BY UCHENDU, PATRICK C.
It is no longer news
that the Nigerian economy is hurting badly. The signs of the ugly state of things
are there for all to see: the slump in global oil prices which has adversely affected
the nation’s oil revenues, the pressures on the naira as a result of declining
oil prices and depleting external reserves and the consequent hike in the
prices of goods and services. They are only a few pointers to the appalling
state of the economy. There is no gainsaying the fact, therefore, that the
country is entering a dreadful period of economic recession that can fittingly
compare with the economic downturn of the 1980s when similar misfortunes
plunged the nation’s economy into a comatose state.
It is interesting to
note, however, that before the present turn of events, Nigeria witnessed a
steady surge in her economic fortunes with the price of oil rising
significantly from about 16 dollars per barrel in 1999 to a record peak of 145
dollars by mid-2008 (Wikipedia). During this time which was reminiscent of the
oil boom era of the 1970s, the nation raked in enormous wealth from crude oil
sales. Ex-President Olusegun Obasanjo who was in power for most of this period
could gladly have
borrowed the well-worn cliché from the 1970s that the problem of Nigeria was
not money per se, but how it was to be spent. He proceeded to establish an
Excess Crude Account where the surplus revenues, or windfall earnings (as touted
then) were paid into. Such was Nigeria’s foreign exchange proceeds that before
President Obasanjo left office in 2007, the nation’s foreign reserves stood roughly
at a whopping 47 billion dollars, representing over ninety percent increase
from the paltry 3.4 billion dollars that it was prior to 1999 (See: CBN Journal of Applied Statistics Vol.4
No.2, 2013). Nigeria’s enormous
stock of wealth at this time is better appreciated when you consider the fact
that before making its exit, the Obasanjo administration had spent countless
billions of dollars on projects and had also paid off the country’s external
debts that had accumulated over several decades. This streak of good fortune would
continue under subsequent administrations, from Yar’Adua to Jonathan. However, from
December, 2014 onwards, crude oil prices began to see sharp declines as robust
global production, propelled by certain dynamics in the international oil market,
exceeded demand (See: Independent
Statistics and Analysis, US Energy
Information Administration).
A number of theories
have been postulated to explain why this happened, such as the one which points
to the lag in economic activities in India and China both of which now constitute
Nigeria’s biggest oil markets, alongside the United States (See: Nigeria’s Biggest Oil Consumers Cut their
Imports, Nigeria Daily News). Another points to the plot by the American government
to punish Russia for annexing Crimea, a part of Ukraine, in March, 2014 (Russia
like Nigeria has an economy which thrives on oil). One theory links the Saudi and
the American government to a similar plot, but points to Russian involvement in
the Syrian crisis as the motivating factor. There is yet another which ties later
oil-price declines to speculations arising from the Paris summit on climate
change held in December, 2015, in which nearly 200 nations signed a pact to
combat the ever-increasing challenge of global warming. While we cannot fully exhaust
this list of possible theories in one write-up, it is important to note how the
individual economies of different countries in the international economic system
are not immune to the shocks arising therefrom.
Bearing this in mind,
therefore, one question we must not fail to ask is how Nigeria can evolve a relatively
stable and vibrant economy that caters for the needs of her people without falling
prey all the time to the dynamics of the international oil market. Of course,
Nigeria is not the only country facing hard times now because of the drop in
oil prices. Other countries like Russia, as noted earlier, in addition to Venezuela,
Iran, Iraq, and a host of others are experiencing similar challenges. But why
we must not take solace in this knowledge is that there are still other oil
producing nations such as Saudi Arabia, Kuwait, and the United Arab Emirates
that have maintained fairly stable economies since the crisis began (See: Falling Oil Prices: Who are the winners and
losers? By Tim Bowler). Why Nigeria’s case seems to be even more peculiar
and pathetic is that, with four dysfunctional refineries, she still relies on heavy
fuel imports to meet up with local demands and, given the current drop in crude
oil prices, you would expect that there would be a corresponding decrease in
the pump price of petrol. But not in Nigeria, may be in another country in
Europe or elsewhere on the planet! In Nigeria, the poor masses who bear the final
brunt of the cascading oil prices by way of job losses, a weakened currency and
other austerity measures the government might adopt to shore up the country’s
budget, also have to contend with a horde of other faceless characters (the
‘cabal’ in the energy sector) whose monopoly of the petroleum industry for many
years have endowed with the ability to manipulate the availability and affordability
of petroleum products as they deem fit, leading to artificial shortages at gas
stations and unnecessary hikes in the prices of these products.
Consequently, if we
must evolve that relatively stable and vibrant economy-an economy that does not
easily cave in to the pressures of the global economic system, and yet meets
the needs of millions of ordinary citizens-we must learn to put the people
first in our economic policies and programmes. Putting the people first would
entail pursuing vigorously a policy of job creation, especially through private
sector initiatives, fixing existing infrastructure and developing new ones to
cater for our teeming population, and providing safety nets for the sick,
unemployed, disabled, the elderly poor, etc, through modest welfare programmes to
help lift our people out of poverty. To this end, the government must engage
other economic stakeholders-policy analysts and experts, captains of industry,
the civil society, labour unions, the organized private sector, etc- with a
view to drawing up sound economic policies tailored along these lines. The government
must also summon the political will to implement the policies and programmes
formulated at such fora. Next, government must stop paying lip service to the
ever-urgent need to diversify the economy and start shifting the emphasis away
from oil to other lucrative areas like agriculture, manufacturing, construction/fabrication,
public utilities, solid minerals, tourism, entertainment, etc, some of which
constitute the real engine of economic growth in many countries. The experience
of Nollywood which steadily rose from obscurity to international limelight,
becoming the second largest movie industry in the world, currently valued at 5
billion dollars and boosting Nigeria’s GDP by several billions of dollars, immediately
comes to mind as one example of how far other areas of economic activity can go
if prudently managed (Nollywood was responsible for making Nigeria Africa’s
largest economy by GDP size and the 26th largest in the world at the last
rebasing in 2014). Other examples such as the Dangote Group which makes
millions of dollars in profit from local manufacturing and non-oil exports and the
Innoson automobile revolution, could just be the kind of bulwark Nigeria needs
against the forces of global market volatility, while creating a better life
for her citizens.
In conclusion, we must bear
in mind that the problem of price fluctuations as a result of market volatility
is a normal occurrence in a market-based economy where the prices of goods and
services are determined by the forces of demand and supply. The international
economic system is governed by the same principles and will continue to
generate impulses that affect the individual economies of different countries
for good or ill. For countries like Nigeria with a mono-product economy, this problem
poses even a much bigger challenge because sudden declines in the price of that
particular product puts the whole economy to jeopardy as we are currently witnessing. However,
Nigeria can create its own defenses against the negative impulses emanating
from the international economic system, while leaving her economy open to the
positive ones. She can do this by evolving sound policies that put the people
first-their hopes, aspirations and well-being-and by exploring other avenues
for revenue generation besides oil. In so doing, we can overcome our numerous
economic travails.
(Originally published
in a school magazine-BOSSS Light, 5th Edition, 2016).
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