Behold, economic restructuring opportunity knocks
The battering of the Nigerian economy by the COVID-19 pandemic has offered the country another golden opportunity to seriously consider the revisiting of the seemingly vexatious subject of political and economic restructuring, to guarantee the immediate and future viability of the country. The serious shock the Nigerian society has experienced as a result of this pandemic has raised questions in many quarters whether the current pseudo federal structure, which we currently operate can take us to the Promised Land. Hence there have been growing calls for the restructuring of the country as the country’s main source of income is facing an unprecedented threat with global crude oil prices falling below the unit cost of production.
As this newspaper noted the other day, many countries including Nigeria and Saudi Arabia, among others, have been offering to sell their unsold stock of crude at a discount. Global demand for oil has fallen sharply starting from China where the COVID-19 pandemic started and across the industrial nations with factories shut, aviation grounded and lockdown in most economies.
While Nigeria had reacted to the drastic fall of crude price to less than $25 per barrel in April 2020, from about $60 in January, and revised its 2020 federal budget benchmark price for crude from $57 to $30 per barrel, it is not yet “Uhuru” for the country as oil price is currently selling even below $20 per barrel. The fiscal crisis generated by this forced the government to approach the International Monetary Fund (IMF) which then approved an emergency loan request of $3.4 billion from Nigeria, to be repaid within five years, to assist the country tackle the impact of the coronavirus pandemic. This IMF loan is a huge favour to Nigeria as this is the largest allocation it made to any African country over this period. In addition, at the request of Mr. President, approval was obtained from the National Assembly for the Federal Government to borrow another N850 billion from the domestic capital market, at the risk of crowding out the private sector in their need for credit. With a huge public debt portfolio of over N25 trillion, before these new additions, and a biting debt service payment situation, the question arises as to how long the country will continue on this path of borrowing. This is sad. As the iconic Benjamin Franklin once warned, ‘He that goes a-borrowing goes a-sorrowing’.
This pitiable situation has revived the perennial call for the restructuring of the country’s political and economic structure. The economy has been going through the cycle of booms and burst, particularly since the country adopted the unitary system of governance. Nigeria needs a paradigm shift as the current economic structure and rigmarole cannot be sustained. The country’s economic prospects appear dim, as evidenced by recent downgrading of the economic outlook by Fitch international rating agency. Economic diversification as widely articulated in the government’s Economic Recovery and Growth Plan (ERGP) has not yielded the desired results and the country still depends on oil as its main source of foreign exchange earnings. The inflow of remittances has dwindled, the naira exchange rate has depreciated significantly, foreign reserves are falling by the day and the inflation rate is on the increase. Funds available for sharing at the Federation Accounts Allocation Committee meetings have been dwindling over the past months and there is the fear of many state governments not being able to pay salaries from next month loom. All these are outcomes of running a unitary government where everyone has to run to Abuja to get economic succour as well as depending on a single source of income for the country.
It can be recalled that this overly dependence on Abuja is one of the reasons the country could not save during the time of boom in the global oil market. Specifically, the state governors should recall to their chagrin that as minister of finance under the Jonathan administration, Ngozi Okonjo-Iweala literally begged them on end to create a $20 billion worth of Sovereign Wealth Fund, which unfortunately they rejected. She was insulted and taken to court by the then governors of Lagos and Rivers states, among others. If the minister had succeeded, the Sovereign Wealth Fund (SWF) would probably have been in the region of about $30 billion by now, if well managed. She was only able to squeeze out $2 billion for the fund to invest in the SWF, which has reduced in volume and value. If the investment portfolio as then proposed by Okonjo-Iweala had succeeded, would there have been a need for a $3.4 billion emergency loan from the IMF, at this time? This is an indication that the state governors should find ways of cutting their coats according to their cloth. In this regard, the COVID-19 pandemic affords the country a golden opportunity to embrace a constitutional change that would help us manage the country’s diversity using fiscal federalism as a starting point.
Following from these, eminent Nigerians from various groups such as the Yoruba Council of Elders, the Ohanaeze Ndigbo, the Pan Niger Delta Forum (PANDEF) of the Nigeria Delta Region and the Middle Belt Forum have once again called attention to the need for the country to see the current economic challenge as a great opportunity to make the sub national governments the engine of economic growth. Even the manifesto of the ruling political party, the All Progressives Congress (APC) supports the restructuring of the country. The country is potentially very rich but the structure it currently operates continues to drag it down from unleashing its potential to be the pride of the black race.
Some issues need to be urgently addressed. First, there’s the need for a continuation of the constitution review, which the federal legislature had begun before the advent of COVID-19. In the First Republic, it was the federating units that exploited their resources and paid a royalty to the Federal Government. There was no federal allocation for the regions that would necessitate going to the centre to collect money based on a specific percentage. At a stage, it was 50/50 implying that the regions kept 50% and remitted 50% to be shared with 20% to the Federal Government and 30% shared among the regions.
Meanwhile, there is a great need for a drastic downward review of the cost of governance with a total review of the emoluments of political office holders as the state of the economy cannot sustain such. Those in authorities should note that the unitary system has failed the nation. This is a time to go for an abrogation of the exclusive clause on mineral resources as one of the answers to the perennial financial lack of the federating states. Governors and individuals should brace up for serious challenges if this is not done soon. This period of health and economic adversity is therefore a fitting opportunity to redesign the present to secure the future in a proper federation. With little or no money coming from oil and COVID-19 destroying lives, this is a time for Nigeria to act on its future without oil.