As the world shifts gear into electric cars, abandoning the fossil fuel burning internal combustion engine, Nigeria continues to play Ostrich, preferring the conundrum of stupidity to sense and sensibility. Instead of investing massively in the vast farmlands of the north and encouraging the production of finished value added products, the federal government is pumping billions of naira annually into drilling for elusive oil deposits in the Chad Basin. Instead of kicking real economic diversification in, the government is playing poker with the lives of a bugeoning youth population with no prospects.
The 2020s promises to be the decade of the Electric Vehicles (EVs). The shift to electric cars has begun. It is noticeable in America and China and its widespread adoption is only a matter of years – a few years. When this happens, it will be a world making a big shift because buying the kind of cars we drive now will no longer make sense. Automobile companies will also no longer make what people won’t buy. A year ago, the Organisation of Petroleum Exporting Countries (OPEC) predicted that 46 million EVs would be in use by the year 2040. A few weeks ago, it raised its EV fleet prediction to 266 million. That is a five hundred percent increase over last year’s estimate. Bloomberg New Energy Finance (BNEF)’s July report expects electric cars to reduce oil demand by 8 million barrels by 2040. That is more than the current production of Iran and Iraq combined.
If Nigeria wants to look beyond consumers of oil for direction, Saudi Arabia is a good example. Saudi Aramco, Saudi’s well managed equivalent of our own prostrate Nigerian National Petroleum Corporation (NNPC) plans to raise $100 billion dollars from its initial public offering (IPO) by selling about five percent of its holding in 2018. With the offering, Aramco IPO will the biggest ever in the world with its entire valuation at $1.6-$2trillion. A significant portion of money from the sale will go into funding education, transportation, renewable energy and plug the deficit. Saudi Arabia, the world’s biggest producer of oil and natural gas, with better infrastructure, better investment in people and processes has taken electric vehicles seriously as a long-term threat. Nigeria has not. What will Nigeria do as oil demand stagnates in the decades ahead due to increasing demand for cleaner energy and the growing popularity of EVs?
By 2030, the gradual extinction of the internal combustion engine will begin, due to a growing electric vehicle fleet, that will prove disruptive to gasoline demand with tremendous impact on crude oil prices. There are three signs fueling the belief in EVs as the future of automobiles. One, the cost of bringing the technology to market continues to declined remarkably. Batteries are five times cheaper than they use to be five years ago, along with innovations leading to increased capacity. Two, the two biggest automobile markets, China and the United States, have witnessed a big surge in investment and installation of charging infrastructure, as well as in other major developed countries around the world. Three, there is a compelling economic case to be made for EVs. The cost of the technology is being driven down more and more due to research and investment by more automotive companies. Even at today’s oil prices, EVs have lower operating costs than internal combustion engine vehicles. Very soon, EVs will have price parity with gasoline driven automobiles. The top buyers of our crude oil, United States, India and China are aggressively pursuing the development of its EV industry, with China leading the way. In 2016, 507,000 EVs and Plug-in Hybrid Electric Vehicles were sold in China, a 53 percent increase from 2015. The United States saw a 36 percent increase, resulting in the sale of 157,130 vehicles. Europe sold 222,200 EVs and PHEVs. A 14 percent increase from the prior year. If this figures does not alarm Nigeria, what will?
The projections are showing EVs adoption will likely mimic the same speed with which smartphones penetrated the mobile phone markets. It will be fast and deep, ending years of reliance on fossil fuel. What is Nigeria’s plan for life after oil?
Nigeria has a lot to fear and a lot of catching up to do. We have to take the threat seriously, instead of our usual, perrenial nonchalance. 2030 is only 12 years away! I urge President Buhari to assemble a world class team as an economic imperative, to help chart our path to meaningful diversification by investing in value added agriculture, mining, education, transport infrastructure and technology. The work on curbing corruption must persist, the judiciary must uphold the rule of law and plugging of leaks must continue and be institutionalised. Without frantic and concerted efforts, significant political and civil turbulence will happen as the struggle to diversify the economies heightens. For self-preservation, the overindulgent National Assembly must look to cutting its bloated salary and institutionalise far reaching reforms.
Credit: Bamidele Ademola-Olateju, Premium Times