Goodluck Nigeria – a failed State

  • Nigeria is in the news. Over 200 schoolgirls have been kidnapped and put up for sale [1] and the country is hosting the World Economic Forum. Surprisingly, news channels in the UK have been portraying Nigeria as a wealthy nation, one of the wealthiest in Africa.
  • The energy and economic statistics I have been following paint a very different picture perhaps best illustrated by electricity supply (Figure 1). Per capita electricity is only a small fraction of N African states and has not grown in 30 years. This is an emblem of failure.
  • With oil production of 2.5 million bpd, significant oil and gas exports have produced a cumulative trade surplus of $298 billion since 1970. Nigeria should be a wealthy, developing nation, but it’s not. Hubbert Linearisation suggests that 61% of Nigeria’s oil may already have been produced.
  • Average per capita GDP has grown in recent years on the back of rising oil price but stands at a little over $1000 per annum. Per capita energy consumption (excluding wood) is 0.12 tonnes oil equivalent per annum, a tiny fraction of N African neighbours.
  • There is nothing in the statistics to suggest any form of progress or development in the last 30 years. Nigeria is a story of lost opportunity and a failed state.

Figure 1 Electricity generation and consumption is a symbol of development. In Nigeria, small growth in generating capacity has been swallowed by population growth. Energy rich Nigeria’s electricity generation is but a tiny fraction of N African neighbours. World Bank estimates are that 50% of Nigerians live off grid.

Figure 2 Nigeria’s troubles begin with an exponentially rising population that has almost trebled since 1970. GDP was static until the 2000s when rising energy prices combined with the start of gas exports in the late 1990s has helped significant growth. But per capita GDP still stands at just a little over $1000 ($US 2005) per annum (Figure 9).

Figure 3 The population structure is typical of a high population growth country with huge numbers of children and young people. Low life expectancy (52 years) means few old people aged 60 and over.

BP [2] do not report full production and consumption statistics for Nigeria, thus I am using the EIA statistics that begin in 1980 [3]. Economic and population statistics are from the United Nations [4]. Data sources are referenced on all charts.

Figure 4 Nigeria is rich in oil and gas with daily oil production running at around 2.5 million barrels per day. This production is similar to Gulf States Kuwait and the UAE and Nigeria is a member of OPEC. Oil exploration and production in Nigeria is conducted by the international oil companies (IOCs) like ExxonMobil and Shell who pay royalties to the government for oil and gas produced. Oil production has been static for a decade in part due to disruption caused by armed militias but it could also be that Nigeria is on a production plateau / peak. Coal production is negligible. The EIA do not report hydro production separately but have a category called renewable electricity and I assume in Nigeria this means hydro. Renewable electricity production is negligible which is symptomatic of the lack of development in this failed state.

Figure 5 Note the different vertical scale on this plot compared with Figure 4. Nigeria consumes about 20 million TOE per annum, about 400,000 bpd which is a tiny amount for a nation of 169 million souls. This equates to about 0.12 TOE per capita per annum compared with about 1.2 TOE per capita in Algeria. Energy consumption has fallen in the last decade which I presume may be down to higher energy prices. Nigeria’s population is 75% rural [5] and I think it is safe to assume that energy consumption is non-uniform and that city dwellers and oil workers in the Niger Delta consume vastly more than the rural dwellers, many of whom likely consume no oil, gas or electricity at all.

Figure 6 In fact the data shown in Figure 5 is rather deceptive since bio-mass is the dominant energy source in Nigeria. The EIA [6] says this:

EIA estimates that in 2011 total primary energy consumption was about 4.3 quadrillion British thermal unit (Btu). Of this, traditional biomass and waste (typically consisting of wood, charcoal, manure, and crop residues) accounted for 83%. This high share represents the use of biomass to meet off-grid heating and cooking needs, mainly in rural areas. World Bank data for 2010 indicate that electrification rates for Nigeria were 50% for the country as a whole – leaving approximately 80 million people in Nigeria without access to electricity.

Figure 7 Nigeria exports most of the oil and gas produced. Gas exports began in 1999 with the construction of Nigeria’s first LNG train. 2012 exports represent 2.7 million barrels per day making Nigeria one of the world’s largest oil and gas exporting nations.

Figure 8 Exports of oil and gas (and forestry products) has led to Nigeria running a structural trade surplus – an enviable position. Bilateral trade has grown significantly in the last decade with ballooning energy prices. I’m not sure what Nigeria has been importing, I suspect oil field services, armaments and luxury goods for the elite. With 50% of the population living off grid demand for TVs, computers and phones will not be high on the shopping list of many Nigerians. The cumulative surplus since 1970 is $298 billion.

Figure 9 Per capita GDP and energy consumption were static for many years but then in the last decade GDP has shot up while energy consumption has declined. This must surely be the opposite sides of the same coin – high energy prices. If the Nigerian population as a whole are becoming poorer, which I believe these figures show, we can likely expect a lot more civil unrest in future.

Figure 10 The general thesis being explored in this series of posts is that rising energy consumption is required to grow GDP, see for example this chart for Portugal. The chart above is rather misleading suggesting that Nigeria has reached utopia, with rising GDP and falling energy consumption and a respectable $9000 produced for each TOE of oil and gas consumed. See figure 11 for the true picture.

Figure 11 Adding Nigeria to the big picture we see that the country lies close to the origin with barely discernible energy consumption and GNI (gross national income) per capita. It is the poorest of the poor and shows no sign of development. Note that the data on this chart are time series, rising from bottom left to top right, tracking economic growth and attendant rise in energy consumption.

Figure 12 Per capita electricity generation has barely risen in over 30 years. Electricity defines development and industrialisation and this has to symbolise the total failure of Nigeria. Oil wealth could have been spent on hydroelectric dams, gas fired power stations and grid development that could have brought employment and civilisation to rural areas.

Concluding thoughts

Wikipedia says this [7]:

Nigeria has been identified as a regional power in Africa. Its economy (GDP) in 2014 became the largest in Africa; worth more than $500 billion, and overtaking South Africa while becoming the world’s 26th largest economy. Furthermore the debt-to-GDP ratio is only 11 percent, 8 percent below from 2012 ratio, and is expected to become one of the world’s top 20 economies by 2050. The country’s oil reserves have played a major role in its growing wealth and influence. Nigeria is considered to be an Emerging market by the World Bank. It is also a member of the MINT group of countries, which are widely seen as the globe’s next “BRIC-like” economies. It is also listed among the “Next Eleven” economies to become among the biggest in the world. Nigeria is a member of the Commonwealth of Nations, the African Union, OPEC, and the United Nations among other International organizations.

According to the UN, Nigeria’s GDP in 2012 in current $US was 263 billion, South Africa was $384 billion and Egypt $255 billion. World Bank figures are more or less the same. Nigeria’s “wealth”, founded on oil, is spread among a vast rural population living off grid and in poverty. I wonder if the BBC and C4 newscasters read this Wikipedia entry which I believe provides a totally misleading picture.

Nigeria’s future is currently dependent upon oil and there is little sign of a diversified and vibrant economy emerging to take oil’s palce. What will happen when Nigeria’s oil runs out and when is this likely to happen? Making such forecasts is notoriously difficult to do but Hubbert Linearisation provides an imperfect tool to make such an estimate. Nigeria has produced 31.7 billion barrels of oil to date and the HL (Figure 13) points to an ultimate recovery of around 52 billion barrels suggesting that Nigeria’s oil is already 61% gone and that production may indeed begin to decline in the near rather than the distant future. The penniless peasants living in the country should not notice, but the ‘haves’ should perhaps prepare for a time of less that lies ahead.

Figure 13 Hubbert linearisation [8] provides an imperfect means of estimating ultimate recovery from production data. When annual production / cumulative production hits zero production has come to an end. The decline curve projected onto the x-axis suggests ultimate cumulative of about 52 billion barrels for Nigeria. With 31.7 billion barrels produced that leaves 20.3 billion barrels in remaining reserves, somewhat lower than the official figure.

[1] CNN: Abducted Nigerian schoolgirls likely split up, taken across border
[2] BP: Statistical Review of World Energy 2013
[3] International Energy Statistics
[4] UN: National Accounts Main Aggregates Database
[5] Princeton: Demographics of Nigeria
[6] EIA Nigeria overview
[7] Wikipedia Nigeria
[8] Wikipedia Hubbert Linearisation

Other countries in this series of posts

Egypt – energy, population and economy
Russian Power
Post-peak Algeria?
Libya – energy, population and economy
Turkey – on its way to a mature economy
Ukrainian Death Spiral
Does the UK Economy Run on Energy or Hot Air?
Portugal – renewables to the rescue?
Belarus grows while Ukraine withers

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14 Responses to Goodluck Nigeria – a failed State

  1. Hi Euan,

    Corruption hurts. First time I have seen a Hubbert linearization for Nigeria. Oil is not forever.


    • Euan Mearns says:

      We have a lot of corruption in Europe as you do in the USA and so I think that is only part of the story – its an easy excuse for a country to use. Or to blame the IOCs or 19th Century slave trade. Nigeria does not appear to me to have or to ever have had a plan. The N African countries seem to be doing MUCH better and part of my aim for this series is to try and get a handle on what works and what doesn’t work in terms of economic development. I suspect the construction of electricity grids is part of the story and roads / railways another.

      Of course it is also good to have these vast areas of rainforest in Africa. I don’t know how you set a strategy for an appropriate level of development alongside conservation.

      I remember once flying over N India. Every village had electricity.

  2. Paul brosche says:

    To Dave and Euan, Nigeria is handld i Newsletter 92, by our Irish frend. URR is there 55gb. And with deepwater also. Palle

    • Euan Mearns says:

      55Gb sounds about right including deep water. A lot of Nigeria’s oil is off shore and so I think we can expect that to go the same way as the North Sea at some point.

  3. Bobski says:

    I’d have thought that the likely distribution of the GDP is so skewed, and the “trickle down” effect being a Thatcherite chimera anyway, that such GDP growth as there has been will be irrelevant to all but about 1% of the populace. GDP seems a rather odd measure of anything in view of the way the books get cooked – including in the UK.

    • Euan Mearns says:

      A rough back of envelope calculation… using GDP/toe yield I calculate that about 20 million Nigerians are participating in the economy, each using 1 toe per capita per annum. And so on Figure 11 you could put 20 million Nigerians on a spot equal to 1 toe per capita and $9000 GDP per capita and the remaining 150 million Nigerians on the origin, i.e. 0:0. That’s probably pretty much what it is like. If you visit an oil service town, there may be a semblance of prosperity, but most other places a peasant, subsistence economy.

  4. A C Osborn says:

    One thing that is worng with using “Per capita electricity generation has barely risen in over 30 years” is that there has been a massive Population explosion, nearly 60 million in that period.

    • A C Osborn says:

      Sorry, that is only the female population, it is more than double that when including the males as well, so almost twice the population of the UK in 30 years.

    • Euan Mearns says:

      The same thing has happened in Egypt and Algeria but both of these countries have managed to grow their infrastructure and provision of service and comfort at a rate much faster than population growth.

  5. A C Osborn says:

    Euan, your own graphs show 40m increase for Egypt and 20m for Algeria as against 120+m for Nigeria. No contest as far as I am concerned.
    Add to that corruption and that $298 billion probably didn’t get invested where it should.

  6. Glen Mcmillian says:

    This link has a ton of good data relating to the current German gas supply situation.

    • Euan Mearns says:

      Almost 39 percent of Germany’s natural gas comes via pipeline from Russia. Thus far, at least. But what happens if Moscow turns off the tap? It is a concern plaguing many politicians in Berlin, and the rhetoric has become sharper in recent days.

      Glen, the Nordstream pipeline now carries most of Germany’s Russian gas imports on a route that avoids Ukraine and all other countries, so I don’t understand statements like this. Russia i snot going to cut off gas to Germany unless Germany does something dumb to Russia.

      • Glen Mcmillian says:

        I agree that given any scenario likely to come to pass in the near future Russia will not deny the Germans their gas imports. Russia after all needs both the money and the good will.

        But neither the Russians nor the Germans have forgotten WWII.

        Germans cannot be sure what might happen on the international scene a decade or more downy the road and it is mostly the long term security of the country that they are nervous about.

        But you have no way of knowing that in what the author is hinting at from reading this one article.

        I am of old Scots Irish ancestry myself with a little German probably mixed in and know a little bit of history. We Scots Irish hillbillies are clannish as hell and seldom forget an insult or an injury.

        The Russians and the Germans used to be the same way and probably still think that way to some extent.

        Everything else equal I would not choose to live in the UK or Germany for fear of losing the next big war due to lack of natural resources- and history is not over by any means.

        If Hitler had understood naval warfare as well as he did power politics and built a full sized submarine fleet before he attacked England he would probably have won WWII.He certainly could have maintained a completely effective blockade for a long long time. IF the cards had fallen a little differently the invasion of Russia could have succeeded too.

        There are still plenty of old folks around in various parts of Russia who either actually fought or suffered near death from starvation and hardship as a result of that invasion and any Russian leader in need of a political diversion to take the Russian people’s attention off of current or future problems could conjure up the German bogey man for another generation at least.

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