The ‘play boy’ days may soon be over

In the past few months, there has been a gradual decline in the prices of crude oil in the international market and this has been a source of concern to economists and financial experts in the country.

As I write, the price of crude oil in the international market is about $74.28/barrel and it may still be lower. Since 1980, the naira has been devalued 10 times, and in reaction to the present situation, the CBN has devalued the naira again to N168/dollar. Reasons why the price of oil in the international market is falling are beyond the scope of this piece. What is, however, of utmost concern to me as a citizen is the way out.

Nigeria with about 170 million people is one of the richest countries in mineral resources in Africa. Large deposits of coal, crude oil, limestone and tin exist in the country. In fact, other minerals such as gold, lead, zinc, kaolin, marble, natural gas, clay and iron ore amongst others are available in large quantities.

Going by the abundance of resources, Nigeria could be regarded as a “land of opportunities” harbouring about 20.3 million unemployed citizens, that is, about 12 percent of the population out of which it is estimated that 5.3 million (25 percent) are youths. Nigeria, however, has to its profile vigorous, industrious and economically responsive people. In the same vein, the population has abundance of the entrepreneurial attributes such as the preparedness to work very hard for economic gains, take risks, endure and continue to take up new occupations coupled with new methods of doing things. All these positives have not yielded much gain at the macro-economic level in the country.

I wonder why the steady reduction in oil price in the international market is giving economists and financial analysts sleepless nights. Is it because of our inability to strategise like a responsible “farmer”? A responsible farmer will always plan ahead of the rainy season and not start working when the rain is over or lament when there isn’t much rain. When a responsible farmer plants a seed, he reaps abundance of crops during harvest. In Nigeria, ministries, departments and agencies (MDAs) at federal, state and local levels have been conducting affairs like “hunters”. A hunter only aims and pursues an animal at a time. That is why we only think of oil and nothing else. All states go to Abuja every month to collect their own share from accruable funds from the sale of oil. Most times, states cannot meet their financial obligations such that salaries of some workers have to be reduced to pay others. Now that have been ordered to have a “contingency plan” for next year, their survival will depend on their economic viability in these austere times. For all the states, hope cannot be a survival strategy in 2015.

There is no doubt that the falling price of crude oil in the global market portends danger to both the monetary and fiscal policy fronts of our nation’s economy. This is because Nigeria derives about 90 percent of its revenue mainly from the sale of crude oil. However, income from the sale of oil in a less developed country such as Nigeria is a “fortuitous and externally generated windfall depending almost entirely on external expertise, direction and markets”. While it has significantly increased revenues accruable to government since 1970s, the very sluggish economic growth since then shows that additional revenues from oil have not immensely improved the productive capacity of Nigerians. When we observed that the economy did not react to reforms, we rebased our GDP which makes our country the “biggest economy” in Africa. If we are not enjoying the benefits of our “biggest economy”, it only shows that something is wrong and it is the right time to take decisions that would improve the economy of our dear nation.

The world’s oil supply and demand situation is not an area that I am competent to discuss but experts have predicted that the price of oil will further go down to, say, about $60/barrel. What will then be the fate and value of the naira? I am praying fervently that the naira will still have a value by the time the price of crude oil in the international arena stops falling. What further compounds the problem of the naira is that we are an import-dependent nation to the extent that we import what we have in abundance. The revenue from sale of crude oil contributes 14 percent to the GDP, while the non-oil sectors comprising agriculture, manufacturing and service contribute 86 percent to the GDP. Why can’t we develop our agriculture, manufacturing and service sectors such that accruable revenue makes up for about 95 percent of the country’s foreign exchange earnings? This will reduce attention given to oil, while protecting the naira from further punishment and undue pressure. This is because in economies with productive capacities such as Malaysia, Indonesia, India, and Singapore amongst others, the falling crude oil price is a bonus to the people as pump price of fuel has reduced and same with consumer goods. India and Indonesia have removed fuel subsidies but this move has not affected the price of petroleum. I believe we will do same here to enable us sustain and if possible improve our economic growth rate.

We have been informed that taxes are likely to be increased but there is no information about the value to be added by government to the organised private sector to enable manufacturers and others improve their productive capacity with ultimate reduction in cost of goods and services.

A recent World Bank reassessment of poverty and growth indicates that “Nigeria has a strong economic track record with a growth averaging 7 percent annually with concentration in agriculture and trade”. The survey further reflects that the “national per capita poverty rate remained very high at more than 60 percent of the population, with insignificant evidence of poverty reduction”. According to the same report, reducing poverty will require non-oil growth and a focus on human development.

We need to start thinking out of the box as a World Bank report indicates that “with the rebasing of our economy, Nigeria ranks 26th largest economy in the world with its wealth and human resources. However, its poverty rate is higher than that of Niger and Benin Republics”.

Despite all odds, there are quite a number of assuring comments by some government officials, that Nigeria has alternative ways of solving the current economic problems occasioned by oil pricing, and that the fall in the price of oil would not negatively affect the economy.

This may be true but would those in power have the political will to solve the problems to the benefit of the common man? If the truth must be told, we need to cut cost through waste reduction in the public sector without compromising productivity, while available funds are to be spent prudently and efficiently.

Accountability and transparency must be encouraged in governance; if not, the “play boy” days may soon be over.

M.A. Johnson