Nigeria And Oil: Looking Beyond Price Collapse

By Austin Okere

The mistake we keep mak­ing as a nation is failing to anticipate and plan for our oil windfalls. There have been many boom oppor­tunities since Nigeria joined the Organisation of Petroleum Exporting Countries (OPEC) in 1971; oil prices increased by 400% in six short months after the Yom Kippur War following the Arab Oil Embargo. Crude prices doubled from $14 in 1978 to $35 per barrel in 1981 following the Iran/Iraq war. 

The price of crude oil spiked in 1990 with the uncertainties associated with the Iraqi inva­sion of Kuwait and the ensur­ing Gulf War – the so called ‘Gulf War windfall’ under then Head of State, Ibrahim Baban­gida. Data from the U.S. Ener­gy Information Administration show that the latest windfall happened between February 2011 and August 2014, under the Goodluck Jonathan pres­idency, when oil prices were much in excess of$100 per bar­rel. Another golden opportuni­ty was squandered.

During this same period, Saudi Arabia has amassed a whopping $593b in foreign exchange reserves and has re­cently announced that it is cre­ating a $2 trillion mega-sover­eign wealth fund, funded by sales of current petroleum in­dustry assets, to prepare itself for an age when oil no longer dominates the global economy. Coming closer home, Algeria, the second biggest African oil producer, with 1.9mbpd has ac­cumulated foreign reserves of $156b and a sovereign wealth fund of $50b. Nigeria, by far the biggest producer in Africa with 2.5mbpd has only man­aged foreign reserves of$28b and a sovereign wealth fund of a paltry $2.9b – about 5% that of Algeria. The major difference being that while the Algerians saved for a rainy day during the boom years, Nigeria was busy squandering her wealth, with nothing to show by way of in­frastructure or any solid invest­ments.