Ever since the emergence of oil and gas as the dominant feature of the Nigerian economy, starting from the 1970s, successive administrations in the country have only been paying lip service to the need for economic diversification.
This is despite the fact that the monolithic nature of Nigeria’s oil-dependent economy has always left the country in dire straits whenever there is volatility in the international oil market. However, plans by some technologically advanced nations to switch from petrol and diesel vehicles to electric vehicles are expected to force diversification on the country.
While the Nigerian system is falling apart as a result of the dog fight over oil revenues, the rest of the world is looking beyond hydrocarbons. Efforts to produce an electric vehicle capable of performance similar to that of petroleum-powered vehicles started about two decades ago. Ordinarily, the idea of driving electrically-powered cars should be an exciting prospect for anyone that is innovation-minded. But such a development will only worsen the current problem of glut in the oil market. Although oil is widely used as a lubricant and for other numerous purposes, there is no doubt that its use in fuelling automobile plays a significant role in the high global demand for oil. The transport industry is responsible for using 70 per cent of all crude oil produced globally. It is said that the effective take-off and expansion of the automobile industry about 90 years ago gave oil the importance that it enjoys today.
Now, the only thing holding back electric vehicles is how they store electricity when the vehicle is not in use. A cheap, efficient and reliable alternative to current batteries would make electric vehicles instantly practicable. And technology is fast dismantling that limitation. So, the idea of a proliferation of vehicles that are not powered by gas or petrol is one that calls for a serious introspection and a robust response from all the major crude oil producing countries, especially Nigeria. Electric vehicles may appear as a dream for the future in Nigeria, but in Europe, Asia and America, that future is already here. Many countries have already set target dates for the phasing out of internal combustion engine cars. The latest of such countries is Britain, which announced last week that the switch to electric cars would be complete by 2040.
Before the British announcement, The Netherlands and Germany had hinted at 2025 and 2030 as the prospective phase-out dates of such vehicles in their respective countries. Volvo, one of the traditional carmakers, had earlier said that it would only be making fully electric or hybrid cars by 2019. The announcement by the Swedish company came just a day earlier than the French government’s announcement of a 2040 date to end the sale of petrol and diesel vehicles. It is a move which the country’s Ecology Minister, Nicolas Hulot, hailed as a veritable revolution. Norway and India are also very much in the mix.
A revolution indeed it will be, but not one that is driven by the need to satisfy curiosity or merely to expand the frontiers of knowledge. Rather, it is borne out of necessity to meet the climate change targets of reducing the level of air pollution by cutting toxic emissions from petrol or diesel vehicles. Hulot, an environmentalist picked by the French President, Emmanuel Macron, to drive the project in his country, even sees it as a public health issue. According to the Paris Declaration on electro-mobility and climate change, transport contributes about 23 per cent, almost a quarter, of the current global energy-related greenhouse gas emissions “and is growing faster than any other energy end-use sector.”
Although all the major oil producers will be affected when the policy becomes fully operational, yet, the impact on Nigeria will be devastating if nothing is done immediately to start weaning the economy off oil dependency. Already, the crashing prices of crude oil, which hit a low $28 per barrel last year from a peak $147 per barrel in 2008, due to the impact of America’s shale oil production, have sent the Nigerian economy, hitherto touted as one of the fastest growing in the world, into recession. That the country is gradually finding its way out of it is as a result of the marginal price increases currently experienced in the international oil market and the relative peace in the oil producing areas of the Niger Delta region.
Besides, increasing oil finds in many parts of the world are gradually diminishing the importance of oil as an economic mainstay and a political tool that it once was. At a point, the Organisation of Petroleum Exporting Countries could dictate the trajectory of global politics by threatening to cut or increase oil production. Now, America, the biggest oil importer not too long ago, alternates the title of the largest producer with Saudi Arabia.
Besides, while other oil producing countries, both within and outside OPEC, were able to use their oil money to build infrastructure and ratchet up savings, Nigeria’s oil money simply disappeared into private pockets. So with the declining value of oil in the global economy, Nigeria is a loser on all counts.
The Nigerian Extractive Industries Transparency Initiative states that between 2005 and 2015, Nigeria recorded staggering 102 per cent outflows from the Excess Crude Account meant to cushion the effect of oil price volatility. This, according to the agency, amounted to $204.7 billion that disappeared from that special account without anything to show for it. But a country like Norway, for instance, has been able to build up assets worth $960 billion from oil proceeds, put aside for future generations, according to a Reuters report.
Norway’s Sovereign Wealth Fund is so large that it is twice the economy of the country and “its size is equivalent to $185,000 for each man, woman and child in Norway,” says the report. Right now, earnings from the oil fund exceed revenue from the sale of oil and the country only spends proceeds from the fund but does not touch the actual fund. For Norway, the idea is to save for future generations, while in Nigeria debt is being accumulated for children yet unborn.
Nigeria may still have time to restructure her economy to be less dependent on oil by shifting emphasis to mining, agriculture and manufacturing. For this to be possible, the problematic power sector has to be fixed while the environment is made more conducive to foreign investment. But for now, the message is clear: there is no future for Nigeria in oil!