This is perhaps the best way to ensure a significant growth in energy demand. Based on the foregoing, our policy makers should be thinking of how to really diversify the economy since oil is a depleting resource. The idea of depending solely on oil must be quickly jettisoned.
It is time to develop the solid mineral sector, which is currently dominated by illegal miners. The agricultural sector must be fully harnessed. Let government enunciate concrete fiscal and monetary policies that will check the contrary headwinds like inflationary pressures and other alternative sources that will put the economy in good stead. For example, on fossil fuels, renewable energy has become a viable alternative to the recurring epileptic power supply. Though there are many renewable energy solutions available, solar energy seems to be the most suitable off-grid solution to explore because of availability of sunshine and relative affordability.
Besides, it has been established that Nigeria’s climate can guarantee more than 2,600 hours of sunshine yearly, a development which has the potential to provide between 5.5kwh and 6.7kwh per square meter on a daily basis. Energy production is a capital-intensive venture that requires investment in equipment, manufacturing, distribution and financing depending on the business model. Apart from the development of the solid mineral sector, the government should not hesitate to mechanise the agricultural sector.
In addition to providing more jobs, the government will earn so much revenue from agriculture. It will further boost the development of our non-oil exports. Developing the agro sector will curb the overdependence on oil revenue. This calls for more investments in palm oil, cocoa, groundnut, rubber, rice, wheat, cassava, plantain, cashew, coconut, pawpaw and others. They are potential foreign exchange earners especially at this time that the value of the naira has depreciated so much. The development has led to energy crisis, rising inflation and high cost of food items. With a population growth rate of about 4 per cent annually, and rising poverty and unemployment, more investment in agro-allied sector, health and education will drive Nigeria’s economic growth.
Despite the recent rise in oil prices, which is yet to improve the wellbeing of the citizens, there is still fear that the oil industry might face infrastructure and divestment challenges. Already some international oil companies are divesting their onshore assets from Nigeria. According to S&P Global Platts, an independent information provider on oil benchmark and commodities, 2022 and 2023 may pose a big challenge for Nigeria’s oil and gas sector.
This is the time to grow the economy away from oil. Nigeria has enormous resources yet to be fully exploited. They include gold, bauxite, iron ore, among others. Currently, Nigeria has over 3 million metric tons of iron ore deposits worth over $1billion, and 2.23 trillion metric tons of limestone worth over $1billion and one billion metric tons of gypsum worth about $250 million. The optimal exploitation of these resources could create millions of direct and indirect jobs.
What is needed is good leadership and political stability to harness them for economic growth and development. Therefore, charting a new course for the economy should begin with addressing the identified economic challenges.