A world without oil is nearer than we had imagined. Large consumers of oil are accelerating plans to switch to clean/green energy. This means sooner than later, oil will lose its importance and consequently, the price will plummet. Thankfully, Nigeria is also gradually moving away from oil. In 2015, without realising it and for the first time since 1971, Nigeria earned more money from non-oil sources than from oil revenues. This, of course, was due to plummeting oil prices and a consequent rise in non-oil tax collection.
The government is now capitalising on the gains by ramping up efforts to diversify Nigeria’s economy and revenue sources away from oil. The reforms must be fundamental and far-reaching to ensure the country finally and decisively moves away from oil as the foundation of its political economy.
India, the largest importer of Nigerian crude, has been making big push for electric cars to solve the country’s unbearable pollution problem. Although, its transport minister’s boast in 2017 to shock the automobile world by moving India to 100 percent electric cars by 2030 is unrealisable, the country’s commitment to clean energy is unmistakable. It has signalled its intention to become a “global hub of manufacturing electric vehicles.” More concretely, it recently laid out plans to convert its fleet of buses to electric vehicles.
China, another high-fuel consuming country, is already the world’s largest electric market. It has the world’s largest network of charging stations for electric vehicles and is also the world’s largest manufacturer of batteries – a critical component of electric cars.
Most countries in Europe – another key destination for Nigerian crude – have set targets to phase out conventional combustion engine cars latest by 2040.
These fundamental energy changes across the world will not only have a huge impact on the price of oil globally, it will directly affect Nigeria and the amount of revenues it can get from oil.
Perhaps, it is that realisation and the revenue challenge brought by lower oil prices that has led to the current aggressive move towards tax and revenue collection by the federal government. This is a good first step. For long, dependence on oil money has made us lazy and unwilling to realise our tax and revenue-generating potentials as a country. This needs to change.
Nigeria must now develop also a duty-based civic culture that will lead to a much more productive social contract between the government and the people. This will be the permanent solution to the problem of wanton corruption and lack of accountability and transparency in government.
The government must also ensure that its aggressive tax compliance and revenue drives complies fully with the law to guide against cases of shakedowns, double taxation and infringement on rights of individuals and businesses.
Much more fundamental however, is the need to develop a strategy for fully diversifying the country’s economy and revenue sources. We believe that should be one of the key functions of the recently constituted Economic Advisory Council and not the duplication of the functions of the National Bureau of Statistics (NBS) as the president has asked them to do.
