After enjoying some semblance of stability that lasted over three years, the price of crude oil witnessed a free fall in June and has continued to tumble ever since. Before then, crude oil had hovered around $110 per barrel for more than 36 months, fetching members of the Organisation of Petroleum Exporting Countries (OPEC) and other crude oil producing countries huge fortunes in foreign exchange earnings. Nigeria benefited immensely from the “boom” while it lasted and, as usual, spent more in servicing the recurrent expenditure of the national budget, while capital expenditure suffered.
Therefore, the austerity measures recently announced by the Minister of Finance and Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala, could not have come as a surprise. For an economy that has suffered the twin-tragedy of mono-product character and near-total dependence on importation, it was obvious that the volatility in oil prices would have far-reaching consequences. Now that the chicken has come home to roost, it is important that Nigerians prepare for what is to come.
Already, the Central Bank of Nigeria (CBN) has announced an adjustment in the value of the Naira, a development that has widely been described as devaluation of the national currency. By the new exchange rate regime, the apex bank has moved the midpoint of the official window of the foreign exchange market from N155 to N168 to one US dollar. This means that the naira will exchange between N168 and N174 to the dollar at the foreign exchange market. CBN has explained that the official adjustment of the naira value became inevitable as a result of reduction in government revenue from oil production and sales.
Figures from the rebasing exercise show that crude oil accounts for only 14 per cent of Nigeria’s N80 trillion ($510 billion) GDP even though it makes up 95 per cent of our foreign exchange earnings and about 80 per cent of government revenue. This shows that Nigeria’s overdependence on oil is largely precarious. Also, data from the rebased GDP and recent economic reports by the CBN show that Nigeria’s huge opportunities in agriculture and manufacturing are not being exploited.
Government must ensure proper co-ordination and sustained monitoring of some recent initiatives so that they do not end up mere paper works that do not translate into concrete and desired results. Above all, efficient management of the nation’s resources, especially in the area of fiscal regime, cannot be over-emphasised. There have been huge leakages of public funds through the nation’s excessively large bureaucracy, which has continued to be a burden on the management of the budget, as gap between recurrent expenditure continues to widen against capital votes.
We have continued to draw attention to the need to drastically reduce the size of the bureaucracy. Government must take decisive action on this by proposing a bill for the restructuring of the existing ministries, departments and agencies (MDAs), with a view to reducing huge expenditure on these bodies which gulp over 60 per cent of recurrent expenditure. We also urge the National Assembly to enact laws repealing the existence of MDAs identified in various reports as either duplication of government activities or irrelevant towards achieving efficient administration of the country.
Nigerian lawmakers should also agree to review downwards their jumbo emolument which is acknowledged to be the highest in the world. Even the management of the so-called “constituency projects” whose money is disbursed directly to the legislators and their cronies should be seriously reviewed. Such funds should be invested in infrastructure which is germane to the nation’s industrialisation, job creation and higher standard of living. Nigeria can survive the austerity measures, and even benefit from it, if only our tradition of waste and bloated bureaucracy at all tiers of government could be curtailed.
