Nigeria has about 38bn barrels of unexplored bitumen resources weighing about 42.74 billion metric tonnes. It ranks 6th in the list of countries with the most bitumen wealth. Nigeria’s untapped bitumen can be found Ogun, Ondo, Delta, Rivers, and Balyesa States. Geologically, Nigeria’s bitumen reserves have close similarities with the bitumen reserves in Canada and it is envisaged if Nigeria’s bitumen would be extracted, similar methods as have been used in Canada would be adopted. In view of this, similar impacts are envisaged between the two countries.
Most refined bitumen is used in the construction industry as constituent products for paving and roofing. 85% of all bitumen is used as binder in asphalt for roads, runaways, parking lots, and foot paths. With the increasing government initiatives towards repairs and redevelopment of roads globally, the market size for bitumen is estimated to exceed $110bn by 2024.
Amidst Nigeria’s enormous endowment of bitumen wealth is a growing need for bitumen. Recently, the Minister of Mines and Steel Development lamented that about 80% of the asphaltic materials used for road construction in the country were still being imported while 120km of bitumen lies fallow and untapped. This comment is like that of the former Minister of Solid Minerals Development in 2016. Lagos Chamber of Commerce and Industry stated that over 5 million metric tonnes of bitumen were imported in April 2019 alone.
With more than ₦300bn spent annually on importing bitumen, bitumen is argued to be on top of Nigeria’s import bill. Data from trend economy indicates that Nigeria spent over $116bn on importing bitumen products between 2014 and 2018. This figure converts to $22bn, $30bn, $26bn, and $38bn for 2014, 2016, 2017, and 2018 respectively. Data on Nigeria’s bitumen import was missing for 2015. The figure below presents Nigeria’s bitumen importation cost.
Nigeria’s high bitumen import ties directly to its huge bitumen need. For instance, as at 2017, 135,000km of Nigerian roads were untarred. On the average one square meter of road requires between 0.8 and 1 liters of bitumen. This converts to between 800,000 and 1,000,000 liters per kilometer. Impliedly, Nigeria’s 135,000km road deficit would require at least 108bn liters of bitumen. This bitumen need would cost Nigeria between $89bn and $112bn at World Bank’s standard estimate of $660,242 per kilometer for two lane highways and $830,248 per kilometer for four lane highways.
In addition to Nigeria’s high need for bitumen products and its enormous infrastructural deficit is its increasing debts, its persistent budget deficit, and a growing revenue need. In fact, the current administration has been taking up measures to increase its revenue. Not too long ago, the government upped the VAT rate and also introduced a finance bill to cater for its revenue needs. The Nigerian government has also been observed to be in an unrelenting pursuit of loans. Perhaps, this is a reason why voices are beginning to project Nigeria’s natural resource reserves as a sustainable revenue generation alternative.
Matching Aspirations to Realities: Bitumen Exploration in Canada and Oil Exploration in the Niger Delta
Exploring Nigeria’s bitumen does not just mean more revenue for the government or a possible reduction in Nigeria’s road deficit, it is the fulfilment of the lifetime dreams of many residents in bitumen rich communities. In many of these communities, it is hoped that the exploration of this natural hydrocarbon will immediately translate to job creation, infrastructure improvement, and an overall boom in economic activities. In January 2020, the Federal Government of Nigeria set up a committee on bitumen exploration to drive wealth creation. Reportedly, the attempt at bitumen exploration is an economic diversification strategy.
Different perspectives have emerged on Nigeria’s attempt to exploit its bitumen. One of these is the economic viability of this exercise. In this regard, the Nigerian government is urged to conduct and publicly present research findings on the economic viability of the process before diving into the exploration. Other perspectives focus on the social, environmental, and health realities that surround extraction of the natural resource. Thus, it is suggested that Nigeria’s aspiration on its bitumen wealth should be marched with these realities.
Literature suggest that bitumen is one of the dirtiest crudes and its exploration has significant environmental and health implications. For example, bitumen exploration in Alberta, Canada bears on some environmental components such as carbon intensity, water use and air quality. It also impacts on the climate, causes tailing of ponds, and extraction sites have proven difficult to reclaim. Evidences also suggest that the attendant health risk of bitumen exploration in Canada include increasing incidences of cancer in extraction sites. In addition to the health risks, bitumen exploration has been commonly associated with increasing incidences of pollution.
Beyond the environmental and health risks that bitumen exploration generates is the livelihood crises that the exercise may generate. Experts envisage that most environmental impacts from bitumen exploration will directly affect land-based livelihoods throughout Nigeria’s bitumen belt. The situation is worsened because Nigeria’s bitumen wealth lies within existing land uses. Areas where bitumen is found in Nigeria are densely populated and in active use. Thus, it is foreseen that exploring Nigeria’s bitumen will threaten the livelihoods of residents in the farming and fishing communities where the resource is found.
An alternative perspective to bitumen exploration in Nigeria is to evaluate the cost based on the series social and economic outcomes of oil exploration in the Niger-Delta of Nigeria. Pollution and livelihood crises generated by the process together with the series of unmet expectations developed into a toll of crises that the country currently battles. Despite the different initiatives to address the violence problem in the region, hostage taking, kidnapping and abductions, sea piracy, political hooliganism, terrorism, and vandalism continue to threaten peace in the oil rich region.
From an environmental standpoint, oil exploration in the Niger Delta created significant negative impacts. For example, over 20 years after oil exploration in Ogoniland, oil still contaminates the land and land owners have not been adequately compensated. In addition, no cleanup has been done in spite of the guidelines stipulated by the United Nations Environment Program. Residents of the oil rich community continue to seek justice for the series of violations caused by oil exploration in their community.
Quantifying Nigeria’s Possible Gains from Bitumen Exploration
Although it may be difficult to quantify Nigeria’s possible earnings from bitumen exploration, the gains can be easily imagined. For instance, with the growing bitumen need in Nigeria, exploration and local production will first satisfy local consumption and remove the huge importation cost of the construction product. Exploration is also anticipated to create more job openings and reduce Nigeria’s employment deficit.
In addition to this, exploring Nigeria’s bitumen reserves should increase foreign direct investment and improve Nigeria’s revenue base. Taking a clue from Canada’s earning of over $101bn from the export of bitumen products between 2014 and 2018, Nigeria can imagine the effect of bitumen exploration on its revenue.
Other Priority Considerations as Nigeria Moves Towards Bitumen Exploration
To fully optimize the prospects of Bitumen exploration in Nigeria, attention must be given to the revenue management framework in the country. Efforts should be made to ensure that bitumen exploration is not limited by the weak management framework that rocks Nigeria’s oil and gas sector. With reference to this, accountability should be promoted in the process of exploration. Also, Nigeria should address the problematic institutional and legal framework governing the rights of locals to land and resources.
In addition to these, Nigeria must develop a strong social and environmental mitigation plan based on extensive research. This is to avoid the potential adverse implications of the exploratory process. Similarly, plans on possible clean-up of extraction sites should be clearly defined before exploration commences. Policies should also be developed to guide the process. For instance, the Nigerian government should develop a comprehensive policy that will promote access to finance for bitumen exploration. This policy should be position within Nigeria’s national economic framework and should focus on promoting access to financial facilities for indigenous investments. Lastly, the disclosure regime for Nigeria’s extractive sector should be improved on to plug leakages, improve productivity, and to increase the revenue performance of the sector.
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