Nigeria - 60 Years of Independence, but Not From Oil

(file photo).
30 September 2020
analysis

As Nigeria prepares to celebrate 60 years of independence on October 1, many say there isn't much cause for cheer. Fuel prices are at a record high and the nation is struggling to wean itself off oil.

The cost of fuel in oil-rich Nigeria has risen for three straight months following the government's ending of fuel subsidies because of a budget crunch.

The price of fuel spiked sharply to a record high in September, rising by around 15%. That's a steep hike in Nigeria, a deeply unequal society where around 40% of its 202 million population live below the poverty line.

And it's not just the fuel prices that have risen. The cost of electricity has doubled -- from 22 Naira (€0.05, $0.06) to over 60 Naira per kilowatt-hour. Staples such as rice, beans and flour have also skyrocketed since the government closed the country's borders last year to combat smuggling.

Many count on cheap subsidized fuel as one of the few benefits they receive from the government.

Earlier this year, the government scrapped fuel subsidies, saying it couldn't afford to keep paying around $2.6 billion to bankroll fuel costs amid the global downturn of the coronavirus pandemic.

Crude oil has provided around two-thirds of its government revenue for more than a decade, according to Bloomberg. This year, collapsing oil prices have robbed Nigeria of a major chunk of its budget.

Nigeria can't use own oil resources

Despite being Africa's biggest producer of crude oil, Nigeria is incapable of producing the petroleum products that people need in their everyday lives.

The West African country has five refineries, where oil is turned into products such as diesel, gasoline and heating oils. Four of these are operated by a state-owned firm.

For decades, these aging state-owned refineries have been unprofitable and poorly maintained -- so much so that they were shut down earlier this year while the government looks to secure funding to revamp them. The fifth is a so-called mini refinery with a minimal output.

The failure to refine its own fuel makes Nigeria reliant on costly fuel imports. In 2019, even before the refinery closures, the nation still had to import 95% of its petroleum needs.

"I think the fundamental thing is a lack of political will on the part of the political leadership to ensure that these refineries work," Nigerian oil expert, Ahmad Umar told DW. "If they bring the required political will, and they really want these refineries to work, they will work."

Nigeria fails to diversify

Apart from Nigeria's inability to make effective use of its own oil resources, economists have long been criticizing the nation's dependency on crude.

Sixteen years ago, then Nigerian President Olusegun Obasanjo said the government would diversify the economy away from oil and solid minerals to increase economic stability and create jobs.

The government of President Muhammadu Buhari has made similar promises, but to limited success, said Nigeria business journalist Ignatius Chukwu.

"Immediately when they took over [in 2015], the first thing that happened was that we went into recession," Chukwu said. "So they battled the recession for two years. Just as they were about to begin to gain positive growth, ... the next thing is the global meltdown caused by the coronavirus with oil as the major victim."

There are a few exceptions. One is the telecommunication sector which grew by 18 percent in the second quarter of 2020, according to Nigerian's statistics office.

Another is the construction industry, which "continues to perform positively, supported by ongoing megaprojects, higher public investment in the first half of the year, and import restrictions," the World Bank reported earlier this month.

What can replace Nigeria's oil sector?

Critics say that as long as the nation's political and economic elites continue to benefit from oil exports, little will change.

Political scientist Tukur Abdulkadir is one of these critics. He lists several failed attempts to diversity over the past decades, from the Ajaokuta steel complex built in 1976 after the discovery of iron ore, to the current government's cotton and textile policy, launched in 2015.

"The textile industry is virtually dead," Abdulkadir told DW. "The Ajaokuta steel complex, the biggest steel complex in Africa, is almost dead now. We had so many. But all of these companies today are not functioning. They have been bankrupted. They have been virtually destroyed."

What is holding Nigeria back?

Large-scale corruption is seen as a major problem.

"Corruption pervades the whole of society, is systematically practiced by the ruling elite and comes in many guises, including: embezzlement of state funds, clientelism, nepotism, fraud, bribery and, as a result, large-scale money laundering at home and abroad," finds a 2019 report by the Konrad Adenauer Stiftung, a German political foundation.

"Corruption permeates every level of society, from high-level politicians and civil servants to the security forces, business people and the country's poorest citizens."

Insecurity is another issue. Nigeria's northern region has experienced terrorist violence and Islamist attacks for more than a decade.

More than two million people are internally displaced as a result.

In central Nigeria, the expansion of farmlands into the grazing lands of nomadic herders has repeatedly led to violent clashes between nomads and farmers.

"What the president needs to do, and the political leaders need to do, is to overhaul our security architecture and address this existential problem," said Abdulkadir, adding that the government needs to act now.

"There is a high degree of disillusionment and dissatisfaction in the country. If this disillusionment continues to accumulate, I fear that one day things could get out of control. And then, even oil will not be able to save Nigeria."

Muhammad Bello in Nigeria contributed to this article.

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