- This time, we should utilise rising crude prices well to avert oil doom
IT is all round cheery news that crude oil prices are on the rebound once again. Between 2015 and late 2016, prices of Nigeria’s premium export item, crude oil, dipped to as low as $30 per barrel (pb). Her output also crashed within that period almost by half as a result of the activities of the Niger Delta militants. Production actually dropped to about 1.3 million barrels per day by mid-2016 while losses of crude due to intensified pipeline ruptures reached 130 mbd.
This hiccup in crude oil pricing and production as well as the mismanagement of some vital economic fundamentals like foreign exchange policy led the economy into a sharp decline and eventual recession. The negative indices across all sectors led to excruciating pain and unprecedented hardship among the citizenry. A distraught nation and citizenry weaned on rent from wholesale crude oil shipments and monthly central allocation began to adjust to a life of serious work and acute want.
Prudence and diversification became the buzz words. For once in several decades, some states of the federation started to look beyond Abuja for survival. Indeed, states like Ebonyi, Kebbi, Lagos, Kano, to name a few, embarked on massive rice farming, with some of them reaping bountiful harvests now. One state even claimed to have exported millions of dollars’ worth of fresh vegetables. States in the cocoa belt, palm oil zone and even root crops like cassava and yam began to intensify efforts at adding value or even export.
But all these nascent forays into improved agriculture production may well come to naught again as petrodollars begin to flow once again.
It was President Muhammadu Buhari who first hinted of the next boom when he spoke about rising oil prices giving momentum to the imminent surge of his administration’s economic drive. The president was particularly in buoyant mood as he envisaged increased developmental activities with more cash rolling in from oil sales.
Apparently, the recent optimism arose from the prices of crude oil shooting up to close to $60 per barrel currently. This has pushed up Nigeria’s crude oil revenue to N11.1 billion ($36.6 m) daily. The current Federal Government budget is based on $44.50 per barrel benchmark. This presents a significant difference of about $15.5 pb as excess revenue.
It explains why President Buhari is upbeat that his government can now hope for an improved economic climate that will facilitate his government’s recovery programmes. Indeed, if we also consider the waiver that Nigeria was granted to produce to the tune of 2.3mbpd, apparently to make up for lost capacity in 2016 at the peak of the militants’ attacks on oil pipelines, then the country has something to cheer. But we must hasten to caution that this is not the first time that Nigeria is being blessed with rising oil prices after a downward trend. We had the experiences several times – in the 1980s and even the 1990s, among others.
Agriculture was once upon a time the country’s major revenue earner. But we abandoned the farms when oil was discovered in commercial quantities in the country. The result is that the economy has been shaped largely by the vagaries of the international oil market, something over which we have little or no control.
We must never return to profligacy.
We therefore urge governments, especially at the state level, to continue with their aggressive diversification drive. This is instructive when we consider that some countries keep their entire oil earnings as reserve because they have fully diversified their economies such that every sector earns ample revenues.
We call for discipline and prudence at this time and ask that the excess revenues be applied to upgrading infrastructure across the country.
