Who didn't know that the "oil windfall", as it was called, was temporary. Even the Nigeria government, as un-strategic as they say our public officers are, opened what they called the excess crude account where they warehoused the difference between the crude budget bench-mark and the actual value in the market place. Everyone knew that the surge was temporary. The countries that had more gumption, especially the Arabian countries (UAE and Saudi Arabia in particular) saved up and used their windfall to invest in their economies, the other less initiated governments, like Nigeria, more or less sat back and shared theirs - some went into private pocket and some to national frivolities. The point was everyone somehow knew that all they were enjoying was a windfall, only that no one knew when the party was going to end. While the countries that sell sold and made massive spread, the countries that bought grew the more determined to find a way to end the windfall. the United States, for one, had to make a decision to explore offshore oil off the coast of Alaska and also began to look for alternative energy. They approved drilling off the coast of Alaska and they also came up with Shale Oil. They stopped importation of crude in 2015. China also gradually began to re-structure their manufacturing machineries to use heavy crude which was cheaper and more available. They party was finally brought to an end!
For one, we need to come to terms with the fact that the party has ended. There is shale oil ready to compete for any price hike, now the United States that has not exported a drop of all since the 70s decided in December 2015 to start crude export. Iran that had been out of the market due to sanctions on their nuclear weapon development have had their sanctions lessened, if not removed, and are planning to come back into business. Iran and Saudi Arabia are at the opposite ends of the Islamic divide which mean they are competing nations and would try to outdo each other as far as oil is concerned. So even if Saudi who has continued to ignore OPEC's call decides to reduce their production, Iran will happily fill their place, anyhow, OPEC is imploding and will implode.
For Nigeria, is there an upside to this hoola-baloo? \My answer is Yes!
To start with, oil is not just an export - cash resource to Nigeria, oil is a national strategic resource with national security implications. The fact remains that even if oil falls to $10 per barrel, Nigeria will still have to drill. We are still grossly under supplied with oil and oil products. Look at the drop in oil price for instance, it has not yet translated into cheaper or more available fuel for Nigeria and it may not even translate if we keep going without rethinking our strategies. Oil products are still very expensive, our exports have been drastically reduced, yet we do not have crude distillates available in the country to power our nation. Nigeria is being punished on both sides of our economic candle. The Government had deregulated Kerosene, but as at January 25, 2016, it was announced that Kerosene will now sell for N83/litre ( it sold for N50/litre). Diesel still sells for about N150 per liter and it is the most utilized crude distillate by the Nigerian corporates, especially the manufacturing industry. Meanwhile our entire economy is driven by these un-available and expensive distillates. Since 1999, we have not invested anything in the oil industry and we have not had the incentive to do so. We could simply export crude at high value and use some of the proceeds to subsidize the import of distillates. Some profiteers emerged and capitalized on the export, import and subsidy. Also as price rose, the cost of investing in new oil infrastructure also increased and became very exorbitant. But with the crash in price and the lost of export potential, I see an upside:
Firstly, oil price has crashed and along with it the price of oil related infrastructures, so it is time for Nigeria as a nation to invest in our oil infrastructure. Given the importance of crude distillates to our national existence, and we have not been able to invest because of the varied distractions and cost., now the price is down, it is time to BUY! It is time to buy vessels to ship crude from the offshore wells to crude depots that should be built in the south west where there are lesser pipeline damages. It is time to invest in deepening our shallow continental sea - shelves so that we can receive very large vessels directly into the ports - Koko, Apapa, PH, Calabar and even Badagry instead of our ships berthing in Cotonou and then trans-shipping to Lagos. It is time to either improve the continued use of pipelines that keep getting sabotaged or divert products to safer location by vessels. It is time to invest heavily in refineries, because the cost of the infrastructure has fallen and it is now more affordable. This is not a complicated business sense, we do it all the time. Investment manager always talk about investing at the low points of the market or what they refer to as "down-market" when the price crash has bottomed out, but most uninitiated invest at "up-market" when the price is looking at the peak and the market is nearing its climax. So this is the best time to begin to plan to make Nigeria energy self sufficient and maybe even become a sub-regional super power where sales of distillates are concerned. There is always a fair market for distillates. if we are willing to stretch, I also feel it is time to even consider dredging the Niger and the Benue rivers to improve the capacity to move products and other goods deeper inland. If we can finance it from our pocket fine, else it is time to borrow for these ends and borrow not a few. We need to set a 2 to 3 years investment target and find the money we need to make these happen. It will not only boost our economy, it will change our course permanently.
Secondly, I feel like God has provided us a window of time, a window for us to improve our refining capacity and our oil infrastructure. Yoruba people say whatever turns its face to one, turns its backside to another. I have this odd feeling that in another 4 to 5 years , price will rebound again or else the market will stabilize. It is the way of the market, it goes up and down. When the market rebounds again, in whatever form, we will be ready as a nation to benefit maximally.
Instead of sitting down and crying gloom and doom, we need to stand up and reckon that Providence might have dealt us a hand that may end up changing the course of our national destiny for the better. There is some good in this seeming bad. We the discerning have to find it out and latch on to it.
May I end with this, things are not always as bad as they first seem and this oil price crash, in my opinion, sure does have some silver lining behind the dark clouds.