Already, the better effects of recent policy redirections can be seen in healthy growth of the non-oil sector, which touched 9% in 20065. However, the impact of reforms has been questionable, most of all, in the oil industry.
Since 2005, the administration of President Yar'Adua has sought to curb oil imports by offering exploration and production incentives to companies involved in oil refining and power generation. However, even though more than 20 private refinery licenses have been issued since, not a single project has taken off so far. Further, plans to privatise state-held oil refining operations have been on hold for several years, largely due to heavy subsidies in fuel prices that makes local refining unviable. Conflict, corruption and lack of official transparency have together caused several major foreign investments to be delayed or altogether aborted.
Although there is hardly any credible data on the subject, Nigeria's oil industry in its present state represent huge losses in terms of potential employment generation and enterprise development. Most existing exploration, production and refining operations run exclusively on raw material and technical imports, with no backward linkages to the local economy. Further, a relatively low standard of education means that technical jobs have almost always to be filled by foreign workers.
Repairing the oil industry, in the context of Nigeria's wider developmental goals, calls for several initiatives:
* Deregulation of oil prices to reduce fiscal burden on the government and to promote private sector investment in refining operations.
* Enhancing equity finance access to emerging oil refining companies; sops and financial incentives to attract foreign direct investment.
* Empowering regulatory authorities to deal more efficiently with issues surround oil operations, including violence and vandalism, labour problems and power deficits.
* Improving capacity utilisation in existing refineries by raising production standards to cut dependence on finished petroleum imports.
* Diversifying the fuel retail business by deregulating the downstream sector and encouraging business expansion of existing players.
* Enforcing environmental compliance and addressing genuine concerns of local communities; increasing social participation and minimising conflicts.
Nigeria's four oil refineries have a combined built-in capacity of more than 440,000 barrels per day, but have never operated at full potential. The fact however is indicative of a much larger failure in terms of untapped potential in Africa's second largest economy. Nigeria's recent attempts to drive SME growth in the non-oil sector are no doubt commendable, but they do not take away the imperative of further development and optimisation of its flagship industry. Only after achieving self reliance in oil can Nigeria hope to develop a thriving and diversified economy.