Why Nigeria’s economy may collapse soon, by ACN

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THE Action Congress of Nigeria (ACN) has raised an alarm that the nation’s economy may collapse unless the Federal Government cuts the “astronomical cost of running a bloated government and takes urgent measures to diversify the economy and shore up the production of oil which remains the mainstay of the economy.”

The party, in a statement issued in Lagos Sunday by its National Publicity Secretary, Alhaji Lai Mohammed, warned that if the listed measures are not taken, the government may not be able to pay its bills, including workers’ salaries, in the next few years.

‘’Contrary to what the Federal Government may say, this warning is not about crying wolf but is actually borne out of a patriotic fervour devoid of politicking, which is the usual refrain of this government when alerted to its shortcomings. We will like to be proven wrong, but this will depend on uncommon and monumental effort, rather than on the basis of the usual canned response from the government,’’ the party said.

ACN said the alert is based on four empirical evidence: The cost of oil production which has skyrocketed from $4 per barrel in 2002 to $35 currently; the massive corruption in the oil sector, with oil theft and sabotage leading to lost production and costing Nigeria some $6 billion yearly in crude theft; the sharp fall in the discovery of new oil and gas reserves due to the low investment in the sector, and the challenge posed by alternative sources of global supply of oil and

gas.

The party said, “the cost of oil production rose from only $4 per barrel in 2002 to $7 per barrel in 2005 and, from the $12 per barrel at the onset of the Yar’Adua/Jonathan Administration in 2012 to $35 per barrel in 2012, according to the just-concluded Nigeria Oil and Gas Conference in Abuja, where the mind-boggling cost hike was attributed to the cost of security in the Niger Delta (put at $16 per barrel).

‘’In other words, the gains recorded from ending militancy in the Niger Delta due to the Amnesty Programme have been wiped off by the cost of maintaining the ‘peace’.”

ACN quoted the Managing Director of Shell Nigeria, Mutiu Sunmonu, as describing the situation thus: “Operating in the Nigerian oil and gas environment can be long and tortuous with costs at the high end of the global scale. There are a multitude of security related issues that have to be dealt with on a daily basis.

‘’In the recent past, militancy has simply been replaced by industrial scale oil theft and sabotage (emphasis ours). We, and others, have had to shut-in significant production; spend huge amounts on replacing and repairing hardware and deploying massive resources to clean up spills.”

On the discovery of new oil and gas reserves, ACN said “the disastrously-low level of exploration activity in Nigeria is supported by the statistics released by the U.S. Department of Energy for Deepwater Discoveries from 2009 to 2011 in which Brazil alone contributed some 40 new discoveries or 20 per cent of the global total, U.S. and Australia contributed 10 per cent each, countries like Ghana making nine new discoveries or five per cent of the global total, while Nigeria had only four discoveries or two per cent of the global total during this period.”