Oil prices have tanked. Nigeria has so many unsold stocks of oil. The Brent Crude sells for $26 per barrel. The average cost per barrel in Nigeria is about $26 and no one is buying.
The fact is that the oil business, for now, is done!
But Nigeria is still producing…while no one is buying and the price is horrendous! We are helping to create more glut and further depress the market. So the international market does not exist for now and it’s best we stopped the production of crude oil for now.
Bit we would starve… what to do?
So let’s look inwards a bit…
Recall that we argued in the “Unplanned Economy” and the “Common Sense” series that:
- Nigeria exports circa 2m barrels we day
- The internal consumption in Nigeria is about 1.2m barrels per day
- Nigeria has capacity to produce 425k barrels per day
- Our Refineries produce only about 80k barrels per day at best
- The refineries produce zero barrels per day now.
It’s in the best interest of the Nigerian State to remove refining from the Exclusive List NOW! The powers to issue licenses should be ceded to the states. And each state should be made to pay for a certain volume of crude oil based on their refining capacities!
The states should license Refineries and Petrochemicals and there shall be no regulating prices. The oil would be bought from the federal government by the states and piped to the state-licensed refineries. The total refining capacity would now be so made so at to be a minimum of 1.2 million barrels per day, allocated to all the states. The products should be sold at commercial rates in and beyond Nigeria. With these, the oil fields would not stop production and the federal government would still have about the same NET revenue in REAL terms. In one fell swoop, several problems are solved.
So if the international market should recover, we would be selling just 800k barrels per day and still earn FOREX. Or increase the internal refining capacity and export finished products. Nigeria would come out of the global meltdown stronger, better, smarter!
To survive this obvious meltdown, we must think outside the box. The solution is not in borrowing and digging the grave deeper but to change strategies and think nimbly! The current model would help sink and bury this economy! We cannot produce our oil out of this problem; further production of the primary product meant for the international market with this pricing is pure madness! We could only survive if we could produce, refine and export! This expands the economy and saves us the worst of the disaster!
But the Exclusive List in the 1999 constitution must be tampered with for this to happen! See? Back to the Constitution without even trying; yes, the Coronavirus pandemic and the global Economic meltdown has proved to us that to survive, we must change that constitution! The challenge now is if we have the guts to take the odds and do the right thing!
We are facing a calamity, and we have solutions for them. Are we ready to take the bull by the horns?