OIL DOOM

Oil prices hit $75 per barrel on friday in Newyork.As a citizen of Nigeria,the 7th largest oil producer in the world,this should be a good news.

Higher oil prices should mean more money in the government coffers.This should in turn lead to improvements in infrastructure.This should also provide more money for more social programmes.

However in Nigeria, higher oil prices means higher prices for petroleum products, which causes a hike in the prices of other commodites.To cut the long story short higher oil prices means tougher times to come for Nigerians.

This is caused by a deficiency in refining capacity, hence Nigeria resorts to fuel importation .This is done with little subsidy,hence making Nigeria to lose benefit of being an oil producing nation.

In the short term Nigeria should sign special agreements with refineries abroad.The agreement should enable Nigeria export crude oil to the refineries at the cost of production of crude, instead of the prevailing market prices which is currently not affordable for Nigerians.The product should then be refined and payed for.Only the cost of production should be used in calculating the prices of petroleum products in Nigeria.This will greatly improve the present situation.The days of cheap oil is over and with the rate of increase in prices we may expect prices to reach $100 per barrel before 2010. Hence government subsidy is necessary or this economy will ground to a hault.

However, the answer is to provide refining capacity in Nigeria.That is why the news that the first privately owed oil refinery has been launched is a wellcomed development.Other investors that have been licensed to build refineries should emulate this investor.Government should also invest some of the oil windfall on building more refineries and in maintaining the existing ones.

The benefit of the oil boom can only be experienced in Nigeria, like in other OPEC countries, when refining capacity improves.Then the oil doom presently experienced in Nigeria will become oil boom for the prosperity of the country.