Nigeria’s oil revenue could plunge by more than 60 per cent from 2030 as global demand for crude oil declines, heightening the risk of fiscal and economic instability in the country, a report has warned.
The decline in oil revenue is mainly linked to the expected fall in global oil demand as countries shift away from crude to renewable energy and electric vehicles.
The report, based on research by the E3G think tank and published by The Guardian UK on Tuesday, said Nigeria was among oil-producing countries that could be severely affected by the global shift away from fossil fuels because of its heavy dependence on oil revenues and limited economic diversification.
It said global oil demand was expected to plateau over the coming decade, with a peak likely in the early 2030s, forcing oil-producing countries to compete for a shrinking pool of buyers.
According to the report, the cheapest producers with abundant reserves and more advanced infrastructure, including Saudi Arabia and the United Arab Emirates, were likely to maintain their position as demand weakened, while higher-cost and less diversified producers could face severe revenue losses.
The report projected that Algeria could suffer an 87 per cent decline in oil revenue, while Nigeria’s revenue could fall by more than 60 per cent from 2030.
It warned that the loss of oil income could leave affected countries struggling to fund basic public services and service their debts, potentially creating fiscal crises with wider security implications.
Beth Walker, a co-author of the report, was quoted by The Guardian as saying governments were not adequately preparing for the consequences of declining oil demand.
“Governments are not thinking about and not prepared for these outcomes. The transition becomes riskier for everyone when oil producers are left to adjust on their own and oil markets are left to manage themselves. Producer fragility becomes a global security risk,” Walker stated.
The report disclosed that oil revenue accounted for more than 40 per cent of government income in 17 countries globally, with the figure reaching between 70 and 90 per cent in countries such as Iraq and Libya.
For Nigeria, it warned that declining oil revenue could weaken the state’s capacity to provide public services and create wider economic and security challenges across Africa.
Walker said the expected problems would not necessarily come as a single global crisis but through a series of national fiscal crises that could develop into unrest, migration and security problems.
She cited Nigeria as a particular concern because of its population and influence in Africa. “Most of these problems are on a much larger scale than Venezuela, and they could all unravel just as the UK and Europe’s capacity to contain live conflicts is drained,” she said.
The report added that the global transition away from oil was already under way, with the growth of renewable energy contributing to declining oil consumption in several countries.
China, previously the dominant source of rising global oil demand, was also experiencing a downward trend in consumption, partly due to the rapid adoption of electric vehicles.
It added that India’s future oil demand remained uncertain and could become pivotal in determining how quickly global demand declines. The researchers, however, warned that delaying the energy transition would not solve the problem, given the worsening climate crisis.
“None of this is an argument for slowing the transition. A slow but chaotic transition can be just as destabilising as a fast one, maybe even more so,” another co-author of the report, Maria Pastukhova, said.
The E3G study was reportedly compiled over two years and included “war-gaming” of different scenarios involving declining oil demand with more than 100 public servants and experts from around the world.
It called for governments, the International Monetary Fund, the World Bank and private financial institutions to work together to help oil-dependent economies prepare for declining revenues.
(Punch)
