The Impact Of Oil And Gas Sector On The Quality Of Life In Nigeria

Image Data Credit: Prof. Aderoju Oyefusi (Dept of Economics, University of Benin)

Nigeria, with a population of about 203 million persons (World Bank, 2019), is the largest oil producer in Africa and is one of the world's top five exporters of Liquefied Natural Gas (LNG). Proved Reserves of Natural Gas in Nigeria was estimated to be 180 Trillion Cubic Feet (TCF) as at 2018 and this is the 8th largest reserve in the world. According to data from OPEC, as at 2018, Nigeria’s proven crude oil reserves stood at an estimated 36.97 billion barrels. 


This was slightly lower than the estimated value of 37.45 billion barrels in 2016. Nigeria’s crude oil reserves also represents 3.11% of total OPEC’s crude oil reserves as at 2018. The decline can be attributed to slowdown in exploration activity, challenges with security in the Niger Delta region, and regulatory uncertainty.

The latest collapse in crude oil prices has exposed the vulnerability of the Nigerian economy. The economy was hit hard by downward trends in oil prices in 2015, leading to an economic recession in which growth declined for more than two consecutive quarters. The effects of the recession were felt by citizens around the country who bore the brunt.  


Between January 2016 and January 2018, unemployment doubled while inflation rose by over 50%. Within a space of about 5 years, between 2013 and 2018, Nigeria moved from being “one of the fastest growing economy in the world” to “the world’s poverty capital” with almost half of the population in poverty and another 6 of its citizens standing in danger of falling into poverty every minute.    

  
This development clearly brought to light a reality that has been quite often ignored; that is, developments in the Oil and Gas sector impact on all aspects of the Nigerian economy and all groups in the society: the farmer in the rural community, students, civil servants, government contractors, traders in rural and urban markets, the typical household, big businesses, small and medium scale enterprises, and Nigeria’s middle class.

Some important developments in the international Oil and gas Industry over the last decade (in particular, climate change and global push towards carbon reduction, the drive towards energy security. global economic meltdown, trade wars, increased protectionism, and technological disruptions and innovations) suggest that the world may have entered a new era of low oil prices. 


This calls for urgent actions on the path of oil-exporting countries to develop effective plans to reshape their economies and reduce reliance on the energy sector. At the inception of the Buhari Administration in 2015, the National Chairman of the ruling party gave an impression that Nigerian leaders have come to terms with these realities and the challenges facing the country.  

In his words, the new Administration would need about N4.1 trillion (about $24.8 billion as at that time) to stabilize government. Stabilization efforts would include offsetting outstanding salaries of workers at the federal and state levels, servicing debts incurred by previous Administration and offsetting outstanding petrol subsidy payments. 


He further stressed that given the backdrop of falling oil prices, an “unprecedented $60-billiondebt”, a largely depleted Excess Crude Account (ECA), massive revenue loss to crude oil theft, the gory challenges of rising unemployment and insecurity, it is evident that a tortuous road lay ahead. 


Five years after, the road ahead does not seem to look better. With oil prices likely to remain much lower than the pre-2014 level at least in the short term, and with no significant reform in the Oil and Gas sector, the economy does not seem to have improved much and the quality of life of many Nigerians has fallen even further. 


Recent initiatives by the Administration barely address the main challenges facing the country in relation to the management of its Oil and Gas resources to achieve the transformation that is required and to turn around the fortunes of its citizens. There is still no single law that harmonizes the goals of the Government for the sector and set out provisions toward their realization, no real progress has been made in terms of establishing fiscal buffers to guide against revenue volatility; rather, public debts have soured.  


Progress in domestic refining is uncertain, oil theft has risen further; fuel subsidy reform is neither here nor there. The structure of property rights and fiscal jurisdiction over mineral resources has remained the same, while oil revenue sharing arrangements continue to create room for looting rather than improving the lives of ordinary Nigerians. Also, after 20 years of massive inflow of funds, nothing much has changed in the Niger Delta in terms of development and quality of life. 

The region is still far below most oil producing countries in living standards and lag behind other regions of Nigeria in measures of development, such as life expectancy. 

If the often-cited intention of the Federal Government to lift 80 to 100 million Nigerians out of poverty over the next 5 to 10 years is to stand any chance of being realized, Nigerian leaders would need to address the problems in the country’s Oil and Gas sector and the management of Oil and Gas wealth headlong. 


With its huge oil and gas reserves, abundant solid minerals, vast arable land and a large and youthful population, Nigeria certainly has the potentials to do better than what obtains presently in terms of development and to give her citizens a higher quality of life than they presently enjoy.   

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