Oil Dependency: Nigeria Needs Shock Treatment
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Going forward, Nigeria is in for a shock of its corporeal life – it will crash but may not burn. It will be wounded and seriously bruised except it reinvents itself and abandons the reckless manner in which it manages its resources. Devaluation is just a beginning of further fall. When a bucket has been leaking at a rate of more than 25%, to keep the bucket full, one has to diligently keep pouring water at the same level or rate of leakage to maintain fullness or at 26%. Nigeria’s leadership has never mastered that simple method of checkmating its finances to plug holes and stabilize its leaks – economy. With the Naira’s devaluation, the economy has lost 8.4%. May the shock continue to reverberate so that the ‘Giant of Africa’ may wake up.
Since 1970 when the civil war ended, naïve and barely literate Gen. Yakubu Gowon with his army of official bandits announced to the world that Nigeria was/is rich. Nigerians have followed that ‘beer parlor’ chant and chest pounding to their own peril. Nigeria is not a rich nation and has never been one.
By the devaluation of the Naira from N155 to N168, I predict that before the end of the first quarter of 2015, the Naira’s exchange rate will be N200 to $1. I just got back from a 3-country trip of UAE-Bahrain-Qatar, as part of a US chamber of commerce delegation. The feeling in that region, even if the oil prices were to fall below $70/bbl, they can handle it. The difference between that region and Nigeria is that they finance their operation and their liquidity per capita is very high. This affords them opportunity to move on and wait for correction.
In the case of Nigeria, with a population of 165 million people, about 4 times the entire GCC regional population, the stress and shock with the falling oil price will be devastating. It is amazing that even with Nigeria’s Finance Minister Madam Okonjo-Iweala, famed former World Bank top executive and her hand-picked followers and admirers in Nigeria monetary and fiscal echelon, there are no apparent economic gains.
There is never enough reserve in Nigeria to cushion the oil price swing. With undue reliance and echoed sentiments that Nigeria is rich because it is an oil producing nation, many unduly abandoned other sectors. How can a bunch of clowns in leadership who can barely read and understand financial structures safeguard an economy as fluid as Nigeria? Their dance is about how much money they take home from milking the system.
I keep hoping that the oil price falls below $50/pbbl, so that Nigeria drinks her oil, is forced to look inward to adjust its ways, and becomes productive. Texas witnessed that in the late 1970s and 80s, and now Texas is US’s most stable and viable economy. In Texas, we do not celebrate oil but use it to oil our way to productivity and prominence - diversified economy.
Given that the US is now net exporter - http://blogs.ft.com/beyond-brics/2014/10/02/victim-of-shale-revolution-nigeria-stops-exporting-oil-to-us/, we love it because our gasoline price is dropping – adding more spending money to our purses. We want it further down. As US no longer buys Nigeria’s crude, I hope they stay away from that and hopefully, Chevron and ExxonMobil will divest their holdings and Shell pulls back. Nigeria needs critical shock treatment so that it may wake up and smell the rotten manner it has been handling its natural resources. Also, when the crude oil flow drops to a trickle, Nigeria’s Delta region will face environmental challenges that in 100 years, they will still be suffering what they have allowed to happen. Nigeria will be the worst hit because of inadequate planning, corruption, over-dependence on importation of refined petroleum products and poor federal system of government, where other federating units depend mainly on the central government for monthly allocation.
If Jonathan makes it in 2015, Madam Okonjo-Iweala and Petroleum Minister Dezani Allison-Madueke, should be fired. The two have not delivered solutions to make Nigeria’s economy hum nor gain traction. They have instead sold naïve and almost illiterate House and Senate members, including their admirer President Jonathan voo-doo numbers.
The Naira has been losing value becoming a worthless currency, and that flies in the face that 30 years ago, One Million Naira was nearly $2m. Today, the same One Million Naira is worth less than $6,000. Anyone who believes that such loss in value is proof of ‘Nigeria Rising and Biggest Economy in Africa’ may very well believe that Nigeria is the richest country in the world. That too, is allowed.
By Ejike E. Okpa
Dallas, Texas.