Will Nigeria leverage the rising crude price to self-develop?

The expression, “one man’s loss is another man’s gain” is even more germane in a world embroiled in social, economic, and political turmoil. The current uncertainty and global instability may be steering us toward a potential nuclear fracas between the top two powers.

We shall see.

These have led to the rising cost of crude occasioned by the invasion of Ukraine by an oil-producing belligerent Russia. The conflict between these giant nations situated in the eastern bloc of Europe has caused the supply chain of oil to soften, leading to a global shortage of petrol and natural gas.

As obtuse and crass  the expression above may connote in the face of human sufferings; the world cannot deny but admit that it is times like this that arouse nations with an essential and indispensable resource to gauge prices. The wise ones use the bonanza to induce growth locally and build their economy while the foolish ones squander it.

Thus the writer is not unmindful or impervious to the human suffering this senseless  war has wrought on millions of people but    to point out that the oil-producing nations will certainly and assuredly exploit the conflict by driving up the price of crude. Again, while some use the flush of cash from the short supply of oil to further develop their country, others will use the windfall to lift their people out of poverty. Yet, the salient question is, what will Nigeria do with its share of the jackpot?

As of the writing of this essay, Nigeria’s foremost crude, Bonny Light, is hovering around $116 per barrel, just $2 below Brent Crude; The country’s benchmark. This price is an almost 500% percent increase from the early days of the coronavirus pandemic when it was trading at around $15 per barrel. And the bright side of this for Nigeria, but to the detriment of the rest of the world who depend on petroleum products for survival, is that we have not seen the last of this surge.

While Western leaders are still contemplating oil sanctions on Russia, oil price is likely to continue its drastic upturn. Many analysts, including Barron, have predicted that oil price will rise above $147 a barrel, the highest last recorded in 2008 if and when a ban on Russia is announced. And could hit $150 should the conflict in Eastern Europe persist.

What does this mean for the big oil producers?

Historically, nations with foresight have used this influx of dollars to transform their economy from a developing oil-dependent economy to a developed diversified one, from an over-reliance on fixed, single income source of income to multiple sources of growing range of sectors and markets.

Nations like Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates have seen an economic boom, with GDP per capita ranging from $53,893 in Saudi Arabia to $128,647 in Qatar because these nations have good wealth managers and they stand to benefit from the rising price and are likely to enjoy lasting prosperity.

However, with more proven oil reserves than Qatar, Nigeria lagged in all indices sitting at crumbly and pitiful  $5,887 GDP per capita. Regrettably, not only did the country not take advantage of the rapid upturn in the 2008 oil price gravy that its contemporaries exploited, it is on track to repeat the mistake of the past, and all evidence shows it will be same old pattern.

So rather than improve the lives of its people, the country further dipped. Its middle class eroded, and more people slid into poverty.

Although the current president has pledged to take advantage of this rising price to stabilize the oil sector, many still believe he cannot put the nation on a permanent restructuring path necessary to bulk the downward trend. However unsettling and weakened the Nigerian oil sector is at the moment, eyes set on just securing this sector are uncreative and shortsighted and will ultimately be sabotaged. Instead, the government should focus on a more dependable and absolute sure path to growth: its human investment. This is singlehandedly the impetus for progress; An area the country still lacks even though it is the primary index used to measure the growth of a nation.

The World Bank also recently echoed this view. It says, “if Nigeria must be prosperous, it needs to direct its public fiscal resources towards investment in its people, starting with the children and also investment in critical infrastructure.”

This is the only panacea to stem the tide. It must do this while blocking all avenues for waste, fraud, and abuse that some have used in the past to plunder the nation’s wealth.

Now is not the time for greed, bluster, or making hollow promises but the time to do the hard work and build a lasting economy where everyone can benefit.

Oil price has not been this high in a long time, and it is likely not to stay this way as the world pushes towards more sustainable renewable energy.

Thus, in the short term, unless something dramatic interferes with the ongoing conflict in Eastern Europe, this current skyrocketing and, yet, painful crude price will remain for the foreseeable future.

Nigeria must use this extra cash to develop and anchor the country, rebuild its infrastructure, invest in its people, and put the country on the path of prosperity.

Failure to do this will see us relieving the past decade. Will the leaders heed?

Email: JlaBode74@gmail.com

Twitter: @obanor