Opinion
Investors And Safe Energy Havens
Investors spooked by three years of global recession have nervously scanned the globe for failsafe, sure-fire places to park their surplus capital.
The rise of the non-Organization for Economic Cooperation and Development countries is fundamentally altering the world’s energy markets, which underwent a historic shift in 2007 when non-OECD demand surpassed that of OECD. Demand growth outside traditional OECD markets is now the driver in the world’s energy, with fossil fuels continuing to account for 88 per cent of global energy demand and for over half of the annual increase in total energy demand. Another historic shift occurred last year, when China became the largest consumer of energy after surpassing the United States.
By 2035, China will consume almost 25 per cent of world energy after just 9 per cent in 2000. The Energy Information Administration trend predictions in future consumption patterns still put liquid fuels at the top for the next 25 years but coal is still to grow strongly to almost catch up over this period. Accordingly, China will provide the largest share of future growth in the global energy market, and it is here that Australian energy fortunes will be made.
China is now Australia’s largest trading partner, with bilateral trade topping $100billion last year.
Coal is the second most important energy source, making up almost 30 per cent of global energy consumption. For Australia, coal is a “dual use” product, as it meets 43 per cent of Australia’s energy requirements, and just over 70 per cent of those of China.
Over 5 billion tons of coal is consumed worldwide each year. Most is used as thermal coal but the extraordinary growth in Chinese steel production since 2001 has boosted demand for metallurgical coal. Demand for coal in the Asia-Pacific region has steadily risen and now accounts for 66 per cent of total global coal consumption.
China is the world’s biggest consumer of coal and Australia is the region’s biggest exporter. Thermal coal is used in electricity generation, while metallurgical coal is used for steel production. Current Australian metallurgical coal exports are almost twice as large as thermal coal exports.
According to Australia’s Department of Foreign Affairs and Trade, between 1999 and 2009, the value of Australia’s coal rose from $8.4billion in 1999 to $39.4billion in 2009, an increase of over 370 per cent.
This symbiotic producer-consumer relation is already reflected in bilateral Australian-Chinese trade.
Scoring a watershed agreement from Chinese utility, China Power International Development is to supply 30 million tons of thermal coal per year for 20 years, Clive Palmer’s privately held Resourcehouse has cleared the way for an ambitious $8.9billion project to export thermal coal from Queensland’s Galilee Basin. Resourcehouse’s “China First” mine is predicted to begin production in 2013. While the Resourcehouse investment is the most high profile, there are many other success stories of Australian energy companies interacting with China.
The economy of Australia is a developed, modern market economy with a Gross Domestic Product (GDP) of approximately $1.2trillion. In 2009, it was the 13th largest national economy by nominal GDP.
There are, however, some storm clouds on the otherwise sunny horizon of Chinese-Australian relations. Given its growing prominence in the Australian economy, China has taken upon itself to critique some of Canberra’s economic policies. Recently, Cheng Ouyang, a junior diplomat at the Chinese embassy told a business forum that Australia’s “dual-speed and patchwork economy” needed fixing, with Chinese help, commenting, “Australia’s dual-speed (basically, the growing mining sector, while manufacturing and other economic areas are depressed), and patchwork economy would not only hurt its own economic development, but also influence China and Australia’s long-term economic cooperation”, before opining that China’s strengths in these areas could be utilized to “help accelerate Australia’s economic development.” Given that Beijing’s diplomats are hardly known for expressing independent opinions, Cheng’s observations can be taken as reflecting official Chinese government thinking.
Despite official concerns about Australia’s “patchwork” economy, Chinese interest in Australia is not limited to its raw materials. Now, 120,000 Chinese students study in Australian schools and universities. Further impacting Australia’s economy, China is a major purchaser of Australian debt. Seeking further involvement in Australia’s mining sector, in 2009, offers were made by state-owned Chinese companies to invest $22billion in Australia’s resource extraction industry.
Such policies undoubtedly produce unease in Canberra, which doubtless would be happy to see a diversification of investment in Australia. China is not Australia’s sole export market for coal – Indian demand is expected to rise sharply as well due to large-scale coastal power projects now coming online.
Massive supplies of raw materials, a guaranteed market, booming exports of over 370 per cent in a decade – it does not get much better for investors than this. Accordingly, one with surplus money could do worse than investigate Australian energy stocks. But remember, in a world of globalization, China’s yuan is just as “green” as the United States’ dollar or European Union’s euro.
Dr Daly resides in London, and wrote this piece for Washington DC-based OilPrice Intelligence.
John Daly
From all indications, Nigeria possesses enough human and material resources to become a true economic powerhouse in Africa. According to the National Population Commission (NPC, 2023), the country’s population has grown steadily within the last decade, presently standing at about 220 million people—mostly young, vibrant, and innovative. Nigeria also remains the sixth-largest oil producer in the world, with enormous reserves of gas, fertile agricultural land, and human capital.
Yet, despite this enormous potential, the country continues to grapple with underdevelopment, poverty, unemployment, and insecurity. Recent data from the National Bureau of Statistics (NBS, 2023) show that about 129 million Nigerians currently live below the poverty line. Most families can no longer afford basic necessities, even as the government continues to project a rosy economic picture.
The Subsidy Question
The removal of fuel subsidy in 2023 by President Bola Ahmed Tinubu has been one of the most controversial policy decisions in Nigeria’s recent history. According to the president, subsidy removal was designed to reduce fiscal burden, unify the foreign exchange rate, attract investment, curb inflation, and discourage excessive government borrowing.
While these objectives are theoretically sound, the reality for ordinary Nigerians has been severe hardship. Fuel prices more than tripled, transportation costs surged, and food inflation—already high—rose above 30% (NBS, 2023). The World Bank (2023) estimates that an additional 7.1 million Nigerians were pushed into poverty after subsidy removal.
A Critical Economic View
As an economist, I argue that the problem was not subsidy removal itself—which was inevitable—but the timing, sequencing, and structural gaps in Nigeria’s implementation.
- Structural Miscalculation
Nigeria’s four state-owned refineries remain nonfunctional. By removing subsidies without local refining capacity, the government exposed the economy to import-price pass-through effects—where global oil price shocks translate directly into domestic inflation. This was not just a timing issue but a fundamental policy miscalculation.
- Neglect of Social Safety Nets
Countries like Indonesia (2005) and Ghana (2005) removed subsidies successfully only after introducing cash transfers, transport vouchers, and food subsidies for the poor (World Bank, 2005). Nigeria, however, implemented removal abruptly, shifting the fiscal burden directly onto households without protection.
- Failure to Secure Food and Energy Alternatives
Fuel subsidy removal amplified existing weaknesses in agriculture and energy. Instead of sequencing reforms, government left Nigerians without refinery capacity, renewable energy alternatives, or mechanized agricultural productivity—all of which could have cushioned the shock.
Political and Public Concerns
Prominent leaders have echoed these concerns. Mr. Peter Obi, the Labour Party’s 2023 presidential candidate, described the subsidy removal as “good but wrongly timed.” Atiku Abubakar of the People’s Democratic Party also faulted the government’s hasty approach. Human rights activists like Obodoekwe Stive stressed that refineries should have been made functional first, to reduce the suffering of citizens.
This is not just political rhetoric—it reflects a widespread economic reality. When inflation climbs above 30%, when purchasing power collapses, and when households cannot meet basic needs, the promise of reform becomes overshadowed by social pain.
Broader Implications
The consequences of this policy are multidimensional:
- Inflationary Pressures – Food inflation above 30% has made nutrition unaffordable for many households.
- Rising Poverty – 7.1 million Nigerians have been newly pushed into poverty (World Bank, 2023).
- Middle-Class Erosion – Rising transport, rent, and healthcare costs are squeezing household incomes.
- Debt Concerns – Despite promises, government borrowing has continued, raising sustainability questions.
- Public Distrust – When government promises savings but citizens feel only pain, trust in leadership erodes.
In effect, subsidy removal without structural readiness has widened inequality and eroded social stability.
Missed Opportunities
Nigeria’s leaders had the chance to approach subsidy removal differently:
- Refinery Rehabilitation – Ensuring local refining to reduce exposure to global oil price shocks.
- Renewable Energy Investment – Diversifying energy through solar, hydro, and wind to reduce reliance on imported petroleum.
- Agricultural Productivity – Mechanization, irrigation, and smallholder financing could have boosted food supply and stabilized prices.
- Social Safety Nets – Conditional cash transfers, food vouchers, and transport subsidies could have protected the most vulnerable.
Instead, reform came abruptly, leaving citizens to absorb all the pain while waiting for theoretical long-term benefits.
Conclusion: Reform With a Human Face
Fuel subsidy removal was inevitable, but Nigeria’s approach has worsened hardship for millions. True reform must go beyond fiscal savings to protect citizens.
Economic policy is not judged only by its efficiency but by its humanity. A well-sequenced reform could have balanced fiscal responsibility with equity, ensuring that ordinary Nigerians were not crushed under the weight of sudden change.
Nigeria has the resources, population, and resilience to lead Africa’s economy. But leadership requires foresight. It requires policies that are inclusive, humane, and strategically sequenced.
Reform without equity is displacement of poverty, not development. If Nigeria truly seeks progress, its policies must wear a human face.
References
- National Bureau of Statistics (NBS). (2023). Poverty and Inequality Report. Abuja.
- National Population Commission (NPC). (2023). Population Estimates. Abuja.
- World Bank. (2023). Nigeria Development Update. Washington, DC.
- World Bank. (2005). Fuel Subsidy Reforms: Lessons from Indonesia and Ghana. Washington, DC.
- OPEC. (2023). Annual Statistical Bulletin. Vienna.
By: Amarachi Amaugo