by Dr. Anthony Okolie
The current economic situation in Nigeria is serious and has already manifested itself in a gradual devaluation of the Naira. A devaluation that is forced on the country willy nilly instead of one that is made on purpose by informed choice. The current situation is reminiscent of the situation in the early 80s during Shagari presidency. That time, the devaluation started as a result of glut in the oil market and the initial response from Shagari’s government was denial. It was initially viewed as a temporary event that will eventually fizzle out and thus attracted half baked measures that neither scratched the surface nor addressed the root causes of the problem. The populace were of course totally against any devaluation because of the consequent impact of any such measures on the country’s standard of living, given the level of dependence on external economies. However, as the country’s reserves got depleted, austerity measures came into force, recking havoc on living standards which made all of us to start demanding for a change of government. Change eventually came in the form of Idiagbon/Buhari coup and later Babangida’s government. In spite of the changed governments, from 1983 to 1990, the naira got devalued 1898% (in 1983 a dollar was N0.79 and in 1990 one green back was N15.00). Till recently, the US dollar was trading at about N130.00 (you may calculate the devaluation yourself this time) but there was relative stability in the last few years since we had civilian administration. Relatively competent economic management made that stability possible but the facts on the ground today is that we cannot continue living on petrol dollar as before. The report from Nigerian popular press is that the green back is trading at over N170.00 and it is already having devastating consequences in the country, when this is just the beginning. One governor forecasted that some states will collapse. My view is that it is not some states that will collapse but the majority of states will not stand. Even if we deny it like Shagari’s government during his time, it will not change anything. The reality today is that the world can live without oil and as such the slide in oil prices in the world market has not even started. To give you an idea of what to expect, consider the following. Before the formation of OPEC in the early 70s, a barrel of oil was trading at US$4.00 per barrel and in Nigeria most of the oil produced belonged to the oil majors. It was Murtala Mohammed that changed all that in Nigeria by nationalizing BP. Nigeria later joined OPEC and the oil boom started. From that time till 2014, how much did Nigeria earn from oil? What did Nigeria do with that money? Now the reverse is happening and I will not be surprised if tomorrow oil starts selling at US$20.00 per barrel. So in the event of such a scenario, what will be happening if Nigerian states are collapsing today because oil is trading at US70.00? How is this development being perceived in Nigeria?
A Nigerian analyst who commented on this development concluded that the downward slide of petrol prices in the world market has reached its lowest. The government tends to view it that way too but its withdrawal from supporting the Naira suggests it may have noticed how counter productive that exercise is. However, the mindset is still suggesting that the phenomenon is temporary and as such no cause for alarm. In that light, all efforts are still geared towards 2015 elections. Everyone wants to be in the number one office in the country (states, LGAs and other plum offices) in order to be the shearer of the national “Cake”. This time though, whoever gets into that office will discover that the cake needs to be baked first. However, they are no trained bakers. So the questions for all presidential aspirants come 2015 should include some of the following:
So what is really happening and why are the oil prices falling? In fact there are a number of forces at work. The first is the stance of the major consumers of oil in the world. The major oil consumers are the industrial economies of the northern hemisphere (Europe, North America). While they constitute the major consumers, oil has mainly been sourced from Asia which has been prone to conflicts, leading to supply disruptions. Thus the consumers decided to rely less on such regions and improve their self reliance. The result is shell gas exploration and intensified research for alternatives to fossil fuel. The consequence for Nigeria for instance is that if before, America used to be the main consumer of Nigerian crude, today, Americans are not any more. To illustrate the result achieved in that regard, remember that oil prices used to go up each time there is a conflict in that region. Currently though, in spite of the ISIS problems, prices are falling. In that light, what will happen when peace returns to that region? In my view, the speed of the price fall will rather gather pace. Secondly, many environmentalists have long been drawing attention to the impact of fossil fuel usage on global warming. The have also been calling for alternatives to fossil fuel usage. The developed world are beginning to listen to such calls and this is having some effects on the actions of the oil majors who have been propping up the price of oil in the global oil market in spite of the state of energy technology because of their vested interests. The Rocky Fella foundation, for instance, recently declared that it is shifting to renewable energy. Thirdly, the developed countries have long been preparing for life after oil by developing the infrastructure to sustain their economy when that happens. So, while there are currently existing filling stations where cars can go to fuel up their tanks, future cars equipped with electric engines will go to charge their batteries. At the same time, the capabilities of such engines are improving drastically.
Now aware of the reality we all face and that we cannot wish it away, what are the actions required today? To give a context to my suggestions, I would like to refer you to some facts which even Shagari’s government recognized, namely you can only improve a people’s standard of living through improving their productivity which in turn relies on widespread effective usage of modern tools. Digital technology is not possible without metal for instance. This is what informed the metallurgy development project of Shagari administration. It was and is roundly cartooned and ridiculed but the Indians did the same thing around the same time and succeeded. Today, the Indians are sending missions to other planets on their own, in charge of our railways, even the metallurgy etc. So what actions are required?