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OPEC and Nigeria
By Lateef Oladeji of Gem Business Ventures
I have often wondered why Nigeria has remained in the Organization for Petroleum Exporting Countries (OPEC) even when leaving the body could have done a lot more of good for the country. Despite whatever apparent gains Nigeria might have reaped from OPEC membership, there are strong reasons for suggesting her pulling out, including: 1.Nigeria has a much higher population than Saudi Arabia, but because the latter has a bigger reserve level of crude oil deposits, she is granted a production quota in several multiples of Nigeria's. Thus, while Saudi Arabia generates a lot of petrodollars to develop her own country, Nigeria has to make do with her lower quota and much smaller export earnings to meet her development yearnings. Equity, in the real sense of it, is called to question here. 2.Oil is the main export commodity of Nigeria. The deliberate massive devaluation that the naira has undergone since 1986 following IMF's several conditionalities has not yielded any tangible benefits but has brought sorrows instead, as Nigeria cannot take advantage of the devalued currency to increase her oil export production and earnings. Moreover, the unfavourable terms of trade she faces in the international market has continued to dampen the urge to resuscitate her traditional agricultural exports. 3.There is intensive search for alternative energy sources going on in the advanced world for cost and environmental reasons. If Nigeria does not take advantage of oil now by producing and exporting more, of what value would it be in future when demand for it will have drastically reduced or even totally stopped? 4.OPEC is a cartel. Any cartel situation leads to inefficient production and consumption conditions. OPEC, therefore, is a stumbling block to smooth flow of international trade and world economic development. 5.None of the OPEC member countries could be regarded as having truly crossed the line of underdevelopment despite all the petroldollars they have amassed over the decades. Furthermore, a few of them have only succeeded in creating or complicating the poverty and crime situations in them What, then, is the essense of an organization that has not been able to positively impact on the lives of the citizens of her member countries? It appears that Nigeria's remaining in OPEC has more to do with politics than economics. There is an urgent need to re-evaluate her position. |
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Thank you for this eye-opening intel. You make a convincing case, and I enjoyed reading it. However, I would like to point out that none of Nigeria's oil wealth is reaching the population anyway, and the population has the same living standards as an impoverished third-world country without any oil reserves at all. Consequently pumping out a larger amount is unlikely to change the welfare of the population, and it might be a good thing that the black gold stays in the ground until the proceeds are less likely to be wasted, or stolen, or both. As you point out, petrodollars by themselves are unable to drag a country into the third world.
 | | nick Jul 22, 2008 14:07 | |
CONTRIBUTOR'S REPLY
Hello, Nick. Thank you for reading and commenting on my intel. Your comments are very rich and fair. I agree with you that if Nigeria was given a higher quota and sold more oil, the money would equally be squandered and embezzled, with ittle or nothing left to improve the lives of the people as has ever been the case. I was only hoping that a more responsible and responsive leadership would emerge some time soon by divine intervention. However, I did not point out that "petrodollars by themselves are unable to drag a country into the third world". Rather, I wrote that "None of the OPEC member countries could be regarded as having truly crossed the line of underdevelopment despite all the petrodollars they have amassed over the decades". I'm sure you meant to reflect the same thing in your comment. Once more, your comments are well appreciated.
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This intel was contributed by gembiz
gembiz
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May, 2012
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