Oil is the lifeblood of the modern world. Its importance in the global economic scene cannot be overemphasised. Without oil, industrialisation of the world would have not happened at the very fast pace that it did. Individuals and businesses, manufacturers of airplane, carmakers among others, flourish on the income they generate by oil-based equipment.
Most oil producing countries, particularly, the developing nations, such as Nigeria rely on crude oil as their major foreign exchange earner. In Nigeria, oil still accounts for about 90per cent of export earnings.
Between 1999 and 2016, Nigeria earned a whopping N77.348trillion from her oil and gas sector, according to data from the Central Bank of Nigeria, (CBN).
But despite this massive revenue, Nigeria is still contending with infrastructure deficit, epileptic power, low foreign exchange reserves and poor living standard. The country- largest oil producer in Africa, also imports refined petroleum from foreign companies to meet her daily needs, owing to insufficient refining capacity. Corrupt government officials ruined the country's four refineries by diverting funds earmarked for their upgrade.
Oil, which remains the mainstay of Nigeria's economy, has a boom and bust nature. During the boom, oil producing countries record large inflow of income as a result of high global prices, but the bust period often has devastating effects on such economies. Oil is a volatile commodity that has had many peaks and troughs. As a traded commodity, it has non-stationary prices; the best prediction of future prices is present prices.
For instance, oil prices reached an astonishing near all-time low in 1998 at just over $17 before reaching an all-time high of $140 in June 2008, only to fall once again below $40 by the end of the year. Also, oil price rose from $112 a barrel in 2014 but prices plummeted, eventually bottoming at about $28 in February 2016. The 2014-16 collapse in oil prices, one of the largest in modern history, had painful effects on economies of countries that rely on oil exports. Venezuela, Nigeria, Russia and Azerbaijan were among the oil producing countries hard hit. Azerbaijan's economy, like that of Nigeria is heavily dependent on oil export. Similarly, oil accounts for about 95 percent of Venezuela's revenues. The Venezuela's situation was so bad that the people were forced to line up to try and buy meat in carcass prompting its government to announce an 'economic emergency' to deal with the very severe economic crisis. The 2014-2016 oil prices collapse also took a huge toll on Nigeria's economy as the country eventually slipped into recession, after its economy contracted 2.06% between April and June 2016.
But following the worst economic meltdown, occasioned by the collapse of oil prices, the Nigerian government announced that it had commenced efforts to diversify the economy away from oil to forestall further economic crisis.
But as the world begins to shift away from fossil fuels to keep pace with the global transition to cleaner energy, Nigeria, from all indications, appears not committed to life after oil as no meaningful development has taking place in other sectors.
Vice President Yemi Osinbajo noted at a recent energy forum that despite government's repeated pledge of diversifying the economy away from oil, oil earnings still provided two-thirds of public revenue.
Osinbajo, who warned of the challenges Nigeria would face in the future if it continues to depend on oil for income, urged oil companies in Nigeria to invest in renewable energy research and development to enable Nigeria prepare for a clean energy economy and the post-oil world.
He said Nigeria must use its oil wealth to prepare for a future world without oil, pointing out that as a member of the Organisation of the Petroleum Exporting Countries (OPEC), the country needed to focus on developing renewable energy and helping other businesses grow in order to adjust to the new reality of the declining significance of fossil fuels.
"Oil-rich countries, such as ours, have an obligation to prepare for a destiny that may well be beyond oil," he said, further noting that countries who buy oil from Nigeria are now devising alternative means of power such as solar and wind energy.
Last year, five countries had announced an end date for the sale of gasoline and diesel cars. Norway has 2025 date, Germany and India (2030), and France and the U.K. (2040). Many others are preparing to follow, an indication that that electric vehicles are about to go global and follow mass market adoption curves.
Wind and solar are now cheaper than gas, oil and coal in many cases and according to experts, these rapid changes will leave the Nigerian oil and gas industry in crisis. In a recent report, Goldman Sachs revealed that by 2030, renewables will account for half of the world's energy mix. Even now, the cost of wind energy, and in many places solar energy, is lower than gas, coal and nuclear, the report said.
Goldman Sachs further stated that oil demand could peak by 2024 - a major departure from traditional analysis that shows oil demand rising to 2040 and beyond.
Already, some companies, such as Total, one of the major players in Nigeria's oil and gas industry, and Norway's Statoil, another player, have seen the writing on the wall and are aiming to become "energy companies", focused on all forms of energy, including solar and wind. Others will continue the failing business model of exploration, drilling and distribution, only to meet the same end as the coal industry, the report observed.
Unlike many resource -based countries, Norway, according to a report, has invested its petro dollars in such a way as to create and sustain other industries where it is also globally competitive.
The fact remains that as a fossil fuel, crude oil cannot be regenerated; that the world is rapidly running out of oil sooner or later is obvious. Our overly dependent attitude on oil will bring the country to its doom. And like Osinbajo noted, if we do not make adjustments in time by strengthening other alternative sources of income to compensate for the lack of oil in the near future, the effects will bring Nigeria's economy to its knees.