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HomeAfricaNigeria's economy on the brink of collapse, opposition warns

Nigeria’s economy on the brink of collapse, opposition warns

Nigerian economy may collapse in the next few years unless the federal government takes some drastic measures, including cutting the cost of running government, diversifying the economy and shoring up oil production, the nation’s main opposition party has warned.

In a statement widely published by the local media Monday, the Action Congress of Nigeria (ACN) said it predicates its warning on ”four empirical evidence”, including the cost of oil production which has skyrocketed from US$4 per barrel in 2002 to US$35 presently; and the massive corruption in the oil sector, with oil theft and sabotage leading to lost production
and costing Nigeria some US$6 billion annually in crude theft.

Others are the sharp fall in the discovery of new oil and gas reserves due to the low investment in the sector, and what it called the most serious of all, the challenge posed by alternative sources of global supply of oil and gas.

The party blamed the hike in the cost of oil production on the insecurity in the oil producing Niger Delta region, where it costs US$16 per barrel to provide security.

”In other words, the gains recorded from ending militancy in the Niger Delta due to the Amnesty Programme have been wiped off by the cost of maintaining the ‘peace’,” it said.

On the discovery of new oil and gas reserves, ACN said the disastrously-low level of exploration activity in Nigeria is supported by the statistics released by the US Department of Energy for deepwater discoveries from 2009 to 2011 in which Brazil alone contributed some 40 new discoveries or 20 percent of the global total, US and Australia contributed 10% each, countries like Ghana making nine new discoveries or 5% of the global total, while Nigeria had only 4 discoveries or 2% of the global total during this period.

”This paltry discovery of new oil and gas reserves is due to the low investment in the sector, which needs to attract US$15 billion annually in capital investment, up from the present US$3 billion, in order to remain a significant global oil supplier and a respected player in
OPEC,” the party said.

ACN said, however, that all those challenges pale into little significance when placed against the challenge posed by alternative sources of global supply of oil and gas seriously – that is Shale oil and Shale gas.

”Here are the facts: The US has more than doubled its estimates of recoverable domestic Shale-gas resources to some 827 trillion cu. ft. (23 trillion cu m), more than 34 times the amount of gas the US uses in a year. Together with supplies from conventional gas sources, the US may now
have enough gas to last a century at current consumption rates.

”Last month, the agency released a similar announcement in respect of Shale oil to the effect that California’s valleys alone hold as much as 15.4 billion barrels of Shale oil, which companies were hitherto unable to reach because the oil exists in pockets of rock that were expensive to
reach before the present advancements in fracking technology. Similar announcements are being made in Europe and parts of Asia.

”For the first time in nearly a decade, the US has regained the position of being the world’s largest producer of natural gas and soon also oil. Thus, in less than five years, the US has gone from seeking new sources of oil and gas overseas to being self-sufficient. Industry experts believe that Shale oil and Shale gas will revolutionise the industry – and change the world – in the coming decades. It will prevent the rise of any new cartels and alter oil geopolitics.

ACN said the announced objective of the US Government ”is to drive down oil prices from the current US$100 per barrel to US$50 per barrel within two years, adding: ”If this happens, which is very likely in view of the alternative sources, Nigeria, with a cost of production of US$35 per barrel, would immediately go out of business, with dire consequences for an economy that thrives largely (if not solely) on oil,” the party warned.

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