Dwindling Oil Revenue And The Nigerian Economy - by Tayo Ogunbiyi

It is no longer news that the Nigerian economy is currently experiencing a downward trend. The fall in the price of crude oil, a major source of revenue for the country, has serious implications for the country’s economy. 

As part of its response to the challenging economic situation in the country, the Federal Government came up with a series of austerity measures while at the same time scaling down the crude benchmark for the 2015 budget from $78 to $73 per barrel. According to the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, government’s resolve to cut revenue projection was part of measures designed to maintain economic stability, boost non-oil revenues further, plug loopholes and waste, as well as cut unnecessary expenditure in order to cope with the situation.

Presently, the economic situation is biting so hard in some states in the federation that monthly receipt from the federation allocation has sharply declined. Consequently, some of the states can no longer meet up with their financial obligations. Thus, only a few state governments are able to pay their workers as and when due, while many others are unable to meet their obligations to their workers. Some Federal Government agencies are equally not faring any better in this respect. The private sector is also not totally immune from the gloomy economic reality in the country as it has impacted negatively on the value of the naira. With the diminishing value of the naira, local industries are facing serious challenges that could actually lead to downsizing of workers if the situation is not quickly addressed. Hence, from every perspective, these are, indeed, trying times for the country.

However, no matter how gloomy a situation is, there is always a silver lining around the corner. Some economic analysts have actually stated that the current slide in crude oil price, and its attendant threats to the nation’s economy, could eventually be a blessing in disguise for the country. There is, without a doubt, some degree of truth in this. For one, the current economic trend in the country has called the attention of everyone to the danger of operating a mono-economy. The nation’s sole dependence on crude oil makes the economy vulnerable as fluctuation in the global crude oil price easily makes it unstable. Naturally, any economy that depends solely on one product would be incapable of meeting the expectations of the citizenry. Consequently, now that we have seen the folly of running a mono-economy, our leaders ought to be working seriously on how to diversify the nation’s economy.

One way of addressing the situation is to revamp the country’s ailing agriculture sector. Various administrations in the country have come out with different policies and programmes aimed at transforming the sector, but the results have not always been anything worthwhile. For instance, the much celebrated “Operation Feed the Nation” and “Green Revolution” of the Obasanjo-led military government and the civilian administration of Shehu Shagari respectively did little to ensure food security for the country, let alone leading to a boom in the economy.

Over the years, as a result of the neglect suffered by the sector, the export potential of cash crops such as cocoa, groundnut, cashew among others, has seriously diminished. It is sad today that Nigeria is no longer a major exporter of cocoa, groundnut, rubber, and palm oil. Ironically, these were the produce that the nation’s founding fathers built the prosperity of the country upon. It is amazing how a nation that was once the biggest poultry producer in Africa now has its total output reduced from 40 million birds annually to about 18 million. The truth of the matter is that agriculture has suffered from years of neglect, poorly conceived government’s policies as well as lack of basic infrastructure. Despite the fact that agricultural production rose by 28 per cent during the 1990s, per capita output rose by only 8.5 per cent during the same period.

Therefore, agriculture has not been able to keep pace with Nigeria’s rapid population growth as evident in the sad reality that Nigeria, which once exported food, now relies heavily on food imports to sustain itself. Contented in its newly found oil wealth, successive governments in the country simply allowed investment in agriculture to decline to a ridiculous level. As against the United Nations specified 10 per cent of annual budgetary allocation, what we budget for agriculture in recent time is just around three per cent. The prospect of the sector, nevertheless, still reflects in its being accountable for over 26.8 per cent of GDP and two-thirds of employment in the country.

Government needs to really appreciate the potential of the sector as a catalyst for economic and industrial transformation. Consequently, government needs to recreate a modernised professional and commercial farming sector, supported by improved infrastructure and research into high performance seeds and livestock. To encourage the teeming army of unemployed youths in the country to take to agriculture, government should make access to loans meant for agriculture much easier while large scale farming powered by mechanised infrastructure should be the central goal.

Aside from revamping agriculture, improving the tourism sector could also be a boost to the country’s economy. Tourism is a veritable instrument for socio-economic development. It impacts directly on the economy through the provision of resources and income that could be deployed to enhance economic growth, accelerate development and reduce poverty. Similarly, it is a good public relations mechanism through which a city, state or country could attract needed foreign investment. Having come to terms with the socio- economic benefits of tourism, some states in the country are now drawing from the examples of cities such as New York, Hong Kong, Nairobi, Rio de Jenairo, among others, that have fruitfully utilised tourism for positive economic ends. In Africa, Kenya, South Africa and Egypt are renowned for their rich and economically viable tourist sites. With its numerous attractive and historical tourist centres, the Nigerian economy certainly stands to gain a lot if efforts are renewed to explore the tourism potential of the country.

However, it needs to be emphasised that the power situation in the country has to improve considerably before a significant improvement can be experienced in the economy. For instance, regular and stable power supply will enable small scale businesses to thrive better if more creative schemes are put in place to guarantee unhindered power supply. Equally, multinational firms that have closed shop in the country because of the epileptic power supply could be lured back if the power situation improves. This would not only bring back lost jobs, but will certainly restore lost ones.

On a final note, for the nation’s economy to get out of the woods, the Federal Government, needs to be more creative, innovative and inward looking.

Tayo Ogunbiyi, a policy analyst, is of the Features Unit, Lagos State Ministry of Information & Strategy, Alausa, Ikeja