The contribution of crude oil to the Nigerian economy will shrink fast, a former Minister of State for Petroleum Resources, Dr Ibe Kachikwu, has said.
Oil represents only about 10 per cent of Nigeria’s Gross Domestic Product but accounts for about 50 per cent of government revenues and over 90 per cent of export earnings.
“The future of oil may be coming to an end faster than the twenty-year historical predictions. This does not mean that oil will not continue to be relevant,” Kachikwu said on Monday in a piece titled, ‘The future of Africa without oil’.
He said for countries like Nigeria and Angola, with over 40 to 50 years’ identified reserves, oil would always be a contributor to the GDP, and a key provider of financing for development.
He said, “But its contribution to those two key economic indices will continue to shrink…and fast too. So, common sense compels that serious focus on retooling the dependency basis of our African economy must begin.”
Kachikwu noted that this month, the International Energy Agency released its 2020 investment forecast, which showed that oil investments were on the decline.
He said prior to COVID-19, a modest two to four per cent increase in new investment was forecasted for the oil sector – both crude and refined.
The ex-minister said, “But with COVID-19, the lockdowns, the economic meltdowns, the crumbling of the travel and hospitality industry, and the crash of oil prices to all-time lows, the investment forecast turned out much worse.
“It is projected that new investment in the oil sector will be down by a frightening 20 per cent. This means that a lot of projected oil field developments, exploration and production, and even investments in refining will suffer.”
He noted that as of June 5, the international oil benchmark, Brent crude, had improved from less than $20 per barrel to $42 per barrel, giving hope of a recovery.