I recently reported on the development of economic diversification plans among countries in the Gulf Cooperation Council (GCC) as oil demand prepares to reach a climax in 30 years. Nigeria, among other African producers, has begun to adopt the same policy, according to new goals announced by Abuja this week.
The National Economic Council (NEC) aims to increase total non-oil government revenues fivefold from $5 billion to $25 billion over an unspecified timeline. Nigerian oil revenues collapsed by $100 billion between 2015 and 2017 due to the ongoing oil price crisis, curtailed only slightly by the Organization of Petroleum Exporting Countries’ (OPEC) agreement to lower output by 1.2 million barrels per day.
A militancy in the Niger Delta seriously curtailed oil production in the country’s oil-rich areas. Locals argue that Lagos, the Nigerian economic capital, and Abuja, the political capital, have monopolized the nation’s oil wealth, leaving those residents near major oilfields on the lowest rungs of the socioeconomic ladder. The year 2016 saw systematic attacks against foreign oil infrastructure in the Niger Delta by militant groups demanding increased investment in the area’s human resources.
In response, Vice President Yemi Osinbajo, who has taken the lead role in governing the country due to the president’s unspecified illness, led a campaign to engage local leaders in devising a revenue-sharing agreement and authorizing a legalization program for a select group of makeshift refineries. Those facilities are notorious for refining stolen oil for use by locals.
“The [Nigerian Export Promotion Council] (NEPC) made a presentation to the NEC on a plan to restructure the Nigerian economy to survive without crude oil,” said the group’s director General Segun Awolowo. “The plan is called the Zero Oil plan.”
Related: This Giant Oil Trader Sees Upside For Oil Prices
Over the next 10 years, the plan could add $150 billion to Nigeria’s foreign reserves, create 500,000 new jobs, and lift 10 million citizens out of poverty. Nigeria is lambasted internationally for its corruption in all three branches of government. To make the oil-free dream a reality, the NEPC plans to increase the exports of key crops, including rice, wheat, corn, palm oil, rubber, hides and skin, sugar, and soya beans. The list shows the plan’s limited scope. Abuja doesn’t see itself expanding into a serious manufacturing hub anytime soon, nor does it demonstrate an interest in growing a competitive technological sector that would bring the economy into the 21st century.
The plan lists the countries it will target with its new agricultural economy. The European and Asian markets will be Nigeria’s biggest prizes, provided output volumes rise high enough to sustain a meaningful market share in those regions.
The NEPC’s stated goal of raising foreign currency reserves relates to Abuja’s dependency on foreign refineries to process crude extracted from Nigerian lands. Years of foregone maintenance has left the country’s refining equipment defunct, forcing the government to export domestic oil, pay for its processing in foreign currency, and ship it back for local use. So far, the government has commissioned the renovation of key refineries, but the projects will take years to complete.
Most economic diversification plans sound good on paper, but their implementation requires a resolute stance from all senior officials that the adaptation is fundamentally necessary and unavoidable. The state of the Zero Oil initiative currently outlined by Abuja’s high command promises a future in the commodities trade, without charting a path for future industries to take root.
Similar plans by the Gulf include blueprints for a new education system and a concrete budget for other expenditures related to the diversification project. A November report on the Nigerian plan is due, so a final verdict on the durability of Abuja’s grand plan will have to wait until then.
ADVERTISEMENT
By Zainab Calcuttawala for Oilprice.com
More Top Reads From Oilprice.com:
- Saudis Lead Gulf Movement To Diversify Away From Oil
- ExxonMobil Dethroned As Top Energy Company
- U.S. Shale Isn’t As Strong As It Appears
