rowland adewumi Nigeria

“If the world finally finds a feasible alternative to oil, what would become of Nigeria’s economy?” Answer: “God forbid, the world will always need crude oil; nothing can replace it, no matter how hard the world tries.” It may not sound like a convincing answer, but that is the unspoken response in the minds of the political managers of Nigeria who cannot just contemplate a future without oil. As far as they are concerned, there must be demand for crude oil, period. It needs repeating: oil is the soul and spirit of Nigeria. Take away the oil earnings and the country will go prostrate. As much as 95 per cent of the country’s exports are oil and gas. Government revenues are almost entirely from oil. Yet, it is not that the country lacks other sources of livelihood, but the easy flow of petrodollars has effectively tamed the Giant of Africa and buried its potential.

Take agriculture, for instance. It is common knowledge that a delegation from Malaysia, on a visit to Nigeria in the 1960s for an agricultural workshop, took palm seedlings back home and today the country is the world’s leading palm oil producer while Nigeria, which used to produce a third of world’s total output in 1962, has disappeared from the palm radar – because it found oil wealth. The country is also not short of good tourism potentials. Neighbouring countries such as Ghana, Gambia and Cote d’Ivoire, and other African countries such as Kenya, Morocco and Mauritius, have developed their tourism to the level of foreign exchange earners. Above all, the human resource base is grossly underdeveloped.

The public education system in Nigeria has suffered years of neglect. Inadequate infrastructure, antiquated teaching methods, insufficient teaching staff often lacking in motivation and probably needing to be taught themselves, and inept administration have all conspired to stunt the development of the human resource. Private schools, which are very expensive, are stepping into the gap. Public investment in education is also on the increase – the Rivers State government, for instance, has declared an emergency in the sector and voted over N70 billion to it between 2008 and2009.

While many countries like Nigeria are stuck to oil and would likely experience terrible consequences if demand and prices were to fall in catastrophic proportions, there are quite a number of countries that have taken a long-term view and diversified their economies away from oil. Before the world finds alternatives to oil, they too are developing alternatives to oil wealth. Experience shows that a period of sustained high oil prices is usually followed by a lull – sometimes brief, sometimes prolonged.

The volatility of crude oil prices is always a warning to oil-dependent countries not to box themselves into the petrodollar corner. Angola, for instance, is looking far into the future. Having fought a bitter war for ages, the country’s infrastructure was in ruins. However, the oil boom has brought about a transformation in the country. The government has launched a massive project to transform the capital city, Luanda, into a foremost tourist destination in Africa. Public parks and walkways are being created to modernise the city. New hotels are springing up in preparation for the expected boom: fivestar Intercontinental Hotel and Casino, Hotel Sana, Hotel Luanda, and Skina VIP Inn. In 2007, Angola’s hotel and tourism business reportedly generated $341 million income – more than twice the figure the previous year and an indication that the “future city” plans are on course. No surprises then that Luanda ambitiously see itself as “the new Dubai”.

Dubai has long transformed itself from a mono-product economy and has become the model of what to do with oil riches. The emirate is one of the seven that make up the federation called United Arab Emirates (UAE). From an emirate that used to depend wholly on oil income, the other sectors of the economy have been developed to such as extent that oil now accounts for about 6 per cent of the city’s income. Its oil wealth has not declined, but other sectors have overtaken it. Recent figures show that real estate and construction (22.6 per cent), trade (16 percent), entrepôt (15 per cent) and financial services (11 per cent) now outstrip oil. Its enviable status as a global business hub has attracted the high and the mighty from all over the world – including Nigerian politicians and public officers who, after failing to develop their own country with the oil wealth, have now found a pastime in buying up property in Dubai. They regularly escape to the city to get some relief from the lack of electricity and basic infrastructure in Nigeria. About the same time Nigeria started its own aluminium project, Dubai aluminium (Dubal) was established.

Dubal is one of the world’s leading producers today while its Nigerian counterparts are still groping in the dark. Dubal is reputed as a “major supplier of foundry alloy to the Far East’s automotive industry, a significant supplier of extrusion billet for construction markets and a preferred supplier of high purity primary aluminium for use in the electronics and aerospace industries”, according to the company. “From a relatively small smelter operation utilizing three potlines which produced 136,000 tonnes of aluminium per annum in 1979, DUBAL has expanded its operations to encompass eight potlines with the capacity to produce more than 950,000 tonnes of quality hot metal aluminium each year for clients in more than 44 different countries.” Hot metal volumes were expected to approximate one million tonnes by the end of 2008. It employs about 4000 workers. Dubai’s neighbour Qatar is already devising its own way out of the oil trap. It has one of the world’s largest gas reserves, but it is looking into the future. Tourism and trade, the country has decided, will be the future. Qatar Airways is leading the way. Doha, the capital city, is primed to become the hub in the Gulf Region. The new Doha International Airport is being built as part of the vision of placing tiny Qatar as a giant on the world map of travel, trade and tourism.

Sixty per cent of the airport is built on a land reclaimed from the sea. The airport will open in 2010 with an initial capacity of 24 million passengers a year, rising to 50 million during the final development hase from 2015. The airport will have a total of 80 contact gates, including 25,000 square metres devoted to retail space, comfortable lounges and multi-storey short-term and long-term parking  acilities. The complex will house a 100-room hotel within the terminal. Other facilities include a free trade zone and a business park, and a suspended monorail to transport passengers through the terminal. The airport is obviously aimed at displacing Dubai International Airport as the hub in the region. Nigeria’s slippery oil Resource curse theorists will see Nigeria as the ultimate case study in the damage oil wealth can do to a country, but they would be shocked to discover the extent of ruin on the country. Whereas other oil-dependent countries are generally regarded as lacking in liberal democracy, Nigeria’s case is compounded by the state of infrastructure. Other countries, democratic or not, boast of excellent road network, electricity and a booming petrochemical industry – quite unlike Nigeria whose refineries do not work, necessitating massive importation of petroleum products for years. Nigeria desperately needs functioning transportation systems, good roads and stable electricity to stimulate the economy for greater performance. The country has clearly not fully utilised its oil wealth to lay a solid foundation for economic diversification. A future without oil does not mean oil will go out of existence. There will always be oil. In all the talk about “alternative energy”, the reality remains that crude oil is still the king. Oil makes up about 40 per cent of the world’s energy use and 96 per cent of its transportation energy – air, land and sea. Paris-based International Energy Agency projects that “distillates (jet fuel, kerosene, diesel, and other gasoil) will remain the main growth drivers of world oil demand”. John Hess of Hess Corporation, at a presentation at Harvard University recently, said oil would still be a major factor in international trade and relations. He said recession would affect demand, but only for a while since “households spend only 6 per cent of their income on energy – so it’s not a major factor”. Moreover, falling crude prices also make alternatives more expensive.

The world cannot do without crude oil in the foreseeable future. What is not sure is the price. It has sold for as high as $147 a barrel and could still dip to $20, or $10 or even less. The volatility places monoproduct Nigeria at the constant risk of running a very uncertain economy where budgets are tied to crude oil prices. All hope is not lost for the country. A rebound in prices could yet offer the country another opportunity of effective management and forward-thinking, like Dubai and Doha – not forgetting Angola, right at Nigeria’s backyard.

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