On Monday, April 27, 2020, British oil and gas giant, BP, became the latest in a growing number of energy firms to declare a massive quarterly loss. Their loss was in the region of $4.4 billion dollars. Bear in mind that this was a conglomerate that posted a $2.6 billion profit in the corresponding quarter of 2019.
The challenges that are already engulfing the oil and gas sector will continue to plague that industry for at least the rest of the year, and may reach apocalyptic levels sooner than we expect.
As I write this, there are hundreds of crude oil laden ships, all filled up, with nowhere to berth, and accruing daily charges of an average of $30,000.
We have also seen crude oil prices plunge to record lows, to the extent that some variants of the product have been given out for free, or worse still, producers have paid storage facilities to take their products.
As at today (May 1, 2020), Nigeria is pricing its very low sulphur sweet crude at $10 per barrel, yet buyers are balking. Our sweet crude is becoming a little bitter.
I had earlier warned that Nigeria needs a Strategic Reserve to store unsold crude. Now, we have so much crude and no one to buy it, nowhere to store it, and little idea what to do with it.
Barely three years ago, I had also alerted that the “crude thinking” promoted by our dependence on crude oil will lead to a rude shock.
“If you are still talking about oil, you are in the past. As far as I am concerned, the era of oil is gone. If you want to believe it, believe it. If you do not want to believe it, you will see it. It is crude thinking to continue to talk and base development projections on crude oil”, I had said at a public event in the nation’s capital.
We must face the fact that reliance on crude oil is failing Nigeria and other mono product economy crude oil exporters. Now is the time for Nigeria and her contemporaries to cure their addiction to sweet crude. For far too long we have grown high on our own supply, to the extent that we have neglected almost every other sector of our economy.
This present rude awakening should be seen as a blessing in disguise – a blessing that compels us to take those drastic actions that will free us from the crude oil trap.
We need to diversify our economy, and yes, it is easier said than done, but that does not mean it is an impossible task.
Prior to Nigeria’s October 1, 1960 independence from Great Britain, not only were we a nation self reliant in food production, but we also exported food to other countries, earning precious foreign exchange in the process. Who can forget the great groundnut pyramids in Northern Nigeria? For example, in 1957, agriculture formed a whopping 86% of our export revenue. By 1977, agricultural exports had dwindled to 6%, and today, the figure is less than 3%.
How did our country go from being a net exporter of agricultural products to a net importer of food products? How did we go from a country that could feed itself to one that desperately depends on foreign imports for survival? The answer to these questions is leadership focus.