Oil mono-economy: Lessons for the communications sector

Interestingly, Nigeria has most of the required ingredients to support mass broadband penetration all over the country. With 5+ submarine cables, the country accounts for $7 billion of Africa’s $10 billion subsea investments providing significant wholesale capacity to access the internet.

The Nigerian oil and gas industry has grown steadily since the first significant oil discovery in 1956 and has since become the mainstay of the Nigerian economy. The country boasts of 28.2 billion barrels of crude oil reserves and total proven gas reserves of 165 trillion standard cubic feet (scf), including 75.4 trillion standard cubic feet (scf) of non-associated gas. The country is usually referred to as a gas province with pockets ofoil as its maximum production capacity stands at 2.5 million bpd.

Over six decades after the discovery of oil in commercial quantities, the economy has however remained largely dependent on oil. The implication is that Nigeria’s ‘oil mono-economy’ status portends that oil still accounts for about 90% of exports and over 80% of total governmentrevenues. With this, the economy has been substantially unstable.

More disturbing is that financial resources accruable from the oil industry have been plundered by politicians and government officials in connivance with multi-national oil companies. This shocking news emanated from a communiqué issued at the end of The Savings and Stabilization Mechanism for Nigeria, by the Shehu Musa Yar’Adua Foundation after a roundtable forum inLagos.

A glimpse of the communiqué recalled that given relatively high price of crude in favour of oil producing Nigeria, the Obasanjo led administration established the Excess Crude Account (ECA) as a savings mechanism “a rainy-day fund”, to ensure fiscal stability. This ECA was to be invested in a Sovereign Wealth Fund, into any of three vehicles: Future Generation Fund
(FGF), Nigerian Infrastructure Fund (NIF) and the Stabilization Fund.

The communiqué sought to gauge the transparency of government in the ECA administration and analyzed an 11-year period between 2007 to 2017; it also split the review period into 2007-2014 and 2015-2017, to cover successive economic governments. The study, however discovered inconsistencies with public data as a difference of 22.8 million barrels (cumulative value ofover $1b) in NNPC’s report between an initial edition published in 2014 and a subsequent edition published in 2016.

Also, it was observed from an account by the Minister of Finance, Kemi Adeosun that within a space of 10 months, ECA funds were depleted from$3.93b in July 2016 to $2.45b in April 2017 without an explanation how the funds were spent. The sources were reports from the Central Bank of Nigeria (CBN), the Nigerian National Petroleum Corporation (NNPC), the Budget Office and the National Bureau ofStatistics.

So, within eleven-year period 2007-2017, $167.5 billion (N24.27 trillion naira) was expected to have accrued to the ECA. Regrettably, approximately N11.6 trillion is unaccounted for! As only USD$2.32 available as at December2017, based on statistics by the Federal Ministry of Finance. A total of$82.26 billion or N11.579trillion (49%) developed wings. We don’t need a national conference before we can appreciate what N11.6trillion would
have done for this economy. Is oil actually a blessing or curse to Nigeria? The study also highlighted the inability to account for higher ECA despite the rallying oil prices.

As other nations march into the industrial revolution 4.0 where technological disruption commands economic interests, Nigeria clings to its‘leaking cup of oil’. Yes, the cup leaks because very soon revenue accruablefrom oil would become quite meagre and unattractive.

While other economies are sustaining technological exploits by adoptingblock chain technology, artificial intelligence, machine learning, Big Data,biometrics, and others powered by broadband penetration, Nigeria’s economicdiversification mantra has been marred by legislative somersaults and a lackof political will to pursue a futuristic agenda.

While the oil sector has over the last few decades contributed significantlyto our foreign exchange earnings, it has attracted what has been called the‘Dutch disease’, a resource curse with negative impact on an economy. Thecountry’s over dependence on oil is not only responsible for the downturn inthe economy but it is also behind the emergence of a redundant humanresource base and economy vested with level of corruption.

The Mono-economy grip of crude oil led to the neglect of agriculture, an over-bloated public sector, financial indiscipline, corruption, nepotism andlack of accountability. For Nigeria to attain the pinnacle of her success,its economy has to be diversified. Diversification does not come in avacuum; sustainable development of other sectors of the economy can only be
achieved if we divest from the current mono product economy.

With oil price volatility and its severe impact on the Nigerian economy,diversification is actually not an option. We are one oil crash away fromanother economic depression and may sooner than later, be unable to meet ourbasic social and infrastructural needs. Nigeria must open up various sectorsof the economy and decentralize its attention from a mono-crude oil economy.It is time to look beyond oil and into other sectors that can improve the
country’s economy.

To address the structural imbalance of monolithic (mono-product) economy dependency in Nigeria- oil, efforts should be towards deepening the non-oilsectors such as agriculture, tourism, manufacturing and of course, thetelecommunications sector. However, this is still predicated on initiatingvarious supportive policies and incentives such as protectionism, tradeliberalization and empowerment of local players.

Telecommunications has been described as a pivotal stimulant of economicgrowth, as it underscores all segments of a country’s socio-economic life.Most of the countries that have leapfrogged development challenges over thelast five decades have technology innovation to thank. South Korea forexample, has in less than half a century, risen from chronic poverty tobecome one of the world’s most dynamic industrial economies. It haspositioned itself as a global player in technology in sectors likeautomobiles, semi-conductors and telecommunications, and its growth wasaccomplished despite resource constraints and geopolitical uncertainties.

Closer home, Rwanda has led a technology revolution which enabled it forge anew path after crippling genocide wars. The land of a thousand hills isshaking off its negative image as a land-locked country forever linked withthe 1994 genocide, in which an estimated 800,000 people were killed. Rwandais possibly the only African country that has a smart-card ticketing system(twende), the latest in a string of technological advances that areunleashing rapid changes in the economy and transforming Rwanda into aregional hub for business communications and information technology. Thecountry has adopted a mixture of business-friendly policies and nationwidebroadband infrastructure to attract investor attention. It now ranks 41/190countries in the global “Ease of Doing Business” rankings, up from 143 in2009. In Africa only Mauritius fared better at 25.

While Nigeria is still a distant 145, it is recording some progress adopting technology. While its broadband plan seems to have hit a brick wall, the country moved up on the Ease of Doing Business index 24 places (from 169)after the Federal Government collocated its critical server infrastructure at MainOne’s Tier III data centre, MDXI. But it is not yet Uhuru. Moreliberal policies need to be enacted to encourage investment. To ensuresustainable growth, the sector is in need of reform. Experts have cited theNigerian Communications Act 2003 as outdated. It focused more on how voicecalls are regulated and not on matters that relate to the new technologicalera.

The law should be repealed to cover issues around broadband. Truly, theNigerian Communications Commission (NCC) is trying to lead the broadbandpenetration campaign, but there are constitutional issues that should beimmediately addressed; such as high costs of Right of Way, long delays inpermit processing, multiple taxation and duplication of regulatory roles,sabotage of existing fibre infrastructure and of course FOREX accessibility.

Government should consider tax waiver or holidays for operators who mosttimes rely on black market as source of forex to import equipment. It isdisheartening to hear that telecom operators pay up to 38 different taxes,levies and rates, as stated by President of the Association ofTelecommunications Operators of Nigeria (ATCON), OlusolaTeniola. Theabandoned Broadband plan addresses these issues and promotes pervasivebroadband deployment, increased broadband adoption and usage and theavailability of broadband services at affordable prices, all aimed atmaximizing the political and socioeconomic benefits of broadband.

At this juncture, there is need to re-echo that telecommunicationinfrastructure remains one of the major issues affecting technologydeployment required for growth and development in the country. Though wehave departed from the dark era characterized by slow Internet links, poorservice, high cost, lack of infrastructure and a retrogressive telecomsmonopoly, much more is required. So has night turned to day? Well, these arequestions we need to ask on sustainability plans for the sector.

Interestingly, Nigeria has most of the required ingredients to support mass broadband penetration all over the country. With 5+ submarine cables, thecountry accounts for $7 billion of Africa’s $10 billion subsea investmentsproviding significant wholesale capacity to access the internet.

Unfortunately, most of this international capacity remains stranded at thecable landing points in Lagos.We need to implement the Infraco’s shared infrastructure model and encourageoperators to deploy infrastructure to enable diversification from oil and the creation of new jobs. Technology is a key driver of trade and attractsForeign Direct Investment (FDI) through stimulation of business activity andthe guaranty of better education opportunities, improved healthcare publicservices and safety.

The implementation of a technology policy requires long-term commitment and significant action by Federal, States and Local Governments, alongside strong private sector participation. It will not be out of place to suggest that the USPFund should be utilised to even support the InfraCos to roll deploy services towards ensuring the underserved get connected. We can no longer afford to neglect or play politics with our future. We can avoid the mistakes of the oil and gas sector and begin to position a morediversified economy with telecommunications as anchor.