OIL CRISES: THE NEED FOR A SUSTAINABLE ECONOMY

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The discovery of oil in Oloibiri, Bayelsa State Nigeria in 1956 brought the nation into the league of oil producing countries in 1958 when it produced its first 5,100 barrels per day (bpd). Since then, Nigeria’s economy has depended heavily on oil over every other source. Oil makes up over 80% of Nigeria’s exports, about 90% of gross earnings, and 75% of government’s revenue.

Due to the full weight of oil on Nigeria’s economy, a touch on it is a touch on every other aspect of the nation’s growth. Dropping oil prices have left bold marks on the economy as a whole – the currency, foreign exchange reserve and investments, and the stability of the society, to mention just a few.

Over the years, plunges in oil prices have always affected the economies of oil producing nations in several ways, and more severely oil dependent ones whose oil exports determine the boom of their foreign exchange. Without foreign exchange, international trade would be hampered, with direct negative impact on the economy. For Nigeria, economic development depends on revenues from oil (over two third of government’s income) hence; there is no surprise about the economic crises the nation is currently facing. Already, Nigeria has abandoned her fixed peg against the dollar for a free float in order to rebound foreign exchange nevertheless, foreign exchange and the economy are yet to stabilize.

Current oil crises not only affect foreign exchange but also foreign exchange reserves and the delivery of the contents of the 2016 budget, which is hinged on the state of oil. The 2016 budget was produced based on previous production capacity of 2.2 million barrels per day (bpd) however, the nation currently produces less than 2 million barrels per day (bpd), with oil price plunge and other internal crises making it is difficult to service the budget.

Apart from a dwindling economy, crashing oil prices have increased social instability in the nation. A socially stable society depicts fair distribution and availability of resources, employment, balanced wealth and living devoid of crime and violence. Over the years, Nigeria’s stability has been fragile and heightened by the impact of the oil crises on the Nigerian society. Furthermore, a limitation to foreign currencies has become a challenge to businesses while unemployment rate has increased.

Incomes are declining even as many organisations continue to lay off staff whilst food prices have predictably increased as well. More worrisome are the costs of food and household items, which have risen sharply as prices of imports have skyrocketed. According to the National Bureau of Statistics, Nigeria, inflation as at June 2016 had risen to 16.5%, the highest since 2005 when oil prices were still stable, as prices have continued to rise on the average of 1.7/2.75 monthly. It is obvious that all sectors of the society already face the negative consequences of the crises in varying measures.

One of the three pillars of sustainable development is economic sustainability.  A sustainable economy is one that has the capacity to optimally use its resources to sustain an economic production that can indefinitely satisfy its people. The current oil crises and its severe effects on every sector in Nigeria have exposed the sustainability void in Nigeria’s economy with her continued dependence on oil. It is clear that the blow of the oil crises on Nigeria is as a result of the unhealthy state of the economy.

Sustaining the Economy through Mechanized Agriculture

Nigeria, with a vast landmass of 923.768km2, an estimated arable land of about 68million hectare, 37million hectares of natural forest and rangeland coupled with a tropical rain forest climate of about 1,500millimeters of rainfall per year, with one of the world’s largest youth population is positioned for an agricultural revolution.

As at independence in 1960, the nation started off maximizing her agricultural potential. Agriculture accounted for over half of the nation’s GDP and about 80% of her foreign revenue. It is however disappointing that Agriculture presently accounts for less than 35% of the country’s GDP. Nigeria has substituted her most stable potential for the unstable oil.

In fact, oil will likely remain vulnerable to external shocks that will keep plunging Nigeria’s economy while agriculture that is a global economic mainstay will remain a sure pathway to a sustainable economy if maximized. Besides, one of the proven secrets to a sustained economic growth is agriculture. Leading economies across the world like the United States, Germany, France, Canada and even China are also agricultural producers and exporters, through mechanized agriculture.

The keys to a sustainable economy through agriculture should thus be driven by ICT and supported by abundant land access, both public and private incentives, research and support, government commitment and citizens’ will power. This will ensure that Nigeria’s growing population is a blessing and not a curse.

Exploring renewable energy sources

Renewable energy from sun, wind, rain that provides electricity generation, heating systems, transportation, and rural off-grid energy is widely accepted as the most sustainable and harmless source of energy possible.

It is estimated that Nigeria, with about 160million people generates less than 6000MW of electricity from fuel products, satisfying only about half its population. However, a nation in close proximity has the potential to produce over 427,000MW of energy from concentrated solar thermal power (Renewable Energy Potential in Nigeria, 2012). Also, with the natural resource of the Kanji, Jebba, Shiroro and the Mambilla dams, Nigeria can conveniently generate more energy than the about 19% of hydropower potential the nation still taps. (Global Energy Network Institute, 2014).

Furthermore, Nigeria is blessed with high potential for generating energy from wind. With the hills that abound in the northern region especially in Jos and Sokoto, the nation has high wind power potential. An assessment of 10 locations in Nigeria reflects that average wind speeds are between 4-5m/second at 30metres height and at 5-6m/second at 80metres height (Lahmeyer International’s study 2005)[1]. This moderate speed of wind is said to be capable of generating huge supply of energy[2].

Moreover, biomass resources from crops, grasses, shrubs, animal wastes and other wastes are other sustainable opportunities for Nigeria. Sugarcane, Maize, and Sorghum, of which Nigeria is the world’s third largest producer of Sorghum (Food and Agriculture Organization of the United Nations, 2013) are some of the most fruitful sources of biomass. As Nigeria has vast land and capacity to produce crops for agricultural purposes, fortunes can also be made from energy from this same capacity through biomass.

Nigeria is also endowed with sufficient natural renewable sources of energy to satisfy both her internal needs and also generate wealth through international trade; this positions the country as a future world power in renewable energy.

Moving from the conventional to the unconventional, Nigeria can make huge and sustainable revenue out of renewable energy sources. Windmills can be built in the North, dams can be revamped, and the massive land expanse can be fully explored for biomass, to satisfy the energy needs of Nigerians, including those of other neighbouring African countries thus increasing revenue. Furthermore, solar panels can achieve sound return on investment for the nation. World Bank already revealed that North and Central Nigeria alone can conveniently produce 42,700MW of power from solar thermal if explored[3]; to satisfy the internal demand of about 20,000MW and more. Moreover, commercial markets for renewables are expanding by the day and Nigeria will do well to seize this opportunity and carve a niche on renewables, to revamp her dwindling economy.

Picking from Canada, a world leader in renewable production; in 2011, Canada exported over 10% of electricity production to neighbouring United States to generate revenue to the tune of $2b per year; just from one country. With the renewable capacity of Nigeria, the nation can make much more revenue from this same renewable means.

All hands will have to be on deck; government’s will power, focus and yearly investments, private investments, foreign investments and conducive environment, incentives, capacity building, research and development, amongst other factors are the only means Nigeria can achieve this highly ambitious but expedient feat. Though expensive to put in place, investing in renewables is worthwhile for a country like Nigeria as a way forward.

As the world continues to fight climate change, and the sun continues to shine, wind never seizes to blow, and the natural dams and rivers remain in place, Nigeria is capable of sustaining its economy through these sustainable sources of energy instead of the status quo which sees a complete dependence on oil. Moreover, with several nations embracing renewables and the United Nation’s world renewable projection, renewables have become trending in this age.

Other means to a sustainable economy for Nigeria are an awakening of the Industrial capacity to improve locally made industrial production, strong regulation, financial support through loans, including a good oil reserve to considerably withstand external shocks like Saudi Arabia. This is not to suggest that the nation should look away from oil production and its potential but should diversify revenue sources in order to sustain the economy in future.

 

References:

Adebayo C. (2014), How is 100% Renewable Energy Possible for Nigeria: Global Energy Network Institute.

Energy and Mines Ministers’ Conference, August 2013, Canada-A global Leader in Renewable Energy.

Irena (2015), Renewable Energy Capacity Statistics 2015: International Renewable Energy Agency, assessed              on http://www.irena.org/DocumentDownloads/Publications/IRENA_RE_Capacity_Statistics_2015.pdf

Lawal A.M. et. al. (2006), An Analysis of Agricultural Production in Nigeria: Africa Journal of General Agriculture

Newsom C. et. al. (2012), Renewables Energy Potential in Nigeria: International Institute for Environment and Development, assessed on http://pubs.iied.org/pdfs/G03512.pdf

Okoro O.I. et.al. (2016), Prospects of Wind Energy in Nigeria: Poobalan Govender

REN21 (2015), Renewable 2015 Global Status Report: REN21

http://www.tradingeconomics.com/nigeria/inflation-cpi

http://nairametrics.com/nigerias-inflation-rate-2006-2016/

[1] In Renewable Energy Potential in Nigeria, 2012

[2] Ibid.

[3] Ibid.

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