I don’t think anyone would hold up Nigeria’s response to the oil price crisis as a model of strategic brilliance-austerity measures, luxury goods tax, new crude benchmark, bla bla bla.
Yet the enthusiasm for these policies and the austerity measures itself has been shockingly consistent. Federal authorities have not said anything new and nothing about the opportunities that could come from the crisis, since the finance minister Ngozi Okonjo-Iweala announced the measures in November.
So far, the signs remain the same-not good. The Naira is still gyrating and dizzy from oil money drought and the bad guys –the bankers are having a field day betting against the currency.
Oil price is still falling, having dropped over 50 percent in the past 6 months. Forecasts show the price will not rebound soon even though it will not fall forever. But what that means is that the federal government will continue to experience shortfalls in revenue, at least in the next 12 months.
To top up the sucker punch, global demand for Nigeria’s crude remains epileptic and sick. Besides, there is nothing in the 2015 budget that shows the government imposed any form of austerity on itself. Recurrent expenditure constitutes 91 percent of the budget at N3.97trillion up from N3.57 trillion in 2014. Which means no intentions to deploy infrastructure, which could create jobs. What you have is a budget that appropriates more money for the ‘boys to chop’.
So, expect deficit to GDP to rise back to its former colony, around 2 percent and debt to GDP back to 20 percent. The domestic debt is already touching unprecedented levels- sitting at N7.65 trillion as at September 2014. Pessimistic projections you might want to say, but they are already staring at us.
It is one thing to botch the budget, quite another to confuse its purpose. I believe that in as much as President Jonathan Goodluck or the finance minister can impose all kinds of austerity and tax on Nigerians, trying to wriggle out of the crisis they failed to anticipate. The austerity they really need to impose is on themselves-whether they will choose to think out if the box and look for the opportunities in the failing oil prices or they will cozy themselves in self-interest and the usual economic quackery. I mean, they should have seen this coming rather than leave Nigerians on the point of nihilism.
True, it will just be foolish to sit back and cry about what the dropping oil price is doing to the economy. The key is in recognizing and revisiting the politically difficult ideas and make them feasible. Simply put, do away with the politics of subsidy and take out the fuel subsidy, which cost the country as much as $7 billion a year-a net drag on the economy that have no impact on the poor masses. There is no need pretending it does not exist. This is indeed the time to flush it out and to point to all those unionists and labour leaders who confuse economic reality for debauchery to re-assess their stand against the monster called subsidy.
It is the same falling prices that created the perfect opportunity for India to end its fuel subsidy regime. It is estimated that those subsidies cost Indian government more than $10 billion last year. A host of other countries are already taking advantage of the falling prices to take out subsidy and focus more on reforms that inspires confidence.
There is no reason to remain confident that the austerity measures will pronto solve the financial crisis the country finds itself now. It is going to remain with us like the effect of heart attacks but wise policy makers always look for windows of opportunities in difficult situations to challenge old un-working norms. And so why not take the advantage of the oil induced crisis to do a radical clean up of, for instance, the budgeting process that wantonly creates room for corruption and graft, reduce the size of the federal government and control fiscal irresponsibility across board, alongside the removal of fuel subsidy.
