When the Nigerian Government announced the rebasing
of her Economy in April 2014, making it Africa’s largest, the news was greeted with low ecstasy in the World’s most populous black
Nation—Nigeria.
Located on the West
Coast of Africa, Nigeria sits atop a greater chunk of oil reserves from the
Bight of Guinea making her the World’s sixth major oil exporter.
From pre-colonial and colonial times, the Nigerian economy thrived on
agriculture with exception of the period of the obnoxious trans- Atlantic and
trans Saharan Slave trade. As such, there is usually reference with nostalgic
regrets of the glorious past when groundnut pyramids adorned the skyline in
Kano, and Nigeria was ranked top exporter of oil palm, Cocoa and Rubber. On
these agricultural produce from Nigeria’s constituent regions, the Nigerian
economy thrived at Independence and this stirred the Country’s first
National Developmental plan of 1962-1968.
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| The Nostalgic Groundnut Pyramids of Kano in the 1970's Source:http://www.abiyamo.com/photo-kano-groundnut-pyramids-1975/ |
Aside agricultural produce, Nigeria had a burgeoning solid mineral
sector. There was Tin and Columbite exploration in Jos whilst Enugu was famed
for her Coal mines; even as the country looked forward to developing exploration
of vast Bitumen reserves at Ondo State and Iron Ore reserves at Ovie Aladja in
Delta State and Ajaokuta in Kogi State. Considering Nigeria’s vast Human
resources in addition to the agricultural and mineral production, Nigeria was
set for reckoning in Africa and alluded as champion of the Black race worldwide.
Fresh from Civil war in the 1970’s, the exploration of Crude Oil in
commercial quantities helped stir the 2nd
National Development plan and the 3Rs (Reconciliation, Rehabilitation and
Reconstruction) of the General Yakubu Gowon administration.
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| PortHarcourt Refinery Company Alesa Eleme Source:http://www.post-nigeria.com/nnpcs-port-harcourt-refinery-company-nets-n11-2bn-profit/ |
Boosted by abundant petro-dollars, the Nigerian economy flourished; the
Naira was founded, decimalized and indeed it was stronger than the dollar as exchanged
for 65kobo whilst the British Pound was worth 2Naira. Foreigners sought to
immigrate into Nigeria and it was said that the problem of Nigeria was not
money but how to spend it.
The advent of oil export into Nigeria’s accruing finances in its
abundance resulted in the neglect of other sectors of the economy It was not
too long before the country had a rude awakening to this slack. The drastic crash
of oil prices in the international market in 1982 forced the government to
finance deficit budgets. Though the country’s government was awash with
burgeoning corruption, the resultant financial crunch turned the begging bowl
into the government hands as it sought international financial assistance to
finance budgetary expenditure and developmental projects.
Then for the first time in the Country’s history, economic woes led to political
turmoil. This ushered in two Coup d’états in the space of two year between 1983
and 1985 led by major General Muhammadu Buhari and Ibrahim Babangida. Upon the
advent of the Babangida administration in 1985, in accordance with
regulations from international credit organizations (IMF and World Bank),
the once enviable strong Naira was devalued amongst several stringent austere
economic measures under the frame work of the
‘Structural Adjustment Programme’.
Under the guise of falling oil prices in the international market, the
Nigerian government began to lag in the implementation of its National
Developmental plans and with infrastructural decadence setting in with a
growing population, the economy cringed as power and manufacturing
infrastructure defoliated under belying malignant corruption.
The advent of democratic governance in 1999 offered the Country exigent
hope especially after years of democratic nostalgia since the famously
‘annulled June 12
1993 elections’.
Buoying on the hope of economic renaissance was the sudden sharp
increase in oil prices on the international market. From a meagre under 20
dollars per barrel, oil prices soared to record levels in 2003. From 50 dollars
per barrel in 2003, it upshot to over 140 dollars per barrel before the close
of the decade. With a production of over 2million barrels per day, the Nigerian
government had more money more than past regimes combined. There was talk of
resuscitation of the power and rail sector, which will in turn boost foreign
investment and the moribund manufacturing capacity of the country.
Additional hope of socio- economic resurrection was offered when in 2005,
the Paris club of creditors wrote off a chunk of Nigeria’s
foreign debt, offering the Country the finance instead, to pour into developmental
project under the auspices of the ‘Millennium Development Goals’ with the
caption of the Conditional
Grant Scheme. Nigeria never had it this good there was much money available
and it was left to the leadership to stir the direction.
“Let's hope that no government will
ever again commit the future generation to such heavy burden of debt”..... Gen.Yakubu Gowon
The sudden drop of crude oil prices in the last quarter of 2014 had a
tsunamic effect on the Nigerian economy. Consumer and import driven, the
penchant for foreign exchange dollars forced a trade imbalance and the Naira
went into free fall from N160 to over N180 to $1. Facing an impending budgetary
deficit, the government was forced to reduce the bench mark for expected
revenue income from petroleum from $75/barrel to $65/barrel.
Oil prices has however began to continue its recession has it is
threatening go below $40/barrel. The condition is not being helped as OPEC led
by Saudi Arabia has refused to cut down production hoping to force competitive
shale oil producers in the US and Europe out of market with declining oil
prices which in turn will create a market shortfall then soaring oil prices
again.
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| OPEC headquartes at Vienna, Austria http://www.britannica.com/EBchecked/media/115511/OPEC-headquarters-in-Vienna |
As such, Nigeria’s external reserves has depleted its peak of $62 billion in
September 2008 to just over $36 billion in November 2014. Whilst monies
accruing to the Excess Crude account have been used for ‘subsidy’ payments.
As the oil politricking rages on the international scene, Nigeria is
blighted with a devastating Boko Haram insurgency which has required over 25%
budgetary allocation for the defence sector in the last 3years. With attendant
infrastructural destruction and Human displacement, the Nation is running a
near ‘war economy’.
It is bemusing to note that despite excess petrodollars accruing to the
Nigerian government since the turn of the century, the economic fortunes of the
Country as developing economy needing massive infrastructural development, portending
into the future does not look bright.
·
As an import
dependent consumer driven economy, there’s a continuous chase for foreign
exchange which causes a balance of trade deficit causing a slump in the value
of the local currency.
·
With an apparent
budget deficit and depleting foreign reserves, the government will be forced to
turn to international creditors for loans which in turn will bring attendant
cogs in debt servicing.
·
The continuous
dependence on importation of refined crude due to lack of capacity to meet
local demand causing the government to continually ‘subsidize’ petroleum
products has ripped tangible benefits of that which accrues as an oil producing
nation.
·
The lack or
inadequate investment and development of the solid mineral and agricultural
sector to attain its glorious past will continue to haunt the revenue drive of
the government.
·
The continual
dependence by state and local government on Federal allocation/ the in-viability
of most states which cannot generate sufficient internal revenue to fund
budgetary expenditure will continue to wear down the country's financial
strength
·
The high cost of
governance especially as it pertains to the remuneration of government
officials and their numerous aides will continue to be a financial burden on
the Nigerian economy.
Whilst minute strides in economic development by various governments at
all levels must be acknowledged, it is very important to note that the Nation
is at the verge of another economic crunch which only ‘political will power to
the needful’ do will save.
