Nigeria and virtually all countries in the world are experiencing economic slowdown arising from the coronavirus pandemic. Public and private establishments have been shut, individuals and families have been locked down in obedience to obey the stay-at-home and social distancing directives of various government agencies. Economic activities in the production, service delivery, formal and informal sectors have virtually come to a halt while supply chains have been disrupted. Even the production and supply of medical goods and commodities needed to fight the pandemic have been hampered by the halt of economic activities.
For Nigeria, the price of crude oil, a major funding source of budgets at the three tiers of government as well as the biggest foreign exchange earner, has collapsed. We witnessed the price of crude oil at about $12 per barrel in the outgone week at a time the country’s production cost of a barrel of crude oil was averaging $18. The collapse of economic activities implied that demand for oil was bound to decrease while the glut in supply arising from the Saudi Arabia Russia market tussle further depressed the price of the commodity. Even the recent meeting of OPEC, the oil producing cartel and its allies, reducing production by 10 million barrels per day has not changed the position. What are the key lessons and takeaways for Nigeria?
Before the current scenario and based on climate change commitments, some advanced countries made firm commitments to end the use of fossil fuel-fired engines, especially for vehicles used in public and private transport. Some of the phase-out dates are as early as 2025 and 2030. However, Nigerian leaders have acted as if they are oblivious of these plans and phase-out dates. We have been led in the business-as-usual manner when an emergency was on our hands. Thus, if this oil price slump did not happen in 2020, it would have crashed in the next couple of years. Instead of planning for the imminent change, we have been fixated and benchmarked our federal, state and local government budgets on the price of crude oil. Now, the crude oil budget funding and foreign exchange inflow will be greatly diminished.
Also, most oil producing nations had huge savings in their Sovereign Wealth Funds, being funds they can fall back upon in lean times. But over the years, our successive administrations treated the need to save with utmost levity. Further, we added no value to the crude oil as we exported it without shame in its vey very crude form while buying refined products from countries that do not produce crude oil. To complicate matters, our leaders at the executive and legislative arms of government have been very profligate, corrupt, inept, ignorant and lacking in the understanding and exercise of enlightened self-interest. They have been legally and illegally taking an undue share of the proceeds of crude oil. Now, we are at a time when the price of crude oil is below the cost of production, where do we go from here? Of course, the nation can no longer keep up with the revolting lavish lifestyles of these so-called leaders. Nigerians are stating in a very clear language that it is either they cut down on their take from public resources by no fewer than 50% or expect the revolt of the poor and downtrodden who have not nothing to lose but everything to gain from the demise of the extant decadent order.
Now is the time to take the mantra of economic diversification and self-reliance to the real next level. It should no longer be a slogan but an actionable framework. We have no options left, unless we want the Nigerian and sub-Saharan African to go extinct because of lack of ability to adapt and evolve. Economic diversification must focus on production, manufacturing, value addition, the knowledge economy including Information Technology advances and Artificial Intelligence. Take for instance, the health goods needed to fight the pandemic, no fewer than five different institutions have made prototypes of ventilators. We can no longer continue celebrating prototypes, but we must move to the level of production. It will be a shame if we continue to import face masks of any description or quality in the next six months. The pandemic has provided an opportunity for the local production of health commodities for domestic use in the first instance and for export in the medium term when our production lines become very competitive.
The Federal Government has established over 300 research institutes spread across so many ministries especially in the Ministries of Science and Technology, Agriculture and Health. The practice had been to simply fund these research institutes with pittances needed to pay salaries and a few overheads, to the extent that little or no research goes on in these agencies. And when research goes on, the results are usually left on the shelves to rot. Research is not targeted, related to specific national challenges and it seems there are no off-takers ready to run with the findings in a bid to link research with production. So, why do we establish research institutes that produce no results or whose results are ignored? Instead of attempting to fund so many research institutes in a period of lean resources, we can strategically focus on about 100 of them and set targets and expected results for them. We can merge institutes with similar mandates.
Now that the flow of the oil dollar has drastically reduced, it will be very unwise that the little available will be used for frivolous imports. A situation where the expenditure of the capital component of the public budget or capital expansion or renewal in the private sector can only be done through massive imports is no longer acceptable in the current dispensation. Nigerian money and resources must be made to revolve in a centric circle where Nigeria comes first, and the resources remain within our boundaries. Constructing a road, airport or bridge or changing public vehicles should no longer be a means of creating foreign jobs and putting pressure on the naira through imports and payment of fees to foreign expertise. We have enough engineers who should be given the opportunity to practise what they learnt. We should only look outside where local capacity is not available. Is there anything the Federal Government can do to facilitate the quicker coming on board of the Dangote Refinery since our public refineries seem to be doomed?
Let no one tell Nigerians that locally made products will be more expensive or of less quality compared to imported ones. The concept of cost has been abused in Nigeria based on a very narrow understanding and articulation of the concept. The cost of a commodity should include the jobs either gained or exported in its manufacturing/importation, the taxes collected/exported in its local manufacture and procurement compared to its importation. It should also take cognisance of the national capacity gained or lost in its procurement.
All the proposed new modes of production and service delivery should be done by the private sector facilitated and nudged by the state through the combination of industrial, trade, labour, fiscal and monetary policy, etc. It is doable but we need an enlightened and knowledgeable leadership at all levels to do it.
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