Oil, still a resource of the future

Prior to the discovery of crude oil at Oloibiri in 1956, agriculture and the agro-allied industry provided the base for the Nigerian economy. But all that became history when oil became the mainstay of the country’s economy.

From an output of 5, 100 barrels per day of oil in 1958, the Nigerian oil and gas industry has grown to be the largest in Africa, with a total installed capacity of three million barrels per day. But at the moment, the output level is averaging about 1.7 million barrels per day; thanks to a self-imposed ceasefire by the main militant group in the Niger Delta, the Movement for the Emancipation of the Niger Delta (MEND).

Global situation

Nigeria is currently the world’s 10th largest oil producer, and sixth on the list of the Organization of Petroleum Exporting Countries (OPEC).

Today, 49 years down the road, “oil and gas account for 46 percent of Nigeria’s Gross Domestic Product (GDP), 96 percent of total earnings, and 80 percent of fiscal revenues,” says Bismarck Rewane, chief executive officer of the Lagos-based Financial Derivatives Company.

Although oil prices fell from an all time high of $147 per barrel last year, Nigeria is still “expected to realise about $70 billion from crude oil receipts in 2009.”

Most leading economic indicators like consumer price index and inflation are a function of oil production, revenues, and earnings.

Nigerian technicians

According to Victor Agbe-Davies, President, Nigerian Association of Petroleum Explorationists, there’s plenty to celebrate after 49 years. “We’ve been able to develop a core of technically minded Nigerians, from geologists to engineers, to field technicians, to technocrats.

“But at the same time, there’re other minuses too. For the oil and gas industry to really exist properly, you need to have a vibrant iron and steel industry. In our business in exploration, we use drilling rigs but right now, all the rigs are being sourced from outside the country. We don’t fabricate any here.

“We also have the petrochemical industry that’s supposed to be an off-shoot of the oil and gas industry. The refineries also is another one, we have the refineries that are not currently working but now from indications that we’re getting from the government, they’ve withdrawn the $1 million requirement from those who have licenses.

Infrastructure gap

As the country approaches its golden jubilee, Mr Rewane said, “Nigeria’s infrastructure gap of $400 billion can only be financed by oil and gas revenues.”

He argued that “Nigeria’s oil and gas resource should be a strategic or vital resource rather than a critical resource; without which our economy will come crashing down.