Nigeria’s economic planners may be having a bleak Christmas this year if they have any compunction left in them. It seems to be that down season once again when the world’s crude oil prices begin to tumble and Nigeria’s economy nose-dives with it.
A few days ago, the Brent crude which serves as the international oil bench mark took a tumble to its lowest level this year. It dropped to $58 per barrel from $61.80. But it had peaked at $86.74 last October having opened the year at $66.
This drop is all the more worrisome because it has already threatened the 2019 federal budget proposal which is benchmarked on average crude oil price of $60 per barrel. Recall that the current budget is pegged on $50 per barrel.
This suggests that the Appropriation Bill for 2019 which is billed to be transmitted to the National Assembly this month would suffer ample re-working as many of its fundamentals have been unhinged. The immediate reaction to this would be spending cuts by the federal government; capital projects would suffer. Some infrastructure upgrades which are going on across the country would be stalled perhaps leading to some of the projects being abandoned for lack of funding.
Further implication of the hiccup in oil price is that Nigeria’s external reserve would begin to deplete sharply unless importation is reduced someway. The Central Bank of Nigeria would not be able to back the naira with foreign exchange at the rate it did in the last couple of years. Scarcity of forex would cause the value of the naira to begin to fall.
Considering that the budget of the last few years had been dogged by deficits and buoyed by borrowings, it means that even at the best of times, revenue was inadequate. Would the fall in oil price get worse? Would a sharp decline in revenues lead to another season of recession? These fears are real and the questionsare all the more germane because in a period of national election, politics often takes pre-eminence over economics.
Sadly, Nigeria has been through this road several times before but she never seemed to have been able to learn the vital lessons. It is not likely that any other country of the world would elect to be a monoculture economy the way Nigeria has seemingly chosen to be. Since the discovery of crude oil in commercial quantity in Nigeria nearly 60 years ago, she has grown to rely almost 100 per cent on crude oil revenue.
Agriculture which was Nigeria’s mainstay before the petro-dollars started following has practically been abandoned. Production of export crops like cocoa, cashew, palm oil, cotton, wood products among a dozen others have been was jettisoned and the practice of farming has atrophied over the years. Today, hardly any of these cash crops is produced in sustainable quantity.
It is the same with food production. Nigeria imports most of her staple food crops and other daily nutritional needs like rice, wheat, fish, poultry products, dairy products and cooking oil, to name a few.
In addition, most of Nigeria’s economic enablers like her refining capacities, gas development, tourism potentials and huge human capital have not been developed over the years to provide alternative revenues for national development.
The country has been locked in a debilitating cycle of merely shipping out crude oil and importing nigh every other need including over a dozen refined petroleum products.
We opine for the umpteenth time that Nigeria has lived dangerously on the brink for too long. She must diversify her economy and build capacities for economic sustenance. With an unrestrained and indeed perversely growing population, any major crash in the price of crude oil could well deal a deathly blow to Nigeria’s economy.