In a matter of days, the Muhammadu Buhari Administration will hand over to a ‘brand new’ government. By implication, the control of the economy, warts and all, will have to change hands. It is therefore most auspicious to proffer some roadmap, pathways and specific agenda for the new government, come May 29, 2023.
Unarguably, the Nigerian economy has not been in good shape in the past few years due to a litany of external and internal factors. This reality makes it extremely imperative that certain economic policies and programmes in some specific sectors must hallmark the take-off of the new administration.
Uppermost among such crucial decisions must be the demonstration of the political will to decisively deal with the fuel subsidy conundrum. In the past couple of years, lingering indecision about the subsidy has caused incalculable damage to the Nigerian economy.
The Buhari administration has only deployed prevarications in all that pertained to the dubious and wasteful subsidy regime. Yet, trillions of Naira have been sunk into the opaque scheme — all heightening public angst and opprobrium against the government. Since the root of fuel subsidy and its ballooning to what it is today is well known, the solution to the incubus is surely attainable.
In truth, Nigeria’s one hundred per cent dependence on imported refined petroleum products is neither necessary nor sustainable. After all, there was a time when many (publicly owned) refineries were functioning optimally in the country. Therefore the subsisting scenario where no refinery is functioning locally is totally unacceptable and counterproductive. The status quo has literally put Nigeria between Scylla and Charybdis: removal of fuel subsidy will surely come with huge socio-political and economic costs – including likely unrests, riots and other upheavals.
Retaining the subsidy also has unfathomable negative consequences. Any initiative therefore to deal with the fuel subsidy crisis must include having many local functional refineries in place. This could entail the rehabilitation or privatisation of the existing (but dormant) refineries as well as building of privately-owned ones. This is why the current palliatives (increasing salary of civil servants and some ‘transfer payments’ to some poor citizens) by the outgoing administration are not only inadequate but also inappropriate.
Rather than address the root of the fuel subsidy debacle, these initiatives are merely ad hoc, panicky and diversionary. If (and when) fuel subsidy is effectively addressed, the ruinous and interminable import-dependency of Nigeria also must be tackled.
For too long, Nigeria has been carrying the unenviable toga of a mono product economy. The “oil shock” in 1973, when members of the Organisation of Arab Petroleum Exporting Countries (OAPEC) imposed sanctions on many developed countries – shot up oil prices through the roof.
It is on record that the price of crude oil between 1973 and 1974 (when the sanctions ended) rose by more than 300 per cent. And so, Nigeria, a member of the Organisation of Petroleum Exporting Countries (OPEC) since 1971 — became a beneficiary of the windfall in petrodollars and ‘easy money.’ Although this development provided so much petrodollar for massive infrastructural development so soon after the civil war in 1970, it unwittingly negatively affected the people’s lifestyle and value system.
It also caused a distortion of the structure of the country’s economy and led to utter negligence or outright abandonment of some sectors of the economy. Conspicuous consumption, ostentatious lifestyle, high taste for foreign goods, renter engagements and preference for white collar jobs suddenly became the order of the day.
Unarguably, before the oil “shock”, agriculture was the mainstay of the Nigerian economy — providing massive employment, food security, so much export earnings; and also accounting for the highest proportion of the Gross Domestic Product (GDP).
As the petrodollar-induced lifestyle got ingrained among practically all strata of the Nigerian society, the economy sharply got stratified into oil and non-oil sectors. However, the reality is worrisome that of almost 20 sectors identified by the National Bureau of Statistics (NBS), only the oil sector still accounts for over fifty per cent of (public) Government revenue and more than eighty per cent of its foreign exchange earnings, yearly.
This ‘disproportionate’ dependence on crude oil revenue to the neglect of other sectors has come to tie the fortunes of the Nigerian economy to the vicissitudes of the hydrocarbon trade, politics and diplomacy in the global marketplace.
It has become compelling, no doubt, to diversify the public sector revenue sources (especially foreign exchange) not only to sustainably stabilise Nigeria’s macro-economy but also to attain reasonable growth and development in a record time. Here, the example of the RT200 billion non-oil export proceeds repatriation initiative of the Central Bank of Nigeria (begun in February 2022) becomes most
fitting and timely.
Specifically, the “Race to US$200 Billion in FX Repatriation”, according to the CBN, “is a set of policies, plans and programmes for non-oil exports that will enable us to attain our lofty yet attainable goal of US$200 billion in FX repatriation exclusively from non-oil exports, over the next 3-5 years.” Several incentives and guidelines have since been issued by the apex bank in this regard; with some good results already recorded.
Diversification of the economy at this time will also entail massive production and deliberate “value addition” locally, of a number of items the continued importation of which has been gulping available scanty public funds.
In this regard, agriculture must be re-prioritised to attain the badly needed food security (food for Nigerians from Nigeria). This will also ensure that many crops among them are of such quantity and high standard to get exported and earn reasonable foreign exchange.
Today, food shortage (scarcity) and high prices remain the core driver of the persisting runaway inflation in the land (standing at 22% at end-March 2023). Indeed, the latest NBS report on food shows that in the past five years (2018-2022), Nigeria spent a humongous sum of N6.7 trillion on agricultural imports, accounting for 7.6 per cent of total imports of N89.2 trillion recorded during the period.
However, diversification drive for Nigeria will not necessarily exclude oil and gas sector development; rather, resource use optimisation and investment-friendly policies should be made to rule in the sector.
Really, the hydrocarbon business, in spite of the raging ‘energy conversion’ and renewable energy ‘fad’, will still remain worthwhile for some more years. The Petroleum Industry Act (PIA 2021) now in place can still be fine-tuned to truly incentivize investment and fresh investors to the oil and gas business.
Similar attention should also be paid to so many other solid/liquid mineral resources largely yet unexploited. In the new economic agenda, the perennial challenge of power (electricity supply) must be tackled head-on with utmost urgency.
For too long, epileptic power supply (or even absence of power) has either cost businesses fortunes or made them close shop. Interestingly, the NDP 2021-2025 says “the generation capacity of the 23 Thermal operating plants in the country is expected to produce 25,000 Megawatts of electricity by 2025. Renewable energy will take up to 23 per cent of total electricity share, up from 13 per cent. By 2025, meter penetration in Nigeria is expected to be 100 per cent.”
If this is realised, a critical infrastructure for proper diversification of the Nigerian economy will be in place and the ease of doing business will improve.
***Okeke is an economist, sustainability expert and consultant on business strategy.*
