Economic arguments for oil exploitation do not stack up

Oil Exploration

On January 11, the New Vision published an article, Why we need African energy banks. The article was authored by Mr NJ Ayuk, the executive chairperson of the African Energy Chamber.

In the article, Mr Ayuk observed that due to the climate change crisis, international financiers were increasingly withdrawing financing for fossil fuel (oil, gas and coal) projects.

At last year’s COP 26 in Scotland, for instance, more than 34 countries that provide at least $24.1 billion a year for fossil fuel projects committed to stopping international financing of the same projects by the end of 2022. Some of these countries include France, Belgium, Netherlands, Germany, and Spain. Prior to that, the UK ended international financing for fossil fuel projects by March 2021.

The withdrawal of international financing for fossil fuel projects, Mr Ayuk noted, stood to stall African fossil fuel projects. This led to his call for the establishment of African energy banks so that Africans can finance fossil fuel and renewable energy projects to: (a) end energy poverty and; (b) support governments to earn revenues to meet communities’ pressing needs.

While I do share Mr Ayuk’s concerns over the energy and material poverty in Africa, and while eff orts to end the above challenges deserve support, the benefits of fossil fuel development as presented by Mr Ayuk are not reflected in various African countries’ realities. Take Nigeria for instance. Nigeria is one of Africa’s largest oil producers. The country started oil production in 1958. Despite over 60 years of producing oil, 85 million Nigerians, representing 43 per cent of the population, do not have access to electricity, per the World Bank. In fact, the World Bank says Nigeria has the largest energy access deficit in the world!

Moreover, Nigeria’s unreliable power challenges are well-known! Businesses and households perennially have to rely on generators to power their work and homes! Angola, another big African oil producer, doesn’t fare well either. As at 2019, Angola’s electricity access rate was 45.67 percent, according to the World Bank.

How about Mr Ayuk’s arguments on oil exploitation supporting governments to meet communities’ pressing needs? Well, a look at Nigeria and Angola points a bleak picture. In Nigeria, 40 percent or nearly 83 million people live below the national poverty line.

In fact, may communities in the oil-producing region face livelihood hardships as their traditional farming and fishing livelihoods were disrupted by extensive, persistent and unforgiving oil pollution in the Niger Delta. The poverty rate in the oil-producing Angola is 41 percent, per the World Bank. In both Nigeria and Angola, a small section of elite enjoy their country’s oil wealth. Mr Ayuk’s article ended on a poignant note.

He observed that H.E. Macky Sall, the Senegalese president and incoming chairperson of the African Union, had, in light of the ongoing climate change induced fossil fuel phase out observed that: “Our countries, which are already shouldering the crushing weight of unequal trade, cannot bear the burden of an unequal energy transition.” In other words, African countries need to utilise their fossil fuel resources to develop.

While African governments must be supported in their eff orts to end poverty, proponents of fossil fuel development sometimes give the impression that Africa can only develop if it exploits its oil resources. First, not only do poor African oil producing countries show us that oil exploitation does not necessarily result in economic transformation, there are also other sustainable and inclusive sources of revenue that can be exploited.

Uganda for instance has a green growth development strategy through which it says that investment in the green economic sectors of agriculture, clean energy, tourism, forestry and others would boost GDP by 10 percent and deliver an additional four million green jobs among others. These green economic options ought to be pursued.

Ms Diana Nabiruma is the coordinator of the Inclusive Green Economy Network-East Africa (IGEN-EA)