It’s no longer news that the Nigerian economy has been reeling under the pain of sliding oil prices since the last quarter of last year. What is news, however, is that this dangerous slide has continued unabated, and is even worsening by the day, with its traumatic consequences.
Essentially, the price war is a direct response to the law of demand and supply, whereby an increase in global supply of oil, without a corresponding increase in demand, produces a huge glut and somersaulting prices. It’s like an epidemic among commodity importing countries like Nigeria, especially if those countries lack alternative foreign exchange earning power. That’s where the key risk lies. Reminiscent of the capital market crash a few years ago, investors even in fairly stable economies such as Mexico, South-Korea, Japan, and the Philippines are divesting. A unique corollary to this trend could be seen in what looks like a conspiracy against Nigeria by prominent economic allies. The United States of America, hitherto the biggest consumer of Nigeria’s oil, either by coincidence or deliberate intention, has refused to buy oil from Nigeria even before the slide commenced. The same goes for China, another huge guzzler, though her economy is understandably incapacitated. The threat posed by a continuous slide in crude price is that it could trigger a global disinflation (slowing inflation) and deflation – a general decline in money supply (credit) and lower global demand which are signs of global depression.
To obviate this danger, the federal government quickly devalued the Naira to N168 per dollar (though it has remained above N185 per dollar) and imposed austerity measures. Contained in these measures, among others, are plans to review import duty waivers and increase tax on ostentatious goods, such as costly drinks, private jets/yachts etc. Obviously, these action-plans are grossly inadequate to fight inflation, mass unemployment, industrial actions, political instability, insecurity/social discontent; and inability to pay salaries, that are already manifesting as fall-outs of the austerity and plummeting oil prices.
When the Senate sat in plenary over the 2015 budget pegged at the benchmark of $65 p/b vis-à-vis the prevailing price of $45 – $46 p/b, members saw the Appropriation Bill of over N4 trillion as scandalous and unrealistic. In fact, some aggrieved senators were of the opinion that the budget should be reworked and cut by 50 percent, saying that it could hardly service recurrent expenditure, let alone funding capital projects. It is also feared that if the oil price should go below $40, it means Nigeria would not make any profit at all; reason being that the country produce at the cost of $30 – $40 per barrel. Of course, Nigeria feels so devastated because over 90 percent of its budget is funded from oil revenue, like the proverbial foolish man that puts all his eggs in one basket. Some other well-meaning oil producers such as Mexico, United Arab Emirates (UAE), Saudi Arabia, USA, Angola, hardly spend their oil proceeds. They’re either saved for the rainy day or ploughed back into other profitable ventures that benefit the citizenry.
Now, the politicians are out again for another election business season. Several promises are being made on a daily basis and exploding in the air like Christmas fireworks. Unfortunately, the common man, as usual, is deluded with all kinds of rhetorics and stomach infrastructure by demagogues. What makes Nigeria’s politics lamentably unique is that more than 98 percent of her politicians desperately want power, not because of any patriotic desire to serve the country, but a selfish desire to serve themselves in corrupt enrichment. Their eyes are focused on the oil money without the slightest realization that oil money is transient and has the tendency to make the earner stupid.
Nigerians are now asking questions, though with little response from government. They want to know what happened to the Excess Crude Account recorded since the past three and a half years. In 2011 the budget was based on $75 p/b, but the oil market price rose to $100 p/b. For 2012, the budget was predicated on $90 p/b whereas the crude price remained at $100 p/b. In 2013, the market situation was virtually the same. However, the 1st, 2nd and 3rd quarters of 2014 witnessed an astronomical rise in crude price from $100 – $118 p/b, against a $73 budget benchmark. There should be an explanation as to the whereabouts of the excess funds for all these years, as there is no proof that they were consumed by any extra—budgetary bill. Besides, Nigerians also deserve to know if the 2014 budget had a 100 percent implementation regime or whether there was a surplus in our account. The House/Senate Committees on Finance and Appropriation are in a position to know this.
In the short-run, however, the federal government, as a matter of necessity, has to “squeeze” its Internally Generated Revenue (IGR) sources (especially Customs and Excise, Nigeria National Petroleum Corporation (NNPC) and the Federal Inland Revenue Service (FIRS) with the intention to block all leakages and get the best declarations from them. In like manner, other parastatals/agencies of government such as the NPA, NIMASA, CBN, NCC, NERC, DPR and over 40 others, must be compelled to forward the profits they have generated into the Federation Account, to save Nigeria. To further cushion the effects of the deficit budget and austerity measures, the salaries/allowances of members/workers/aids of the Presidency, National Assembly, and the Judiciary should be slashed by a minimum of 35 percent as an adhoc sacrificial measure, because to whom much is given, much is also expected. According to Olisa Agbakoba, profits from the maritime sector and other agencies can fund the 2015 budget.
As a long-term measure, Nigeria must adjust to the reality of producing and consuming its own products, instead of being import-obsessed. To give fillip to the above, government must increase the productive capacity of the citizenry. This, of course, brings the issue of energy consumption to the front burner. Without regular electricity, productivity will remain a nightmare in Nigeria. In looking further inward, government must develop the mines and agriculture aggressively. Rather than waiting and relying on federal monthly allocation, each state should make efforts to develop its rich solid mineral potential hitherto abandoned due to oil-money “long-throat”. The same goes for thousands of tourist destinations across the country yearning for development. Governments should invite private/corporate investors, local or foreign, and provide them with the necessary industrial environment to enable them develop mines and tourism sectors. Countries such as UAE, Israel, Saudi Arabia, Italy, Tanzania, Uganda, Kenya, Egypt among others, fund their budgets and development projects mainly from tourism and non-oil revenue sources.
The scientific development of agriculture and its ancillary industries is, without doubt, the beginning of wisdom in fast-tracking economic development. It will provide the capacity for Nigeria to feed its citizens without being a wholly dependent or beggarly nation. It will equally provide jobs for over 65 percent of the people including young graduates, thereby reducing unemployment significantly. President Goodluck Jonathan’s, agricultural policy, in fairness to him, looks quite robust. But many are yet to see the positive results. The price of food is high. Nigeria still shamelessly imports products such as flour, rice, vegetable oil, apple, pineapples, tomatoes paste, sugar, wheat, fish, chicken, beef, leather from the limited land resources of the West and Middle East.
In a gripping analysis by Forbes Magazine of June 2013, “roughly 60 percent of the world’s uncultivated arable land lies in Africa. Nigeria alone has 84 million hectares of arable land, of which only 40 percent is in use. The rest is lying fallow.” What is more, over 70 percent of Nigerian land is fertile and flat, and there is water almost everywhere. Thus, if Nigeria starts to invest in agriculture now, in the next 10 years, we will be able to feed ourselves and have surplus for export. Therefore, the critical challenge facing Nigeria is not lack of human and material resources, for we have them in abundance—labour, fertile land, solid minerals, good weather among others. Rather, we need to boldly de-emphasize oil as the “god” of our economy and evolve a charismatic leadership capable of galvanizing our vast, but “wasting” potential into an economic tool-kit needed to salvage Nigeria. True, we need a change from impunity, deception, corruption and business as usual that have characterized our government since 1999. It’s not going to be easy, but never mind, we must carry our cross. “What we refused to learn by scolding, we must learn by spanking”, with courage.
John Daniel Obioma is an Associate Editor with The Economy magazine