Saturday, 30 January 2016

WHY GOVERNMENT SHOULD RETHINK NIGERIA’S ECONOMIC BASE

President Muhammadu Buhari
The Nigerian economy is in dire straits with the potential to get worse if sound political and economic judgment is not brought to bear on the affairs of state. With the nation’s foreign reserve significantly depleted, a huge population and oil prices crashing daily for a mono-product economy like Nigeria’s, the impact is only better imagined if all the fundamentals, including human discipline are not mustered to manage this situation.

The government presented its 2016 budget before year end and it was premised largely on expected revenue from crude oil sales. Although oil contributes about 14 per cent to the GDP, without doubt, it drives the entire economic process and for the 2016 budget, the government based its calculation on $38 per barrel. By the time of its presentation to the joint session of the National Assembly, the price of oil had nose-dived and has since descended to below $30. Oil experts and other market indices are pessimistic in good measure and now predict that the price could plummet to below $15 per barrel in the course of the year. So, when the Senate Committee on Media and Public Affairs gave a hint of the intention of the National Assembly to shift the oil price benchmark for the budget, it was not totally unexpected.

However, even the budget’s designed focus on non-oil revenue remains a mere desire as the budget fundamentals do not indicate a substantial fiscal commitment to its realisation. Unless the government intends to tax Nigerians to death or resort to borrowing to realise its revenue, there is certainly no money to finance this plan. Indeed, there are no easy solutions and all Nigerians must brace up for serious re-orientation if the nation would not be postponing the doomsday.

Of course, relying on the shifting dynamics of the international political economy, is no hope at this critical time. The Minister of State for Petroleum is looking to an emergency OPEC meeting to explore the possibility of production cut to shore up price. This did not succeed even in the last December meeting of the cartel in Vienna. The prospects of such are even doomed following the expected easing of the economic sanctions on Iran after its nuclear deal with the Western powers and the insistence of the big producers, namely, Russia, U.S. and Saudi Arabia, to glut the market with increased production. This gloomy picture is then made complete for an oil-dependent country like Nigeria with the speculated slowdown in Chinese growth, and the boost in alternative sources of energy.


So, Nigerians and the ruling class should know that hard times are here. It is certainly high time thoughts were directed to alternatives to driving this oil-dependent economy. These times are auspicious for Nigeria to rediscover a new sense of urgency or direction and restructure the economy for good. Oil wealth nudged the country into a certain laziness, characterised by extravagant spending, unbridled consumerism and looting of the public purse by rent seekers and locusts in power. Now that the wealth has been frittered away and money is hard to come by, Nigerians have to suffer the consequences of their wasteful and indolent past. So, urgent steps to restructure the polity and the economy are inevitable especially so that regions or states can begin to create their sanity zones or pockets of efficiency and become centres of development.

The lesson of human history is that adversity concentrates the mind. Let this be the case with Nigeria. A glimpse of this comes from the histories of Japan, Singapore and Norway for example. Before World War I, the Meiji rulers in Japan embarked on massive economic reconstruction through copying of technology from the West and creating the institutional base for its consolidation such as the Ministry of International Trade and Industry.

Singapore created a first world economy through focused and disciplined national reconstruction project championed by Lee Kuan Yew. And Norway overcame its reliance on crude oil following the oil shock of the 1970s and pioneered energy generation from waste recycling. Necessity remains the mother of invention. The governing elite in Nigeria should wake up, redeem itself from irredentism and allow a government structure that the people need to unleash their productive capacity.

This should be complemented in the short term with a clear fiscal policy side to boost the other aspects of the economy. This has not been calibrated in the 2016 budget and the National Assembly should take note as there is still room for remediation. The government should know that this is an emergency period. Nigeria can only achieve transformation through the renewal of the citizens’ minds and a renewed work ethos. Leaders must communicate the reality that the economy is bad in words and action.

To diversify the economy especially using agriculture as launching pad should not be difficult. There is land. There is the good climate and there is a huge population of able hands and brain. Also, there is a huge number of research institutes in Nigeria with research outputs that can be harnessed to achieve the goal of that transformation. Let that work begin now. (Guardian)