empty oil

Columnists in Nigeria excitedly announce the latest electric car technology, and how it means progress. Yes, it means progress for humanity as a whole, but for Nigeria in particular, it is demonstrative of a trend that is extremely dangerous.

Oil prices have dropped. They will continue to drop. Technology is making it feasible to get oil in places that they previously were not accessible from. The big multi-nationals are selling their oil fields in Nigeria. When you see people exiting a business, what is this indicative of?

Oil is dying. The western world knows it, that is why they are heavily investing in converting the things that used to use oil to electric. The newest cars are electric or hybrid. This trend will continue, because there are many ways now to generate electricity from non-oil sources. 30% of Germanys electricity is renewable and non-oil. Their cars will be powered by this same electricity. What will they need Nigerian oil for?

People do not really realise this, but almost any income you see in Nigeria is trickle-down oil money. Our entire government (the biggest spender) is almost entirely powered by oil money. Even the taxes collected are re-collected oil money.

Even the new fangled e-businesses – if you have someone buying a pair of boots, he got the money from his job at a security company, who make their money guarding oil workers. So much of the money rotating about comes indirectly from oil.

Now when the oil prices drop, and they will, a lot of that money will dry up. People will stop having free cash, and the economy will dry up. So we will become dependent on our manufacturing and exports. Which don’t exist.

Are we going to build a machine manufacturing industry now? An industry that took Germany and Japan the last 100 years to build? What chance does Nigeria have, considering how few engineers we have, and how all good engineers easily find jobs in the U.S or U.K? To do so will be next to impossible, realistically. Nigeria will likely never be able to compete with other countries when it comes to machine manufacturing.

I am biased, but we do have a chance. Our programmers. I have worked with programmers all over the world, in Germany, China, India, etc. And I have found something – Nigerian programmers are actually great. The programmers in Nigeria are great, the ones working outside of Nigeria are great. Nigeria has a unique chance to build a manufacturing and an export industry right now by focusing on knowledge based skills.

The industry of producing information based intangibles is new. It’s like when countries were building cars at the turn of the last century. That’s where we are right now. If we invest right, Nigeria can become one of the top five exporters of software and software products. And when that oil dries up, our liquidity will come from the software.

The government of a country is responsible for the long-term outlook of the country. The software industry is one of the few viable industries that can be invested in right now to give Nigeria the long-term ability to export goods and earn revenue. Entertainment is another one. Other older industries like machine manufacturing or tourism will be really hard to activate because of the existing competition out there.

The private sector is supposed to be selfish. And everyone in the private sector needs to realise if their business is long term oil dependent. If it is, they should start investing in industries that are not. Software is one of them.

Action plan

1. Private sector: Divest into non-oil dependent industries. Consider the software export market and outsourcing centers. Build software local so you have expertise for the future.

2. Government:

  • Fund the tech departments of universities somewhat better.
  • Government software should exist as tiny modules that are completed by smaller companies, so there is steady project flow to keep the companies occupied (not monolithic contracts). To make this happen, there will likely need to be a very well designed technical department to design such.
  • Incentivize software export. E.g for the first $10,000 brought in via an exported piece of software, match it with $10,000 tax credit
  • Have trade-fairs where Nigerian companies can demonstrate what they have built

3. NGOs

  • Create avenues that enable developers understand how they can sell software (not just create it)
  • Help software developers come up with structures around what they build so it becomes commercially viable
  • Create paths-to-market that make it easier for devs to monetize
  • Do not just focus on products under your ‘leadership’. When you see folks doing good stuff, give them the additional resources they need (e.g design talent) even if they did not pass through your ‘program’

The danger for Nigeria is real. Our entire economy is based around a resource that is rapidly losing value. We really cannot afford to wait much longer before investing in viable things we can export in the future. When economies shrink rapidly, war breaks out. Businesses collapse. The government takes on debt.

Germany started its push to transition to renewable energy in 1980. 34 years later, they have achieved 30%. It takes time to create a transition such as this. We need to start now.

This post first appeared on Mark’s blog.

Photo Credit: Surat Lozowick via Compfight cc

Mark Essien Author

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