Nigeria may have one more opportunity to maximize her oil wealth, as some analysts are of the opinion that oil prices could spike from 2020 due to a supply shortage within the next decade. Oil prices are currently trading around $50 from a peak of over $100 a few years ago.
Oil use has not been knocked out yet
Even though adoption of electric cars is increasing, the purchase cost is still quite high compared to vehicles that run on petrol. Oil production costs are also falling, yet several major projects in the industry have been put on hold due to current low prices. This could lead to a shortage in supply in a few years. A boom in oil prices however will lead to even more research into cheaper renewable energy solutions, till they become cheaper than fossil fuel.
What Nigeria should do
The National Assembly needs to pass the 3 remaining components of the Petroleum Industry Bill (PIB). The Senate in May this year, passed the Petroleum Industry Governance Bill (PIGB). The other parts pending include Bills on ‘Upstream Petroleum License and Lease Administration’; ‘Downstream Oil and Gas Administration’; ‘Petroleum Fiscal’ and ‘Petroleum Revenue Management including Petroleum Host Community Fund (PHCF).”
There is also need to increase the size of the Sovereign Wealth Fund (SWF) which is one of the smallest among Organization of Petroleum Exporting Countries countries(OPEC) , and embrace fiscal prudence. Nigeria appears to have mismanaged proceeds from the last oil boom, with states and local governments having no savings when crude oil prices crashed. States were unable to meet salary and pension obligations, leading to a bailout by the Federal Government. The FG itself has had to ramp up borrowing to fill a N1 trillion budget deficit.
