Nigeria and countries like Ecuador and Chile ought to look towards investing in renewable natural capital and intangible assets, like knowledge, innovation and institutions, as a way of diversifying from oil as their reserves are more likely to be exhausted in less than 50 years.
This was revealed in a World Bank Report entitled, “The Changing Wealth of Nations 2021” released yesterday.
According to the report, unless new oil wells are discovered, the current oil reserves of Nigeria will only last about 49 years while the gas still have over 100 years’ worth in reserves.
The report also noted that 18 countries still have oil reserves that will last for more than two generations and some others have more than a century worth of reserves, but that “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.”
According to the World Bank report, many countries such as Nigeria “with high rents from non-renewable natural capital have not invested sufficiently to offset the depleting asset. This is expressed in terms of negative adjusted net savings.
“This is true not only for hydrocarbon-rich countries such as Iraq and Nigeria, but also for some mineral-rich countries, such as Guinea and Sierra Leone. The negative adjusted net savings in these countries are a lead indicator of unsustainable wealth management. If continued, it will negatively impact the value of future wealth.
“This is because the value of a depleting non-renewable asset is being consumed rather than being invested in offsetting asset accumulation such as via human capital or productive capital investment. Therefore, governments may need to consider policies that would better preserve and build wealth or look for alternative sources of income to raise their net savings.”
According to the report, investments in renewable natural capital and human capital could help countries to diversify their asset portfolio and reduce their dependence on non-renewable natural capital.
It noted that the share of human capital in total wealth had increased by more than 10 percentage points between 1995 and 2018 in Nigeria, the Democratic Republic of Congo and Ghana while it had declined or had not changed in Cameroon, Gabon and the Republic of Congo.
The report cited Gabon and Nigeria as examples of decline in multiple types of wealth.
“Although their non-renewable wealth (mainly from fossil fuels) increased by more than 30 per cent during the 2004–14 commodity boom (in part due to newly discovered deposits and the increase in fossil fuel prices), this non-renewable wealth dropped below pre-boom levels after 2015.
“At the same time, these countries had among the largest declines in renewable natural capital per capita. Gabon dropped from $1,400 to $1,200, and Nigeria dropped from $3,000 to $1,300 in fewer than five years. The decline of these assets in turn affected the countries’ total capital per capita, especially after 2015.