What becomes of Nigeria when the auto world finally abandons oil?
As the world begins the countdown to the great switch from fossil fuel automobiles to electric-powered and hybrid vehicles, there are apprehensions, especially in the crude oil-driven economies, of the world, that a huge market is about to shut down or drastically reduce. Gboyega Alaka explores the grim situation and the options for Nigeria.
Additional reports: Franca Chigbo, Olugbenga Adenikin
IT’S the season of change and as is becoming clearer, nothing really can stop the impending global transition from petrol and diesel automobiles to electricity-powered and hybrid ones. Following clamours to go green and save the planet, top automobile manufacturing companies and their home countries are set to make the final shift away from combustible energy and all its negative implications for dear planet earth.
Just about a month ago, new French Minister for Environment, Nicolas Hulot announced that France will be outlawing the production and sale of petrol and diesel vehicles come 2040 – a mere 23 years away.
Come that year, he explained that the country will also be banning all “new projects to use petrol, gas or coal,” as well as shale oil.
The decision is part of new President Emmanuel Macron’s radical measures aimed at making good his pledge to “make the planet great again.”
The minister also expressed his country’s willingness to make the necessary investments towards making the shift a reality. In Hulot’s exact words, “The carbon neutral objective will force us to make the necessary investments.”
A couple of days earlier, Sweden’s Volvo had announced plans to build only electric hybrid vehicles starting 2019. This will make Volvo the first major auto maker to abandon cars and SUVs powered solely by internal combustion engine.
The Sun newspaper, UK actually captured it in a most ominous manner (from the perspective of oil producing countries) with the screamer, DEATH KNELL FOR DIESEL. It followed with a rider which read: ‘Volvo to STOP making petrol and diesel cars from 2019 in favour of electric or hybrid models.’
This decision, if followed through, will make Volvo the first mainstream automobile manufacturer to make the switch. The Swedish auto company may be making the quick move to consolidate its position amongst leading auto manufacturers in the world, seeing that the switch has become inevitable. Already toxic fuel vehicles have come under fire in countries like the United Kingdom in the past year, with the authorities even threatening extra tax levies on diesel. There have also been sectional agitations to remove and scrap the most polluting cars from UK roads, while ‘pay per mile’ charges and increased ‘congestion charges’ on diesel vehicles are being considered.
Volvo’s president, Haka Samuelsson said the company’s decision followed people’s increasing demand for electrified cars. To meet the new trend, the company is targeting one million electric vehicles, both hybrid and those powered solely by battery come 2025.
The high stake legislators across Europe are placing on diesel vehicles has also influenced Renault to take a decision to ditch small-engine diesel, while Volkswagen will in the immediate future, turn to petrol-hybrid for the next generation Polo.
Germany, which is home to 41 car and engine auto plants, and has made some of the world’s most preferred automobiles, also last year voted to ban all diesel and gasoline cars by 2030; while India, the Netherlands and Norway also have similar proposals in the works. Norway as a matter of fact, has voted 2025 as the deadline year to ban all fossil fuel-based cars, in its bid to have all its automobiles running on green energy.
The question therefore is, where does this development leave Nigeria, a nation almost fully reliant on sales of crude oil export for its revenue and economic sustenance?
Entertainment and media mogul and a member of Nigeria’s upper lesgislative chamber, Senator Ben Murray-Bruce, has for long warned against an impending doomsday. Senator Murray-Bruce, known for his commonsense video clips and twits had in one of his videos, warned that those who are against restructuring would soon realise that they are only wishing away an inevitable doom. He warned that the entire spectrum of leading Europe and America’s automobile manufacturing companies were on the brink of migrating fully to electric/solar powered/hybrid automobiles and wondered what will become of Nigeria’s crude oil product.
In a recent article addressed to the president and published in newspapers and online platforms, titled, “If oil can’t save Venezuela, it sure can’t save Nigeria,” Senator Ben-Bruce again reinforced his argument against the nation’s over reliance on oil. He underlined the impending danger, when he wrote, “When I proposed electric cars for Nigeria and started driving one, many laughed. Today, France, U.K. and Norway have banned petrol cars from between 2025-2040.”
He deplored the recent avoidable death of Nigerian engineers at the hands of Boko haram insurgents during an oil exploration mission to the North-East, wondering why the country should be losing viable men to the crude oil exploration, when the world is already moving away from the product.
Senator Ben-Bruce also predicted a situation where Nigeria and other African countries may soon become a dumping ground for petrol and diesel cars and trains that have no future.
“Already we are becoming a dumping ground. Motor Assembly plants that are now becoming obsolete in South Africa and Asia are being knocked down and transported to Nigeria to deceive us that cars are being assembled in Nigeria.”
Indeed, the ‘common-sense’ senator, who also heads the Senate Committee on Privatisation, has never pretended about his passion for moving Nigeria along with global technological trends and standards, even though some have derided him for being more of an oratorial revolutionary. In February this year, at the presentation of a brand new Made-in-Nigeria Hyundai i10 car to a Nigerian journalist, as part of Stallion Group/VON ‘buy made in Nigeria car’ campaign, he canvassed for a migration to assembling electric cars, pointing out that the world was moving forward.
He also warned that “If Nigeria does not restructure today and move away from dependence on oil, a very, very rude shock awaits us eight years from now.”
Citing the Venezuelan example, he wrote, “Look at Venezuela. The proven oil reserves in Venezuela are recognised as the largest in the world, totaling 297 billion barrels, yet Venezuela, with less than 20% of Nigeria’s population is facing economic ruin. If oil could save a country, it would have saved Venezuela!”
While appealing to the president to visualise and work towards a prosperous future for the country, Murray-Bruce cited the case of the United Arab Emirates, which seems to have seen into the future and has thus started a systematic diversification to aviation.
“Thirty per cent of the Gross Domestic Product of Dubai comes from aviation,” he pointed out, stressing that it did not happen by itself but by visionary and purposeful leadership.
Seba’s prophesy of doom
Bruce was unwittingly reinforcing a futuristic exercise made sometime in 2015 by Tony Seba, an American economist and professor at Stanford University, in which he wrote that “No more petrol or diesel cars, buses, or trucks will be sold anywhere in the world within eight years. The entire market for land transport will switch to electrification, leading to a collapse of oil prices and the demise of the petroleum industry as we have known it for a century.”
In the article titled, Rethinking Transportation 2020-2030, Seba predicted that people will be switching en masse to self-drive electric vehicles that are ten times cheaper to run than fossil-based cars, with a near-zero marginal cost of fuel and an expected one million miles road span.
He finished it off when he wrote that “The long-term price of crude will fall to US$25 a barrel. Most forms of shale and deep-water drilling will no longer be viable. Assets will be stranded. Scotland will forfeit any North Sea bonanza, Russia, Saudi-Arabia, Nigeria and Venezuela will be in trouble.”
A country tied down by crude oil
Nigeria, since the discovery and commencement of the exploration of oil in the late 1950s and early 1960s, systematically descended from its peak position as a global agriculture produce export super power, ‘voluntarily’ relinquishing its strength in cocoa, groundnut, palm oil, rubber and cotton; and solid minerals like coal, tin, columbite .
According to online economics journal, TradingEconomics.com, oil and natural gas account for more than 91% of Nigeria’s total export earnings. This implies that all other economics sectors’ contributions, including agriculture, solid minerals, manufacturing and entertainment, account for less than 10%. This also implies that Nigeria faces a clearly bleak future, much worse than the recession it is currently battling come 2040 and beyond, when France, the last of the major automobile manufacturing countries, would have fully transited.
The figures emanating from the Nigerian Bureau of Statistics however show a grimmer picture. The NBS figure shows that Nigeria in 2016 earned N6.997 trillion from crude oil export, an increase of 0.75 per cent. That amount formed 96.09 per cent of the current 2017 budget estimate of 7.281 trillion.
Incidentally, the nations championing this migration are also Nigeria’s major export partners. In 2014 when crude oil accounted for 91 per cent of Nigeria’s export earning, its lion’s share of export went to Europe, 46%; 29% went to Asia (with India and China as her leading partners), 13% went to America while 12% went to Africa.
The implication of course is that, should the world dump oil today, Nigeria as a country would be in disarray. What then is the way forward?
The other economic implication is that the country, which is also largely reliant on importation for its sustenance would find itself in a cul de sac, much worse that it is presently experiencing and much worse than what Venezuela is experiencing.
‘Only Agric can pull us out of the woods’
According to the Managing Director of the Bank of Agric, Mr Kabir Ibrahim, the issue of finding alternatives to the country’s over-reliance on oil is something the government ought to have addressed long before now. Pointing out the country’s present predicament, where the dwindling oil prices and revenue is forcing the country to seek alternatives, Ibrahim, whose organisation shoulders the mandate to provide credit support for all activities in the agricultural value chain and ensure growth in the sector, said “agriculture is the only sector that has tremendous opportunities from the farmers to the market.”
He said the whole gamut of value chain of activities in the sector is such that can “provide employment opportunities, revenue to government in terms of taxes, revenues in terms of exports and foster economic development.” He noted that grants to farmers also have a way of trickling down as far as the farm input suppliers of items such as fertilizers, pesticides, pumps, with its ripple effects.
This, he said, is excluding the yet untapped revenues wasting away due to poor investments in preserving and processing raw agriculture commodities. By the time this is taken care of, he said “you’d have provided more employment and opportunities for those who want to add extra value to our agriculture.”
Ibrahim also spoke about the huge potentials a robust venture into agric has for the transport sector. With particular reference to Benue State, popularly referred to as the ‘Food Basket of the Nation’, he cited how countless number of vehicles fully loaded with food stuffs drive out of the popular Zaki Biam roundabout on an hourly basis and declared that, “The value chains in agriculture are endless and the opportunities are there. Once we are able to focus on them, rightly invest in the value-chains, believe me sincerely, we are out of the woods because most of the advanced countries largely rely on agriculture than oil. That is if they have oil.”
Asked what could be done to get the country back to its enviable position of leading agriculture produce export country, Ibrahim said the country is in the agric era and guaranteed that Nigerians’ penchant to jump on the train of any thriving business will soon see them moving en mass into the agric sector. He however noted that the whole issue revolves around money and access to finance.
“You know, what is killing the sector is the interest rate. If we get funding below 5 per cent, then we can continuously lend at below 9 per cent, making a spread between 5 and 7 per cent on any deal. Once finance is there, access to finance is easy and all the inputs required are there and we monitored and ensure that the funds are invested in agriculture, we will regain our former place and even exceed expectations. “
One good thing going for the sector, he admitted, is the fact that most of the countries in need of the agricultural products are always pledging research funds, which would go a long way in boosting activities in the sector.
Ibrahim also said the revolution currently being witnessed in rice farming in the country is a sample of what the country will soon witness with other crops.