Wanted: A new oil policy
From an all-time high of $110 per barrel, the price of oil has tumbled to around $83/b. Such is the complexity and variegated profile of the global economy that this relatively new phenomenon of cheaper oil has meant different things to different social formations across the world.
For consumers, cheaper oil has meant a relief, since there is the estimation that across the world, $1 trillion will be saved from the fall in oil price. The case of the United States is more ambiguous, and we daresay nuanced. This is because the country is both a producer and an importer of oil. In the former context, if the downwind spiral in the price of oil continues, then the euphoria spawned by shale oil in North Dakota will be over, whereas for oil importers in the same country, happy times are here.
Incidentally, Nigeria shares this duality of status with the US. On one hand, Nigeria is a producer of oil, and on the other it is an importer of refined petroleum products. Unfortunately, this is where the similarities end between the US and Nigeria.
For Nigeria, the outlook is somewhat bleak. This is because ours is still a mono-cultural economy since the price of crude oil in the global oil market is a major determinant of the country’s economy. Matters have hardly been helped by the rather confusing and conflicting depositions from our public officials. When the price of oil started to move south, there were assurances from Ngozi Okonjo-Iweala, finance minister and coordinating minister of the economy, that there was really no cause for alarm. On the other hand, and in more recent times, some of our legislators have been warning that the economy may be imperilled in light of the falling prices of oil.
Between these two positions of optimism and pessimism, we are of the view that there is in fact a third option which should engage the serious attention of all patriotic Nigerians. On this score, it is baffling and shameful that for a long time, Nigeria has been contented with a dysfunctional economic structure whose health is helplessly tied to the vagaries of oil price in the global market. Wiser and more thoughtful social formations have since moved away from this state of mono-cultural dependence. We are of the conviction that Nigeria should join this thoughtful and reflective community, which include countries like Malaysia, Norway, Mexico and Brazil. It is mind-boggling that since 1958 when oil was discovered in commercial quantities, Nigeria has remained shamelessly fixated on only the upstream phase of the oil industry.
Against this background, and in conformity with the stock wisdom that adversity is an elixir, Nigeria should use the present and ‘negative opportunity’ of the downward spiral of oil price to take a bold and critical look at what passes for oil policy in the country. This is with a view to evolving a new oil policy which would serve the interests of contemporary Nigerians and future generations. This new oil policy should involve a situation in which a measure of extensive diversification will take place within the oil industry itself.
It is instructive to note that when broken down into its various components, the crude oil can yield around 100 sub-components which can easily be the basis of our much-needed industrialisation. In the specific sense, our urgent plea is that Nigeria, with its crude oil, can use this important product as a basis for establishing viable refineries and petrochemical industries. In the process, the envisaged outcome is that like most prudent countries with foresight, Nigeria would be transformed from an importer of all manners of goods to an exporter of same.
In showing up this roseate vista, we are quite aware that the road ahead is thorny and fraught with difficulties and even treachery. After all, the zero-sum character of international relations is such that what one country loses, another gains. Still, the immediate foregoing should not be a cause for despair. Through a careful and skilful cultivation of allies, a new oil policy will emerge in which most of the gains from this resource will remain in the country via the process of backward linkages. Potential allies could include IOCs and countries like Malaysia, Norway, Brazil and Mexico.
The cynic is likely to dismiss the IOCs since Big Oil from historical times has always been self-serving. But one can certainly not say the same thing for social formations like Malaysia, Brazil and Mexico who can be cultivated for the name of South-South dynamics. Some of these countries can be approached such that the Nigerian oil industry can serve as the basis of the country’s much-needed industrialisation. Meanwhile, there is also the huge and relevant Diaspora out there whose technical skills can be tapped.
Most importantly perhaps, what is urgently needed is a novel and transformative attitude on the part of our leaders. The opportunity provided by the volatility in oil prices should be grabbed. This is with a view to putting in place a viable and robust oil policy. And the time to do so is now.