SEATTLE — The recent surge in the global oil supply has resulted in shrinking oil revenue for oil-producing nations. Nigeria in particular has been particularly hard hit by the drop in oil prices.
Nigeria has abundant oil reserves and is highly dependent on its market price, deriving more than 90 percent of its foreign exchange earnings from crude oil revenue.
Between September 2014 and July 2015, Nigeria’s shrinking oil revenue reflected a two-thirds drop in global oil prices. This has caused the Nigerian National Petroleum Corporation (NNPC) to announce that “dire consequences” await the nation.
All this doom and gloom has not deterred some Nigerian experts who see an opportunity for the nation to address its issues including the country’s over-dependence on oil sales and misappropriation of funds.
Despite shrinking oil revenue in Nigeria, the NNPC, which is the state-run oil company, has become very wealthy. Between January and August of 2015, reports from the NNPC indicated that the company made $3.4 billion, but only $608 million made it into the federal account.
The money in the federal account is used to pay for government expenses like education and salaries. According to a news article in PUNCH, government employees in 36 states have gone months without being paid for their work.
Many attribute their unpaid work to the dwindling allocations from the NNPC. This misappropriation of funds is reflected in Transparency International’s Corruption Perceptions Index of which Nigeria ranks 144th among 177 nations, according to Bloomberg Business.
Rather than continuing to rely so heavily on oil revenues, experts in Nigeria are calling for the government to step up investments in construction. They believe this will create jobs, update the deteriorating infrastructure and address the housing crisis.
“My view is that there should be more investment in construction; if you want to create more jobs, you do a lot of construction, which affects several aspects of the industry and others too,” said Rafiu Salawu, the president of the Nigerian Academy of Engineering.
Salawu argues that the construction sector has a multiplier effect that will positively affect other sectors of the economy. “When people work in construction for instance, they will need to eat and there will be women preparing food, and by extension, funding people in the agriculture sector, and a lot of people will be employed whether in housing, road construction or other infrastructural development; there will be a lot of people to employ,” he said in the PUNCH article.
According to a 2010 report by Global Construction Perspectives and Oxford Economics, growth in the Nigerian construction sector was greater than any other developing country. It has the potential to be a big industry that employs a large amount of people.
With its huge population rapidly urbanizing, Nigeria needs to improve its roads, ports, bridges and airports. Investment in construction will create jobs and update the nation’s infrastructure.
Also, a surge in construction will be able to address a housing crisis facing the nation’s poor. Acquiring affordable housing in Nigeria has been difficult for the majority of people. Due to the country’s large oil reserves, land in Nigeria is expensive.
High housing prices have led to a large amount of slums and homelessness. According to the World Bank, the African nation has a housing shortage of 17 million. If increased construction is in the future, Nigeria’s shrinking oil revenue may end up being good for the country.
Sources: Bloomberg, Punch Newspaper, Vanguard Nigeria