By Obi Odenigbo
Yesterday; with only $35; I was able to fill up the fuel tank of my modest Kia Optima. That is simply unheard of. And while I am pleasantly surprised by the dwindling fuel prices in this part of the world; I can’t help delving into its ramifications in other parts of the world- especially in my birth country- Nigeria.
Over the past months; global oil prices have dropped to their lowest level in years- plunging by more than 25% from what they were worth 4 months ago. Irrespective of what business journals you read; most analysts agree that this fall in prices is linked to the slowing growth in China and Europe and increasing oil production here in the United States and in post Gaddafi Libya.
Now this is a sobering reality for Nigeria and few other countries whose revenues come primarily from oil. Africa’s largest oil producer could slip into a recession if the current trend continues. And here’s why; nearly all Nigerian exports are petroleum exports!
According to the International Business Times; 95% of all Nigeria’s foreign exchange earnings and 85% of its total revenues come from oil sales! This shocking lack of economic diversity makes our country especially vulnerable to the current price dip and there is no doubt we are already showing signs of suffering. Look no further than the Finance Minister Ngozi Okonjo Iweala- who according to the BBC- has already proposed budget cuts and a tightening of the monetary policy. And I don’t blame her. Oil revenues in Nigeria fell by a whopping $604 million dollars in September alone! Now that’s US dollars!
The worrying aspect of all this is that it has happened before. Yes, it has all played out before in Nigeria. But as usual, there is this perennial culture of resting on laurels. No sincere effort is ever made at diversifying the economy. Everybody wants the oil! Every graduate wants to work with the oil sector! The oil chiefs in the NNPC never seem to retire, get fired or resign! Every youth corps member wants to get posted to Abuja. There has been no real effort at reform or true federalism.
The Federal government still collects “Oil money” from oil producing states and then redistributes it monthly to the 36 states in a quota system of allocation. What then is the incentive for the individual states to self-finance? That is why today; if you live in Abuja- irrespective of your financial situation; your peers and friends in other states call you a ‘Big Boy’ or a ‘Big Girl’. Which in plain English means; you are at the centre of Money!
I wasn’t teasing when I said “It had all happened before”. Allow me to take you briefly to the oil boom in the 1970s. Nigeria had just discovered its vast oil reserves.
The budding country leveraged on this new found wealth to borrow billions of dollars in order to facilitate infrastructural developments and expansion. Up until then; Agriculture had been the primary driver of the Nigerian economy. Anyways, just 10 years after this oil boom; with the fall of oil prices during the 1980s oil glut; we struggled to keep up with our loan payments and eventually defaulted. At a point; we limited repayment to the interest portion of the loans we took! It took us about 15 years to sort this mess out with our creditors who forgave large chunks of our loans and allowed us to repurchase our debts at 60% discounts.
My point? What is happening today is a repetition of history. And while Nigeria continues to demonstrate remarkable history amnesia; we can be certain that the world remembers! We cannot expect that Europe or other members of the “G20” or “Paris Club” will forgive our debts again. Europe has enough problems of its own.
We have come full cycle and until our economy is diversified and true federalism adopted; we face a clear and present danger of recession. Something- every Nigerian- should be worried about.
By Obi Odenigbo