To understand the implications of the world’s changing energy demands, and the eventual change in geopolitics for Nigeria, we need to understand how our relationships with key economic partners like US, China, Europe and India will change.
As the US has most of the other commodities Nigeria produces and Nigerians cannot afford most American produced goods, there won’t be much basis for significant economic ties between the United States of America and Nigeria. American multinational oil and gas companies will continue to operate in Nigeria, but their presence here will not be considered as strategic as it was in the past.
According to SBMIntel, result will be that counterterrorism, international development and geopolitical competition with China will subsequently drive US – Nigeria relations.
However, the Trump Administration’s interest in counterterrorism is waning, as the focus of Western populists is no longer terrorism, but migration, and migration from Africa is largely seen as Europe’s problem, not America’s.
International development is definitely not the focus of the Trump Administration, but competition with China is. It is difficult to determine how far the US is prepared to go in its competition with China, in what arenas it plans to compete, or how much it is willing to invest.
Given President Trump’s strident “America First” rhetoric, and distaste for foreign aid programmes, it is unlikely that the US will see Nigeria as an important destination for the few dollars this administration deigns to dole out.
European engagement with Nigeria is likelier to be more focused on a single issue; migration, than economics. Recent visits from top European diplomats and heads of state to the African continent have focused on the goal of discouraging migrants. As the US makes the transition from net crude oil importer to exporter, Europe is working hard to adopt alternative energy vehicles. Europe is also in a state of flux, with enough problems like Brexit, the rise of right wing nationalism, and a potential Eurozone crisis induced by a stagnant economy, to keep it occupied for at least a decade.
India and China are now two of Nigeria’s most important and dynamic trading partners. India for exports and China for imports, and there is sufficient room for growth in these relationships.
In a competitive energy market, Nigeria cannot merely afford to sell its petroleum, and leave it at that. Other players like the Saudis are working hard to lock themselves in the Indian market, and while the visit of Saudi Arabia’s crown prince, Muhammad bin Salman to India in February this year was of critical importance, Nigeria did not seem to notice, and appears to lack a strategy to take advantage of vulnerabilities in the Gulf to sell itself to an Asia that is heavily dependent on Gulf petroleum supplies.
Climate change concerns are also poised to severely disrupt the petroleum-based economies of the world as activists push for more focus on renewable energy sources. The Green Party in Germany recently secured major electoral victories based on its campaign as the party of responsible climate stewardship. Climate change is an issue that dominates amongst millennials, and these are the people rising in economic prominence. European and American automakers are now investing heavily in the development of mass-produced electric cars. China, driven by air pollution concerns, is also making large investments in renewable energy.
Nigeria’s elite has grown rich on trade in a single commodity, but despite oft-stated rhetoric on diversification, the federal government of Nigeria remains hopelessly addicted to crude oil revenues, and rather than innovate or truly revolutionise its economic base, the political elite only seems capable of focusing on areas in which some small amounts are already demonstrably available and then increasing taxes in those areas.
It would be safe to say, therefore, that Nigeria’s political elite is quite incapable of adjusting to a major disruption in the market for crude oil such as a sudden breakthrough in renewable energy production. What this means is that Nigeria has a fiscal crisis and an internal political architecture that is not optimised to generate enough revenue to make up for the shortfall in exports of that sole commodity.
Indeed, the collapse in crude oil prices spurred by shale oil drove the country into a sudden recession and led to a massive spike in borrowing. The debt profile of Nigeria has doubled in the past four years and there is no apparent end in sight.
Meanwhile, there are no major infrastructure or economic investments to show for all the borrowed sums, meaning the debts will be that much harder to repay.
We saw earlier that the switch in emphasis from human- to machine-based means of production disrupted economies based on the supply of the humans, and unable to innovate around the problem, those empires eventually fell.
However, while the slave trade lasted for hundreds of years, the petroleum economy has only truly been around for the last 60 or so. Crude oil has always been a finite resource, and even absent the environmental and climate concerns driving the current push away from petroleum, all oil-producing countries would have eventually run out of oil and been forced to find new ways to survive. Some nations will survive the post-oil economy in much better shape than others, and as things currently stand, Nigeria cannot count itself in the former category.