The World Bank has warned Nigeria and other nations with high dependence on fossil fuels as their major source of generating wealth to expedite action in diversifying economies and implementing transitioning plans before the global demand for crude oil falls significantly.
In a recent report released by the World Bank on Wednesday, the international agency advised the Nigerian Government to act fast in moving away from its reliance on the nonrenewable sector and begin to transition towards low-carbon/clean energy industry.
The World Bank Report themed ‘The Changing Wealth of Nations 2021, advised the Federal Government to develop other areas of the economy that would improve the quality of labour and increase productivity in the country.
“The high rents from nonrenewable natural capital generate outsized government revenues in countries that are abundant in such resources.
“Put another way, government resource revenues are high in countries where nonrenewable natural capital is a large share of total wealth.
“Resource revenues in MENA countries can reach half of total revenues. And many countries in Sub-Saharan Africa have a high dependence on nonrenewable natural capital and resource revenues, including Gabon, the Republic of Congo, Chad, Guinea, Mozambique, and Nigeria.
“Since nonrenewable wealth may be at risk from the low-carbon transition, countries’ fiscal position—and governments’ ability to finance development priorities—would likewise be placed at risk.
“These countries may need to start accelerating the transformation of their revenue sources to other sectors of the economy as associated assets—such as human, productive, and renewable capital—to avoid the potential negative consequences of reduced global demand for fossil fuels,” World Bank stated.
The report cited Brazil as a good example of a country that has succeeded in reducing its dependence on fossil fuels by more than 50% in 10 years.
“Other countries have managed to transition from a high share of fossil fuel wealth to a higher share of mineral wealth.
“For example, after the 2008 financial crisis, mineral wealth became the most important type of nonrenewable natural capital in Brazil, where oil wealth was between 60 and 70 percent of its total nonrenewable natural capital in previous years.
“In 2018, Brazil’s oil wealth share of total nonrenewable wealth dropped to less than half, and minerals reached 53 percent of nonrenewable wealth,” it disclosed.
The World Bank further stated that, unlike countries like Venezuela, Georgia, Syrian Arab Republic and Sudan with huge reserves of fossil fuels, Nigeria has less than 50 years left to consume the remnant of its oil reserves if it does not discover more oil fields.
“Considering current amounts of fossil fuel reserves, 18 countries would have oil reserves that could last for more than two generations.
“According to the US Energy Information Administration’s annual petroleum reserves and production data (EIA 2020), oil reserves in fossil fuel–dependent countries, such as the República Bolivariana de Venezuela and the Islamic Republic of Iran, could last for more than a century.
“But other oil-producing countries, like Nigeria and Ecuador, could entirely deplete their oil reserves in fewer than 50 years at current depletion rates, assuming no other significant oil fields are discovered or become commercially viable.
“Natural gas reserves could last longer,” the agency said.