Nigeria’s Resource Dilemma: Red Oil or Black Oil?
Just like most other countries on the continent, Nigeria since independence from colonial powers has remained a resource-based economy facing political and economic woes towards industrialisation which has been noted since the 19th century to be the elixir for development. To worsen matters, Nigeria’s overdependence is on a singular resource: crude oil. Nigeria struck it rich in the 1970s after a bloody civil war to reassert sovereignty over an oil-rich area, the Niger Delta.
The Niger Delta’s oil wealth comes from two sources: the red fruits of oil palms native to the nutrient-rich tropical rainforest region and the black crude oil deep below the earth. Without debate, successive Nigerian governments hand in hand with international oil corporations like Shell and Chevron came drilling for the more valuable black oil of the Niger Delta, darkening any potential future for the existing young palm oil industry. The instant the drill hit the ground running, Nigeria became wealthy off the stuff that fuelled the industrialisation of the 20th century.
Nevertheless, as history would note, this wealth from crude oil came at incomparable costs: Nigeria got flung into the resource trap. The economy of Nigeria grew over-reliant on crude oil as the major source of revenue, a reality that exposed the economy to the volatility of international crude oil prices. This overreliance on crude oil also meant the neglect of other vital industries like agriculture which formerly employed the greatest number of the population before the era of crude oil in Nigeria.
Further compounding the issues, the wealth that was realised from the sale of crude oil in Nigeria was mismanaged by government officials who enriched themselves at the cost of the public good. The worst hit by this disastrous combination of factors were the local residents of the Niger Delta who battled not only the economic challenges that snowballed from the mismanagement of the Nigerian government but also ecological challenges that flowed from the inadvertent production of crude oil by international oil corporations like Shell.
With the Nigerian government fixated on the proceeds from the sale of crude oil, international oil companies were given a long leash to explore and drill crude oil with minimal regulations. Equally motivated by profit, international oil companies milked the opportunity with two hands. With environmental standards well below known international standards at the time, these oil companies produced crude oil that on occasions spilt into the waterways and swampy creeks of the Niger Delta. Even the natural gas that accompanied crude oil was being flared with soot and smoke polluting the air of the Niger Delta of Nigeria.
While all of this went on in Nigeria, Indonesia, a formerly colonised country that started off on a similar footing as Nigeria went down a different route. Not faced with Nigeria’s resource dilemma of choosing between palm oil and crude oil production, Indonesia pursued the production and exportation of palm oil as a state policy. With a similar tropical rainforest climate to Nigeria’s Niger Delta, Indonesia was well suited for the cultivation of oil palms that produced palm oil.
Sourced from one of the most efficient oil-producing plants on earth, the value of palm oil is further inflated by its multiple uses. Palm oil and its derivatives are heavily used in the food industry — about half of all packaged products sold in supermarkets contain it. In the cosmetic industry, it is widely applied as a foaming agent; in the medical industry it is sought after for its antimicrobial effects, also, in the energy industry palm biomass can be used as biofuels. Sighting these tremendous benefits, Indonesia invested heavily into the production of palm oil, an investment that yielded its status as the world’s largest producer and exporter of palm oil.
This position occupied by Indonesia guarantees employment for 3 million people and contributes about 4.5% to the national GDP. For this reason, the recent blanket ban on palm oil export by Indonesia, the world’s largest producer and exporter of the commodity is expected to trigger a shock in the international palm oil market driving prices high. With the wide usage of palm oil and its derivatives, this shock can easily roll over to other international markets of products that use palm oil and its derivatives in production.
Given these circumstances, the international market is open to any new supplier that can easily profit from meeting international demand for palm oil, an act that would diversify trade in palm oil and eventually normalise international prices of the commodity. With the stage set once more for Nigeria, the country is faced with yet another test to choose between the red palm oil and the black crude oil of its Niger Delta. For the sake of posterity, this writer hopes Nigeria does not repeat its cruel past and follows through with its bold talks of diversifying the economy away from crude oil to other more viable industries like agriculture.
