Nigeria’s oil crisis: An opportunity for industry reform
Obaro Ibru discusses why the slump in oil prices represents a significant opportunity for Nigeria.
2016 has so far been a difficult year for Nigeria; with 96 per cent of its export revenue earnings and 75 per cent of government revenue in oil, the country is facing huge economic challenges. Meanwhile, the naira continues to reach record high exchange rates against the dollar and the government struggles to balance its budget.
Many fear that if oil prices continue to fall or remain stagnant, Nigeria risks losing its “MINT” status and will be unable to maintain its position as a potential powerhouse in the world economy. However, as a Nigerian national and entrepreneur with knowledge of global trade, I am inclined to disagree. I see this as a significant opportunity for industry reform – Nigeria finally has the chance to evolve from a mono-product economy with one sector accounting for over a third (35 per cent) of GDP to a multi-product one with diversification across a number of sectors.
Many companies are already using it as an opportunity to invest and innovate in other areas of their businesses. Aero Contractors is a great example of this. It is the oldest and largest aviation company in West Africa and one that my family and I have long been a major stakeholder in. It has used the slump in oil prices to introduce better value fares for its domestic airline business and introduce new initiatives into the local market to empower more people to fly more often. It has also played a key role in the oil and gas operation in Nigeria since its establishment over 50 years ago and is now the fastest growing Nigerian carrier passenger.
Going down to an individual level, I’ve personally been pleasantly surprised by the rise of repats that has occurred as a result of the crisis. A huge number of young, Western-educated Nigerians are returning from the UK and the US, and instead of joining what was traditionally a very safe sector (i.e. oil and gas), are determined to set up their own businesses and explore opportunities in other industries.
One sector, where this is particularly prominent, is agriculture. Before now, many young Nigerians saw agriculture as a venture without a future. However, with ongoing import restrictions on key products such as rice, and a stronger political will to encourage Nigerians to purchase local produce and support homegrown manufacturers, this impression is changing. Despite its agricultural potential, Nigeria imports over $5bn worth of food each year and less than half of the 84 million hectares of arable land in the country is cultivated for agricultural purposes. There is, therefore, a significant opportunity for Nigerians to take advantage of this and prove to the world that the country has more to offer than barrels and Brent crude.
Power infrastructure is another sector, where opportunities for innovation and investment lie. Nigeria is a country with over 170 million people and a higher proportion of the population belonging to the millennial generation – those born since the early 1980s – than any other country in the world. Its enormous population uses the same amount of power as 1/60th of the UK – an impressive statistic on its own, but when you consider that it has been growing at 7 per cent annually with virtually no power, it is even more so. If this issue could be resolved, the country could double the size of its economy within the next decade and its dependence on the oil and gas sector could become nothing but a distant memory.
Another opportunity exists in changing the narrative on the role of Nigeria and Africa in global affairs. As the current president of OPEC, Nigeria is in a prime position to lead the world in this time of crisis, breaking the stalemate between OPEC and non-OPEC countries. The government is clearly serious about addressing the issue – evidenced by the fact that earlier this year, Buhari, appointed himself as the new oil minister. Having previously been head of the Petroleum Trust Fund and the former oil minister under Olusegun Obasanjo, he has extensive knowledge of the oil sector and his new position in the sector will help him to further deliver on his promise of improved transparency and accountability in the sector.
• Obaro Ibru is Legacy Owner and Director,
Aerocontractors Company of Nigeria limited
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