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Oil and Nigeria’s errant economy

By Luke Onyekakeyah
17 March 2020   |   4:24 am
It is disheartening and lamentable that anytime there is shock in the price of oil, no matter how small, the Nigerian economy goes into tantrum and the “economic managers” begin to run helter-skelter looking for “oxygen mask” to put it on life-support.

It is disheartening and lamentable that anytime there is shock in the price of oil, no matter how small, the Nigerian economy goes into tantrum and the “economic managers” begin to run helter-skelter looking for “oxygen mask” to put it on life-support. This episodic tantrum is a national embarrassment that the country’s leadership don’t want to appreciate and address, which explains why the problem persists.

Each time the national budget is being prepared, the “experts” recognise that the dollar benchmark could change. They recognise that should the change point downwards, the budget would be messed up. While the “experts” recognise all these, they go ahead and prepare the budget and leave it there, sit at a corner hoping that the oil price doesn’t go down.

If, at the end, nothing happens to the oil price, or, if at least it remains stable at the proposed budget benchmark, they puff champagne, wine and dine in merriment. Hurrah, the projections based on hope, fear and uncertainty did not backfire. The temporary stability would have given false proof that the experts made a proposition and it worked. But they forget to realise that if it worked for this year, there is no guarantee that it would work the following year.

The “experts,” over the years, have failed to tell the government/leadership the truth; that it is dangerous and unwise for Nigeria to be putting all her eggs in one basket. No “expert” has been able to muster the courage to tell the leadership to divest from oil and diversify to save the economy from imminent collapse.

But which country or countries run their economy based on fragile hope that hangs on factors that you don’t control? Rational economic planning/management must be based on facts and figures. It was the legendary Albert Einstein who said it is madness to continue doing the same thing and expecting a different result. Is it not madness to be running the Nigerian economy the same way, every year, and expecting a different result – growth? How do you prepare a budget based on oil whose price is indeterminate?

How Nigeria could be struggling with oil price fluctuation every now and then without an attempt to resolve it once and for all is most perplexing. Oil price vacillation is a reality that cannot be controverted because the cause(s) are often beyond human control. Anything can happen anywhere in the world and the price of oil is affected. Something like corona virus that has triggered the current oil price downturn is extraneous and outside human control. Did any expert anywhere project that such a deadly virus would emerge from China and spread worldwide to shake the global economy?

I don’t give a hoot if the oil price falls to N20/barrel or lower. Perhaps, it is only then that Nigeria would wake up from slumber and do the right thing. Why the hysteria every time the price of oil falls below the imaginary budget benchmark? There is no sense in doing that if the economic managers did their work well.

In this country, government always rings the alarm bell whenever the oil price falls. But nobody hears anything when there is boom in price. Between 2006 and 2009, for instance, the price of oil went from $74.59 to $109.25. Again, from 2010 to 2013, the price of oil rose from $84.24 to $100.95. The price in 2014 was $93.24 before it went down to $45.55 in 2015.

Over this boom period, oil producing countries reaped huge revenue that the wise ones applied judiciously to uplift their economy. Nigeria reaped huge petro dollar. Countries like Saudi Arabia, the world’s biggest oil exporter, took full advantage of the sustained rising oil prices to build new cities.
The projects were designed to burnish the country’s image, develop non-oil economy and generate enough employment to maintain social stability.

Saudi Arabia reportedly built an “Economic City” named after King Abdullah from past oil boom. It is a mega project that cost about $27 billion. The integrated city was designed to include a power plant, a desalinization plant and a port, industrial district, a university and residential area for two million people, among other facilities. It is definitely an ultra-modern project, strategically taking advantage of oil windfall to boost that country’s economy.

The catalogue of countries taking advantage of increased oil revenue to boost their economic potentials is noteworthy. Even the newly oil-exporting countries like Chad and Sudan are not left out. Reports say the Sudanese capital Khartoum is blooming with new skyscrapers and five-star hotels despite the crisis that plagued the country.

But in Nigeria, nothing happened to show that the country has ever reaped huge oil windfall. Nigeria is a major oil producer, the sixth in the world and obviously, got her fair share of oil prices windfall. What strategic advantage did we get from the oil windfall? Was there a way the citizenry were made to benefit from the oil wealth?

The general economic landscape in Nigeria is still appalling. The general welfare of the masses remains pathetic and depressing. Nigerians are looking forward to the day when they would witness a turnaround in their fortunes arising from a deliberate action of their leaders at all levels.

When I remember that there are countries without oil that have highly developed economies, it strengthens my unconcern about what the price of oil may be. If the oil price comes to $10/barrel, there will be nothing to steal by anybody. If many countries without oil could survive on the other natural endowments they have, then it is foolhardy to take oil as the life-wire of our economy. Oil is just one out of the hundreds of other resources that Nigeria is endowed with. Why then the jittery about oil price?

What Nigerians got from the previous oil price booms was atrocious stealing of the petro dollar by the political elite. The Economic and Financial Crimes Commission (EFCC) has recently jailed some politicians for stealing billions of Nigeria’s oil money put in their care. The agency is also on top of hundreds of graft cases involving huge oil money stolen by the political elite.

When oil price was above $100/barrel, for instance, a large proportion of the income was stolen leaving about 10 per cent that goes into national development expenditure. If oil price comes to $10, the economy will still run as the revenue would most likely be applied judiciously. About 10 per cent is what Nigerians get while the rest are stolen.

Between 1960 and 1967 when the civil war broke out, the average price of oil was $24/barrel. The price went down to $22 in the early 70s. What was recorded as oil boom from 1975 was $58.50. While the Head of State, Gen. Yakubu Gowon built flyovers with oil price of $24, which made him declare that Nigeria’s problem is not money, the present political leadership cannot repair the Lagos-Ibadan Expressway since 1999, or do anything else.

The pre-war period was the golden age of Nigeria. That was when the regions boosted their potentials from diverse economic activities and products, particularly agriculture. During those yester years, there was no oil money to steal. The political leadership in the regions focused on development using what was available.

A lot has been said about restructuring the country to boost economic development to no avail. But there is no alternative to that. Nigeria is held hostage by Section 44 (3) of the 1999 Constitution as amended.

Section 44 (3) states: Notwithstanding the foregoing provisions of this section, the entire property in and control of all minerals, mineral oils and natural gas in under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly.

Beyond any conceivable imagination of Nigerians, this section of the constitution, unreservedly and with total finality, confers the ownership and control of all mineral resources of the country, including those found in the adjoining territorial waters, on the Federal Government. That is to say Abuja has unwavering powers to exploit the minerals as it deems fit without hindrance or opposition. This is the crux of Nigeria economic problems.
The call for restructuring dovetails into the clamour for economic diversification. The two face the same hurdle in Section 44 (3) of the constitution. Unfortunately, the same lip service being paid to restructuring is also paid to diversification. Everyone in government talks about diversification without mentioning the constitutional hurdles facing it. And not until this constitutional brick wall is torn down, there would be no headway for Nigeria, at least, economically.