Nigeria and countries like Ecuador and Chile should consider investing in renewable natural capital and intangible assets, like knowledge, innovation and institutions, as a way to diversify from oil, as their reserves are more likely to be depleted in less than 50 years.
This was revealed in a World Bank report titled “The Changing Wealth of Nations 2021” released yesterday.
According to the report, unless new oil wells are discovered, Nigeria’s current oil reserves will only last around 49 years, while gas still has over 100 years of reserves.
The report also noted that 18 countries still have oil reserves that will last for more than two generations and that some others have more than a century of reserves, but that “oil-producing countries like Nigeria and Ecuador could run out of oil. fully their oil reserves in less than more than 50 years at current depletion rates, assuming that no other major oil fields are discovered or become commercially viable. “
According to the World Bank report, many countries like Nigeria “with high rents from non-renewable natural capital have not invested enough to offset asset depletion. This is expressed in terms of negative adjusted net savings.
“This is true not only for oil-rich countries such as Iraq and Nigeria, but also for some mineral-rich countries such as Guinea and Sierra Leone. Negative adjusted net savings in these countries is a leading indicator of unsustainable wealth management. If it continues, it will have a negative impact on the value of future wealth.
“This is because the value of a non-renewable asset that runs out is consumed rather than being invested to compensate for the accumulation of assets, for example through human capital or investment in productive capital. Therefore, governments may need to consider policies that would better preserve and create wealth or seek other sources of income to increase their net savings. “
According to the report, investments in renewable natural capital and human capital could help countries diversify their asset portfolios and reduce their dependence on non-renewable natural capital.
He noted that the share of human capital in total wealth increased by more than 10 percentage points between 1995 and 2018 in Nigeria, the Democratic Republic of the Congo and Ghana while it either decreased or remained unchanged in the past. Cameroon, Gabon and the Republic of Congo. .
The report cites Gabon and Nigeria as examples of the decline of several types of wealth.
“Although their non-renewable wealth (mostly from fossil fuels) increased by more than 30% during the commodities boom from 2004 to 2014 (in part due to newly discovered deposits and rising fossil fuel prices ), this non-renewable wealth fell below pre-boom levels after 2015.
“At the same time, these countries have experienced one of the largest declines in renewable natural capital per capita. Gabon went from $ 1,400 to $ 1,200, and Nigeria went from $ 3,000 to $ 1,300 in less than five years. The decline in these assets has in turn affected countries. total capital per capita, especially after 2015.