Crude at $70: Time for new SAP
‘Nigeria is not broke, Nigerians are broke’
By Dele Sobowale
“Already, some states are having difficulty with the payment of salaries of their workers. Many have issues with payment to contractors” – Alhaji Remi Bello, President, Lagos Chamber of Commerce and Industry, LCCI. THE NATION, November 13, 2014, p 13.
The same day’s edition of the paper reported that workers at the National Assembly, NASS, had not been paid their salaries for October; and legislature’s third quarter allocation is still pending (p 5). And, on its back page, the RIPPLES cartoonist reminded us that Dr Okonjo-Iweala recently assured us that ‘Nigeria is not broke”. To which RIPPLES replied, “Yes. It’s Nigerians that are broke.”
But, jokes apart, it is quite clear to those not clinging to officially sanctioned illusions that Nigeria was already in deep trouble. That crude oil was heading for a drastic fall was predictable from last year. What nobody could forecast was the dramatic drop from $108 in August this year, just three months ago, to $76 on November 13. Now, this mind-boggling reality portending grave dangers for all segments of Nigerian society and the nation’s economy can only continue to be ignored at our collective peril. The first thing governments, at all levels, and the people of Nigeria must understand, is that the remedies which must be applied, invariably painful, cannot wait until after the 2015 elections – as those in governments would prefer. The old adage, “a stitch in time saves nine”, applies here. The longer government delays, the worse will be the damages to be repaired later. So, some of the measures, recommended under such circumstances, are urgent – like initial first aid to victims of car crashes.
There is no need to repeat all the known facts about the vital role of crude oil revenue to our economy. What we must get into our, usually thick, yet porous, skulls is the fact that for several years to come, the revenue will be less than what it was in 2013 – which was inadequate for our needs. Meanwhile, those financial needs have escalated; some on account of measures taken in the past (Minimum Wage increase, agreements with ASUU and NMA etc’ bloated governments, debt stock and repayment obligations etc); others will result from the need to, in the first instance, obtain more loans and pay more interest. One thing is inescapable, there will be more hardship for the masses and there is nothing governments can do to avert the decline in popularity and pervasive hostility which will arise from these calamities.
NATIONAL ECONOMIC SUMMIT GROUP, NESG.
One remedy, often mentioned, but impractical in the short-term, however indispensable in the long-run, is diversification of the economy to reduce our dependence on crude oil. That was an idea on which the Structural Adjustment Programme, SAP, of the 1980s was bottomed. Unfortunately, very little came of it – until President Babangida – the author of SAP, stepped aside in 1993. Chief Ernest Shonekan, as the Head of Government to IBB, organised the first annual National Economic Summit Group, NESG, meeting in 1992. As a participant, representing the Nigerian Institute of Management, NIM, I recollect that one of the major recommendations in the final communiqué was diversification of the economy to reduce reliance on crude oil. In the 22 years interval very little had been done to actualise that dream. The NESG 1, not only made that recommendation, it also laid out the ways to achieve the goals. Additionally, there has been no NESG meeting which had not emphasised the need for diversification of the economy.
Those attending the annual NESG meeting, who can be regarded as those with economic clout, the same individuals who donate generously to presidential campaign elections and visit Aso Rock regularly, had failed to persuade six Heads of State – three military and three civilians to prosecute the diversification programme seriously in twenty two years. Obviously, it cannot be done in a hurry and it will take time before its impact is felt. Meanwhile, we need something that can be done immediately.
TIME FOR SAP 2
Let me first of all admit that SAP 1 was a failure. However, it needs to be pointed out that Nigeria was not the only country undergoing adjustment at the time. Several countries in Asia and Europe were also undergoing the same therapy. At least five Asian tigers were included. And, they were very successful. Nigeria’s SAP failed, not on account of economics, but because bad politics intruded into economic policy management. For instance, when IBB decided to establish two political parties – NRC and SDP – and fund them with government money, he took a decision which had strong economic implications – but negative. The N40 billion (worth over N1 trillion today) spent on the political transition programme, which was later annulled, could have established four power stations – each with 2000MW capacity. That error alone robbed us of 8,000MW which we would have been enjoying from the 1990s till today. Only God knows by how much the Nigerian economy would have grown since then.
What should be basic content of SAP 2?
Wait till next week…
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