Since its discovery oil has been an incredibly important part of mankind’s development. The source of energy, the source of wars, the source of wealth. The discovery of oil in any nation immediately meant the discovery of great wealth and what some would call “easy money”. That easy money though, was a curse for some, the “oil curse” is when oil rich countries fail to develop despite their abundance of oil due to a plethora of reasons such as mismanagement, corruption and straight up theft of oil revenue or the oil itself. It’s termed the oil curse because it can be argued that the sudden influx of oil generated revenue, “easy money” destabilises its host economy, a case of too much too soon. 

In march before I started this blog, I wrote about this topic on a piece of paper, I found that paper today and read it, its out of date now, but I still wanted to share it. so here it is

A perfect example of the oil curse is Nigeria, despite over 50 years of selling oil, the country still lacks the know how to extract and refine the resource on its own. This means it is forced to leave these processes to the multinational companies, sell the extracted raw crude oil to other nations and then buy back the refined final product such as PMS, diesel and kerosene. The term “easy money” now even more fitting as virtually all stages of its production is outsourced to these multinationals.

The oil curse also means that in all the years Nigeria has been making “easy money” from oil proceeds, it has neglected to develop any other sectors that are capable of bringing in substantial revenue. It is worthy of note that before the discovery of oil and it’s mass extraction process began, Nigeria’s primary exports were mostly agricultural products. Renewable sources of wealth which were mostly abandoned for “easy money”. It is no secret that fossil fuels are limited, their regeneration rates infinitesimal in comparison to current depletion rates. Simply put, oil extraction may be good money, but is isn’t sustainable money, not when considering the life span of countries with future generations. Every country that relies on oil sales undoubtedly knows that one day it’s oil wells will run dry and those countries working governments know to plan for that eventuality by strengthening other viable parts of their economies so they aren’t left dead in the water when it happens and in a time where the entire world is beginning a transition to cleaner, sustainable sources of energy, the timeline for the extinction of oil sales revenue is accelerated. Countries like Nigeria also know to plan for this moment, they know to do this but they simply do not.

Oil is an amazing source of income but as we’ve seen in the past, it isn’t the most sustainable one. Oil prices are fickle at times, oil sales need high prices, OPEC fights for it, price wars between OPEC, OPEC+, America and other market players simply show that OPEC is no longer the power that it once was. For Nigeria, the consequences of relying solely on oil has been felt before, oil prices have often plunged below Nigeria’s set benchmark of functionality which is $28 per barrel. These were wake up calls, the country falls on hard times but its government simply turns off the danger alarm and goes back to sleep.

On television, after a reconstruction surgery, doctors may tell patients, “it’ll get worse before it gets better”. I believe that this line directly applies to Nigeria’s situation, no fall in fall in price and no depressions will be enough to force. It’s hand into another venture as long as oil remains. I have always been of the opinion that it is only when we finally, completely exhaust our wells and the last barrel is sold, will we finally be free of the oil curse.

At current extraction rates, Nigeria still has decades of oil left and no government would  be mad enough to simply stop oil sales and force its economy to adapt to something else. Without oil sales for a day, the economy would very likely collapse.

This line of thought, this extreme belief that it is only at the precipice of doom, of utter and complete system failure that we can learn to change our ways is damning, but still,  it is borne out of the complete recklessness and indiscriminate thieving of decades worth of governments. To learn how to stand, we shouldn’t need to lose the ability to sit.

Instead of having to pick between agriculture and oil, imagine how well off we would be if we could harness all or even just a few of the viable sectors available to use and profit off them simultaneously.

The precipice I speak of has long been an abstract thought in my head, one I thought I would never witness until recently as the coronavirus (COVID-19) continues to run riot, decimating economies. Once again, the price of oil is a casualty it’s demand falls, the USA’s WTI oil was trading at negative $54, meaning people were being paid to take oil off the hands of the hands of the extractors.

Oil is not a priority to any nation during this pandemic, people aren’t driving cars, factories are not operating, so demand is free falling. This is Economics 101, no demand, price falls.

The Nigerian government and other oil depended governments should be very afraid. Should the price of Nigerian oil fall too close to zero or even venture beneath it, then the economy will most likely collapse, but there might be a silver lining, the epidemic might just be the push the government needs.

The precipice will come at a cost, but should it usher in a new era of progress and prosperity, very few will care.