Former Nigeria vice president Atiku Abubakar on Wednesday asked the country’s government to build its own oil reserve to preserve potential economic crises after the coronavirus pandemic.
“I believe that the time is right for Nigeria to build a strategic crude oil reserve, with massive storage capacity that can hold at least a month’s worth of our OPEC production capacity,” Atiku tweeted.
“If we build such an infrastructure, we will not have to sell our crude at a production loss. We will be in a position to stockpile the product in our reserve until such a time as prices improve.”
Currently, the Nigerian government depends on oil for 60% of its revenue and 90% of its foreign exchange. But with prices for several oil benchmarks falling below zero, Nigeria is generating massive losses for every barrel it produces.
Due to poorly-managed refineries, the Nigerian government which was responsible for practically all oil refining through the Nigerian National Petroleum Corporation (NNPC), now government relies on imports to meet its populations’ demand for fuel.
Nigeria still produces crude oil but sells to the United States, China, and the European Union, who re-import gasoline at a higher price, subsidises it and sell it to Nigeria consumers at a massive loss.
The current structure, Atiku believes does not guarantee a good future for the Nigerian economy if the present President Muhammadu Buhari administration does not act fast.
“It is time for Nigeria to protect her economy from being tossed to and fro by circumstances beyond our control,” Atiku, who was the head of Nigeria’s economic council from 1999 to 2007 said, “We must assert our sovereignty, by exerting more influence over the global trade in crude oil, and other features.”
Atiku noted that Nigeria must follow suit to other countries in protecting their economy from being vulnerable to external influence.
“This measure can flip that, and make our oil industry more stable, even when there is global instability. This will translate to greater economic independence on our part,” Atiku said.
North American and European nations, Atiku said, have such internal controls to protect almost every sector of their economy – from agriculture, automobile, and even intellectual property in which Nigeria should not be left behind.
He advised the Nigerian Government to discuss with other partners in the Organisation of Petrol Exporting Countries and obtain a concession “whereby we can defer our daily quota, such that when we undersell, due to a crash in the price of crude oil, we can oversell when the prices stabilize, subject to the condition that we balance out our quota.”
“The features market for commodities is a turbulent one, due to unforeseen hazards that come and go. Today, it is COVID19; tomorrow, it will be something else.”