Nigerians – The Econogeddon Is Near. A Season of Severe Oil Revenue Drop Is Near

The Obama administration announced a plan March 31 2010 that would permit oil drilling 50 miles off the coast of Virginia and encourage exploration for future drilling sites along the eastern seaboard and northern Alaska.  This shows a determined effort by the U.S to have energy independence from foreign OPEC countries. According to Bloomberg BusinessWeek, ‘[a]n expanded offshore drilling program should provide a boost to the U.S. oil industry and eventually lessen the country’s dependence on energy imports’.

 

This is a huge policy with major impacts for all the OPEC countries, especially African members. Arguably, this move is not going to alter the U.S energy supply in the very near future since it would require many years of investment before any result can occur. Nevertheless, with an estimated value of about 5.4 billion of oil and 37 trillion cubic feet of gas, this is a big deal.

 

For Africa’s OPEC members, time is running out for them to do the right thing and revamp their economic structures by diversifying them out of minerals and hydrocarbons. If the U.S weans itself of foreign oil after this decade with a combination of local supply, changes in energy usage habits, and advancements in alternative energy sources, Africa could be in for a great shock.

 

Nigeria gets more than ¾ of its foreign earnings from crude oil and most of the trade is with U.S. If U.S does not buy, that will immediately reduce the international price of oil. China is ramping up its solar technology and is on the course of modernizing its coal industry. Nanotechnology will start bearing real fruits, in terms of market impacts within a decade. All these and more will surely alter the energy market and any nation that does not plan away from selling hydrocarbons is going to suffer severe economic consequences.

 

What can the continent do now? It must begin a coordinated investment in Science, Technology, Engineering and Mathematics and a steady process of transitioning its economies from minerals to knowledge driven economic sectors. Now is the time to use the gains of the crude oil sales to provide the infrastructure that will sustain the future economy. That infrastructure will include technology clusters, world-class universities, good road networks and communication facilities. As Africa ramps us these investments, it will position itself to become a global knowledge player. It has an advantage when compared to all the other parts of the globe; its wages are still low and that is an opportunity to become a global outsourcing hub. It is all good news if the continent can plan, but it could be an economigeddon if no one acts with the ‘fierce urgency’ it demands.

 

Now is the time for African Union and African leaders to set a roadmap so that by ten years, at least half of the African countries will get more than 50% of their foreign earnings from areas directly unrelated to sale of minerals and hydrocarbons, especially in their present unprocessed forms. A knowledge economy will give Africa the expertise to differentiate their commodities and minerals and that will help attract higher value in the international market. We are giving away our gold, platinum and crude oil free because we do not have the means to process them.  That needs to stop and African Union must lead.

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