We have been down this road before

That the Nigerian economy was, and still is, in a real mess is no longer news. Two things are surprising however. One is that we were caught with our pants down again. The other is that we are responding with the same lack of imagination, again. If our economic mangers refuse to properly wake up […]

That the Nigerian economy was, and still is, in a real mess is no longer news. Two things are surprising however. One is that we were caught with our pants down again. The other is that we are responding with the same lack of imagination, again. If our economic mangers refuse to properly wake up we may be heading for real disaster in 2015. The signals are not too good.
Oil and natural gas account for 96% of our export earnings, and about 80% of our government revenue. Its price has been hovering around $100 a barrel for some time now (going as high as $112.42 last June). We thought we were very comfortable since our medium-term budget plans for 2015 to 2017 have been pegged at $65 per barrel of oil, and the only disagreement is between the Executive and the Legislature, arguing over whether we should benchmark next year’s budget at $73 or higher. We were not paying attention to the oil market, but focusing how to share the loot. Well, the price of oil came crashing down to under $70 a barrel. As of last week, they still were not sure how to respond.
The government came up with some haphazard and panicky measures which are already proving inadequate, indicating that it has no clear grasp of the seriousness of what we are up against. The CBN devalued the naira from 155 to 168 (to the dollar), and widened the margin within which it could be allowed to fluctuate from plus or minus 3%, to plus or minus 5%. But even before the full details were out the Dollar was selling at around N190 in the open market, and showing signs of it could even go higher. In addition, the CBN hiked up its benchmark interest rate to 13%, and took additional measures to ease the pressure on the naira. The Ministry of Finance is proposing to tax luxury consumption, and cut government spending in what it terms “austerity measures”. The president is chipping in with “directives” to the ministries or agriculture and industry to “produce what we consume” and boost non-oil revenue. Same old story, same old song.
Not only are we late again in catching up with changing realities, but we are repeating the same strategies that have been tried, without much success, since President Shehu Shagari, and even before.
That the price of oil usually goes up and down is well known. We were supposed to have an excess-crude fund where we keep all oil incomes over and above the benchmark price for exactly such an eventuality. Our governments, both Federal and States, have bastardized this whole arrangement, with the active connivance of the National Assembly. The current Minister of Finance has been in-charge, since the days of President Olusegun Obasanjo (except for some few years under Umaru Musa Yar’adua) and cannot claim ignorance or innocence. Which austerity are they even talking about? Boosting revenue and cutting non-essential expenditure? I thought that had been the policy of all governments since Shagari, indeed since Murtala Mohammed? These tokenisms only last while the pressure is on, only to be jettisoned after the price of oil picks up again.
Oil markets are inherently volatile, and we have to constantly keep an eye on them, adjusting our game plans as we go along. Or what exactly does the job of “co-ordinator” for the economy entails?
Still, even though volatilities are normal, this current drop in oil prices looks like it could be with us for quite some time, both for economic and geo-political reasons, certainly throughout next year, and perhaps into 2017. We may be looking at $60 per barrel, or even less, in future which calls for a more strategic examination of our options over the next five to ten years.  Boring as it may sound we have to keep on looking at supply and demand very closely. Our oil exports to the US have dried up because they no longer need our sweet crude. Not only has it increased its own production but it seems to have replaced Saudi Arabia as the “swing producer” keen to ensure cheap oil supply globally. This is in their real interests.
For the Nigerian elite, however, cheap oil is not good news. Used to stealing most of the oil revenue, and keeping the masses happy with mere hand-outs, the managers must come up with how to do things differently. The dollar would most likely rise above N200, budgets may have to be trimmed, and the CBN may have to roll out more Naira to keep the economy going, with serious implications for inflation and employment.
We would have to struggle to find customers to replace the Americans, but even that has consequences. China and India would be happy to get our cheap oil. But how much can they absorb in a situation of global oversupply?  Cheap oil also means cheaper shipping costs, so even our Chinese imports would be cheaper, making things more difficult for our own industries, struggling with poor power cuts, and crippling infrastructure. Cheap Naira also means the necessary infrastructure we still require would be more expensive to build.
The way I see things, 2015 may be the year we go back to “national planning”. Every serious country plans, and creates conditions where both the public and private sectors play specific developmental roles of enhancing fortunes and livelihoods.
The changes we are witnessing now are here to stay. We must go beyond “austerity measures” and tinkering with exchange rates and money supply. Enough of all these rosy (and often fake) PowerPoint presentations, road-maps, master-plans and multi-year visions documents! It is time for serious strategic thinking, proper planning, diligent implementation and governance that is accountable; we must change direction, a take another road. We have listened to the same old songs, and seen the same unimpressive dance steps. The masquerade needs a new dance, a more inspiring, and stimulating tune.