Nigeria’s Projected 2.5mbpd Oil Output Cannot Grow Economy

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  • Nigeria’s Projected 2.5mbpd Oil Output Cannot Grow Economy

The Nigerian Association of Energy Economics (NAEE) has said Nigeria’s constant projection of 2.5 million barrels per day (mbpd) of crude oil production in her national budget will be inadequate to grow her economy, stressing that the country needs to produce at least 4 million bpd to boost the economy.

NAEE also said the country’s continued reliance on generating sets to provide the energy needed by her economy was abnormal.

It said the country appeared unserious with the kind of energy policy it wanted to pursue for her economic growth.

President of NAEE, Prof. Wumi Iledare stated at the association’s celebration of the 2016 World Energy Day in Abuja, that the 2.5mbpd oil production projection of the country showed that her economy is not competitive and growing at a rate commensurate with that of her competitors.

“My premise is that if you look at the population of Nigeria and what you need energy to do, and I gave an example of the population of the United States with 300 million people, they consume 16 to 8mbpd and translated that to us that if the Nigerian economy is actually growing the way it is supposed to grow, the 2.5mbpd will be used by our economy and there won’t be any to export,” said Iledare.

He also said: “So, I foresee a situation where if we are going to have any oil export at all, we should be targeting at least 4mbpd. If we are going to grow our GDP at 12 per cent per annum to be able to catch up with the world, we cannot use our oil for money, we should use our oil for power and 2.5mbpd cannot generate the electricity that we need to grow our economy. Oil is an input of production and that is what it should be. If this economy expands, 2.5mbpd will not sustain it.”

Iledare also spoke on the country’s electricity sector, saying that the economy’s reliance on generating sets as an energy source was unsustainable.

According to him, “4000MW of electricity for 170 million people cannot grow the economy and the only reason why we are still happy is because we are looking at energy from a residential point of view. 4000MW for an economy like ours is a child’s play and that is why we depend on generators.”

“It is inefficient to use generators to power an economy and that is why the cost per dollar of GDP in Nigeria is significantly high, meaning that our economy is using energy inefficiently,” he stated.

He said on claims by electricity operators in the country that they do not have a tariff that is cost reflective for investment in the sector: “All over the world, when you are in a monopoly market, you cannot allow the supplier of that monopoly product to fix the price. In the energy sector, the price cannot be uniformed because the cost of distributing energy to different sectors of the economy will be different.”

“When you find out the cost of what it will take you to deliver your energy, you go to the NERC and debate it to get the tariff that will fall within the expected investment costs. You cannot increase tariff without investment that is where the problem is, the Discos cannot ask for a higher price if they do not have the evidence that they actually invested money to improve services,” he added.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya; Email: [email protected]

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