Trouble looms if we don’t earn $15bn from non-oil export by 2020.
Minister of Agriculture, August 2017.
Thank God somebody at the topmost level of the Federal Government has finally put on his thinking cap. But for those wedded to the illusion of Nigeria exporting 2.3 million barrels of crude oil in 2018, Ogbeh’s alarm, despite its frightening implications, is a step in the right direction. Anybody who has conducted research into the trend in the global automobile sector would be alarmed by the rapid rate at which the leading auto manufacturers – Toyota, General Motors, Ford, Volvo – are moving towards marketing electric cars. Volvo is far ahead of the others who will now scramble to catch up.
The Swedish auto giant will start producing and marketing hybrid cars running on electricity and gas by 2018. By 2020, which is a mere three years away, no car manufacturer will be left marketing only cars using petrol or diesel. Furthermore several countries are moving to outlaw automobiles using fossil fuel. Nigerian officials who stubbornly refuse to accept that the Age of Oil is over are still projecting export of 2.3 million barrels of Nigerian crude oil into 2018 and years beyond. The Age of Oil might be over globally, but the Age of Illusion is just starting in Nigeria if the proposed 2018 budget represents our government’s position. The reasons for that comment are not hard to discover and it requires no great intelligence to understand our predicament which those with ostrich mentality want to ignore by burying their heads in the sand of contemporary history.
Cars and light vans using petrol account for close to 65 per cent of oil consumption world wide. As vehicle manufacturers abandon petrol embrace electric vehicles the global demand for crude will drop so sharply as to threaten the economies of all oil producing nations. Nigeria, with the strongest dependence on crude exports will be at the worst disadvantage. A brief summary of where the world stands will illustrate our predicament.
By 2025, a mere eight years away, many countries generating power from fossil fuel would have vastly increased their shift to renewable energy sources which are also more environmentally friendly. Advances in science and technology as well as the economies of scale are making renewable energy sources more competitive everyday. Each building, each structure which adopts solar energy reduces the number of potential customers for crude oil. Millions are doing that world wide – even in Nigeria. Every inverter sold anywhere on the planet is a vote against the use of fossil fuel for power generation.
Instead of taking these early warnings into consideration, the framers of the Nigerian 2018 budget have been talking and acting as if Nigeria alone can swim against the strong tide of history. The Ministry of Budget and Planning even appears not to be working for the same government as the Ministry of Petroleum. Otherwise, the Minister of State for Petroleum should have been able to tell his colleagues what Audu Ogbeh is now telling Nigerians and the world. At least Dr Kacikwu attends the meeting of the Organisation of Petroleum Exporting Countries, OPEC. Additionally, the General Secretary of OPEC at the moment is a Nigerian. They know that OPEC is poised to end the exemption granted to Libya and Nigeria regarding production cuts. Other nations want the misery that oil exports have become democratized. All must share in the calamity.
Nigeria’s oil export is likely to be pegged at 1.9 million barrels per day. That will leave an unfavourable variance of 400,000 barrels per day. That means 18 per cent of the crude exports revenue budgeted will not be earned. That also means that $19.2 million per day or $7.2 billion or N2.5 trillion will not be realized in 2018 from crude oil. Given a N7.2 trillion budget, it is easy to see why we will be in trouble in 2018.
Incidentally, we don’t need to wait until 2018 to know that the stubborn and continuing dependence on crude exports which forms the back bone of our budget is a recipe for disaster. The actual performance in 2016 and the first half of 2017 provide sufficient reasons for alarm. The actual revenue from crude oil exports fell far below budget last year when 2.2 million was used as the basis for the budget. Then as now those in charge of the budget kept assuring Nigerians and the global community that 2.2 million per day was realistic. In 2017, the actual was 1.7 million. The shortfall was 23 per cent. Then, as now, the Minister ignored all those pointing to the error involved in baseless optimism regarding crude exports.
One would have thought that the Federal Government and the members of the Economic Management Team, EMT, would have learnt from their mistakes from last year. But, obviously, from what we have seen in the 2018 budget nobody learns anything even from recent history. Otherwise, it is difficult to imagine how a Federal Executive Council, FEC, including Professors, SANs, Ph.D holders, former governors etc could approve that budget based on 2.3 million barrels a day. Perhaps one recent report would help to open their eyes and something else. The Directorate of Petroleum Resources recently announced that revenue from crude exports fell below budget in May and June of this year. The budget was $76 billion; the actual was $56 billion and $44 billion for May and June respectively. So, the negative variances were $20 billion and $32 billion or 27 per cent and 42 per cent respectively. By half year, the country is now so far behind budget that it would have amounted to a minor miracle if we made the 2017 estimates. So, where is the basis for optimism regarding 2018?
We better listen to Ogbeh or perish.