Reflection on Nigeria's 2014 Economy

by Desmond Onyeka Agwunobi

Below is an article I wrote towards the end of 2014 during the administration of Dr. Goodluck Ebere Jonathan. Subsequently, that administration ended the following year by May, 2015. The article is now like a throwback and a reflection of Nigeria's 2014 economy. It was equally an economic prognosis of Nigeria. The article was then submitted to Rennaissanceafrica Company Limited and it was regarded as one of the best because it accurately pictured the Nigerian economic situation. It analysed where we were and the way forward for Nigeria.

Way back when things were not as bad as they are now, it was Dr. Mrs Ngozi Okonjo-Iweala that was the Minister of Finance and Coordinating Minister of the Economy. According to Forbes website, she helped Nigeria's economy grow an average of 6% (per annum) over three years and thus, becoming the largest economy in Africa. She was credited with developing reform programs that helped improve governmental transparency and stabilizing the economy.

Although due to high political sentiment and propaganda, many Nigerians could not appreciate her work then. But I am sure that seeing the extent our economy has gone bad today, many would be appreciating and desiring the good old days when Dr. Mrs Ngozi Okonjo-Iweala was the Coordinating Minister of the Economy. Read and reflect on the article below:
 

DIVERSIFYING THE NIGERIAN ECONOMY: AN IMMINENT IMPERATIVE
December 19, 2014

By Desmond O. Agwunobi

                                           

It is no longer news that the crude oil price has dropped below Nigeria’s budget benchmark for the third time. Consequently, another downward review of the 2015 budget is on the way. Within a couple of weeks, the Federal Government has changed its benchmark twice from $78 to $73 and lately to $65. The fact that the United States of America – the major consumer of our product backed out a couple of months ago has not really helped matters. Nigeria is a mono product based economy. And that is why the issue of economic diversification is timely and a subject for serious deliberation.

Why is Nigeria as a nation sweating over the global dwindling of the price of crude oil? It is simply because her economy is crude oil driven. It is no rocket science to know that Nigeria’s economy is mono product based. No wonder it is subject to the vagaries of volatility. The oil price, which accounts for more than 70 percent of government revenue and 95 percent of foreign-exchange income, has fallen by 37 percent in 2014. With the current trend, the projection of experts is that crude oil price would still fall to $50 per barrel over the coming months as market forces shake out the weakest producers, hence the need to diversify the economy.

Should the current fall in crude prices continue over a longer period, years of austerity would be inevitable for Nigeria. Over the years, the leadership of the country has shown a lack of fiscal discipline. It has been from one story of corruption and administrative profligacy to another. They have been largely prodigal and wasteful.

For well over a decade, Nigeria has benefited from oil boom as oil prices have consistently been above the budgeted price. Enough should have been saved to cushion the effects of the current slide in oil price. More importantly, the government should have channeled the profits to other vital sectors of the economy. By now, other sectors should have generated substantial foreign exchange equivalent or even more to that of crude oil. Currently, the masses especially those occupying the lower echelon of the economic ladder are seriously paying for the years of administrative profligacy and prodigality of its leadership. The gap between the rich and the poor is still wide indicating under-development. Hence, the rich are getting richer while the poor are getting poorer.

The failure of government to use oil funds to transform other sectors of the economy has led to lack of sustainable overall economic development and this leaves the country in a greater state of foreign dependence. One of the sectors that have felt the negative impacts of crude oil discovery is agriculture. Agriculture was the main foreign exchange earners for Nigeria before the advent of petroleum. Agriculture has suffered total neglect and patronage by government. A World Bank report in the 1950s indicates that Nigeria had tremendous agricultural potential – enough to produce crops for itself and for export. However, with a rapidly declining agricultural industry, Nigeria imports many of the crops it used to export such as cocoa, palm oil and groundnuts.

Furthermore, the issue of pollution has taken a toll on our environment. Oil exploration and production activities had produced polluted creeks, rivers, land and other water bodies. This resulted in the destruction of aquatic life in the region, erosion, deforestation and destroyed farmland in this agricultural region. Indeed, activities associated with oil exploration activities have compromised the integrity of our ecosystem and made it unsuitable for agricultural and other economic activities to flourish.

The huge revenue realized from oil windfall made the government of Nigeria to loose focus. Efforts and attention is concentrated on oil industry. The non-oil industry such as solid minerals, agriculture, tourism, aviation and many more has been underutilized. Their full capacity for contribution to the national coffers has not been developed.

However, it is imperative for Nigeria to find ways to diversify her economy. This should no longer be just an official mantra. With the current reality in the global oil market, Nigeria must start to ‘walk the talk’. The non-oil sector that has dominated the structure of the Gross Domestic Product (GDP) should start to contribute similar proportion to revenue base of the country. It is time to locally transform our crude oil and natural gas by adding values to create products like Liquefied Petroleum Gas (LPG), fertilizers, electricity, petrochemical products, plastic products, among others. This will create a lot jobs for the economy and boost the integration of oil and gas sector with the rest of the economy.

But there is something crucial. The issue of corruption has to be addressed. Corruption renders every economic policy ineffective and useless. I once said on the electronic media (Television) that if corruption is eradicated in Nigeria, every economic policy will work. The economy is on downward spiral because of the cumulative effects of the corrupt practices of past administrations. Corruption leads to underdevelopment. No wonder my favourite lecturer in the Nigerian Institute of Management (NIM) always says: “while the developed countries are busy developing development, Nigeria is busy developing underdevelopment”. In order to checkmate corruption, the government has to revamp the anti-graft agencies like the Economic and Financial Crimes Commission (EFCC) and the Independent Corrupt Practices and Other Related Offences Commission (ICPC). Appropriate punitive measures have to be dished out to individuals guilty of corrupt practices no matter how highly placed. The Judiciary should live up to expectation; all prosecutorial misconduct to shield corrupt individuals in high places should be abhorred.

Economic diversification is vital to Nigeria’s long-term economic growth. Her mono product economy is facing serious challenge in sustaining growth because of swings in prices of crude oil at the international market. A successful diversification plan requires strong political will on the part of the leadership to execute firm political commitment, consistent public policies and substantial financial resources. The government has to create enabling economic environment for the participation of the private sector. Entrepreneurship and the Small and Medium Scale Enterprises (SMEs) have to be encouraged.

In conclusion, nobody knows exactly whether the current trend in oil price is a new long term trend or simply, short term volatility. Whatever it turns out to be, it is a message for the government of Nigeria to reset and rebalance the economy.

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