HOW NIGERIA MAY COLLAPSE IN 2015
by Rudolf Okonkwo
Forget the urban legend that there
is a United States CIA’s plot to fulfill their purported prediction that
Nigeria would cease to exist in 2015. If Nigeria collapses in 2015, the country
to be held responsible, besides Nigeria itself, is Saudi Arabia. Before you
raise your hands in protest, it won’t be for the reason you think.
Nigeria has a very high ranking on
all the lists of the most-unstable countries in the world. Last month, a
UK-based risk analysis firm, Maplecroft, grouped Nigeria with the worst ten in
Africa. Heading the team of most-unstable nations are Somalia and Sudan. Others
are South Sudan, Democratic Republic of Congo, Central African Republic, Libya
and Egypt. The ranking looked at conflict, terrorism and political pressure.
In another list compiled by Foreign
Policy Group and Fund for Peace in 2013, Nigeria was ranked 16th in the world
with a 100.7 points on the failed state index. The index indicators are factors
like demographic pressure, human rights, uneven development, economic decline,
de-legitimization of the state, public service, security apparatus,
factionalized elite and others.
The good news is that Nigeria is
also on the list of the highest growing economies in the world. Some of the
richest people in the world are Nigerians, too. So, all things being equal, the
economic factor will balance out the instability factor and allow Nigeria to
soldier on beyond 2015. In fact, that is how Nigeria has been soldiering on,
defying all predictions of doom. When Nigeria last visited the precipice, which
was during the civil war, it was able to pull back and survive, thanks to the
oil boom that followed.
In his speech during the declaration
of his interest for a second term, President Goodluck Jonathan touted Nigeria’s
economic growth as one of his accomplishments. At 7% growth per year, Nigeria
is one of the top performing economies in the world. The president gloated,
“Nigerian economy is on the right path.”
Nigerian economy is not on the right
path. In fact, it is in distress. Even the eternal optimist, the Minister of
Finance, Mrs. Ngozi Okonjo-Iweala, is beginning to sound the alarm bell.
Here is how we got to where we are:
You must have heard of the declining
crude oil price. Unlike past fluctuations in price of crude oil, this one is so
bad that everyone is going to feel the effect. If the austerity measures
announced by Mrs. Ngozi Okonjo-Iweala have not affected you directly, the
recent devaluation of the Naira would.
All these are happening because
Saudi Arabia is locked in a mortal fight to destroy the US crude oil
production. Experts believe that the United States, with its 11 million barrels
production a day this summer, became the world’s largest oil producer, beating
the former number one, Saudi Arabia. Most of America’s new oil is produced
through fracking, an exploration system that extracts oil from shale rock using
the process known as hydraulic fracturing or fracking. This process of
splitting rocks using high-pressure liquid is expensive and is believed to be
profitable as long as crude oil price is high. The thinking in Saudi
Arabia is that allowing crude oil price to fall below $60 a barrel will knock
off the US shale production.
At the last meeting of the
Organisation of Petroleum Exporting Countries, OPEC, in Vienna, the cartel
failed to do what is needed to increase price – that is, cut the production
quota of each of the 12-member countries. While Venezuela, Nigeria, Iran, Iraq,
and Ecuador pushed for cut in production, Saudi Arabia, Qatar, Kuwait, and the
UAE opted for retention of the current production quota. That failure led to a
further drop in price of crude oil to a five-year low. At $72 per barrel of
Brent crude, Nigeria’s oil is now selling below Nigeria’s 2014 budget benchmark
of $77.5 per barrel.
What this means is that Nigeria will
find a way to make up the short fall in revenue. Technically, nothing will be
going into the Excess Crude Account until oil price recovers. And whatever was
there has been all but depleted. Initially, Nigeria raided its External Reserve
to support its expenditures but that move was not sustainable. That led to the
decision to devalue the Naira and reduce pressure on the Central Bank to keep
burning dollars in foreign reserve in support of the Naira.
On the American side, the fall in
oil price has been a foreign policy political weapon. America’s lack of
dependence on foreign oil means that it doesn’t have to worry about every
little crisis that flares up in the Middle East. In other ways, the fall in oil
price means that countries like Russia, Venezuela, Iran and Syria are under
economic pressure. That helps America’s foreign policy entanglements with these
countries.
Iran is being forced to stay on the
table to discuss its unclear ambition by a combination of sanctions and falling
oil price. Russia has lost over $100 billion from falling crude oil price and
is under severe economic pressure that it is moderating its ambitions in
Ukraine and other parts of Eastern Europe. In Syria, ISIS that has been
financing its campaign of terror from illicit oil sell is now having difficulty
selling oil in a world market that is glutted. For Venezuela, America doesn’t
have to worry about the radical leftist government in the country when declining
revenue is forcing the government to deal with a growing number of disaffected
citizens.
Given these economic and political
conditions, there is little interest in America or Saudi Arabia to see an
increase in oil price soon. What this means is that Nigeria must brace itself
for a crude oil price that could fall below $60 a barrel. In trying to calm the
fear of Nigerians, Mrs. Okonjo-Iweala assured Nigerians that the country would
withstand crude oil price of $60 a barrel.
But what about a $20 dollar a barrel
price of crude? Will Nigeria still stand or will it collapse? If by next year
the price of crude oil falls to $25.42 a barrel that it was in May 1999 when
President Olusegun Obasanjo’s started his first term as president, Nigeria may
collapse. Here is why.
Let’s begin with Nigeria’s
budget. Nigeria’s budget can be divided into four parts: statutory
transfers, debts services, recurrent expenditure and capital expenditure. In
2014, Nigeria budgeted N4.64
trillion. This is divided as follows: N399.7
bn or 8.61% for statutory transfer, N712
bn or 15.34& for debt service, N2.43
trillion or 52.35% for recurrent expenditure and N1.1
trillion or 23.7% for capital expenditure.
The United Nations Development
Programme recommends 70% of the budget to Capital Expenditure and 30% to
Recurrent Expenditure. In the last ten years, Nigeria’s budget allocation has
not come any close to the UNDP’s recommendation. The best we have
performed in the last ten years was in 2010 when Recurrent Expenditure got
56.77% while Capital Expenditure got 40.23%. Actionaid Country director,
Hussaine Abdu, lamented about Nigeria’s inability to produce a progressive
budget in line with UNDP recommendation. “No country develops under such
provisions,” he said, “because what grows a country or builds the economy is
the amount of investments you are making on infrastructure and other structural
issues that you require to strengthen your economy.”
Looking at what the government could
do with the current economic austerity, the budget would be a good place to
start. With debt service taking up 15.34% of the budget, recurrent expenditure
at 52.35% and statutory transfer at 8.61%, the only place that the government
has room to maneuver without having to fire workers or upset bureaucrats, is in
capital expenditure. So instead of increasing it, the government may be forced
to decrease it further, never mind the recent non-budgeted ordering of N9.6 bn cooking
stoves.
In the last four years, crude oil
price has hovered around $100 a barrel. The Nigerian government has been
swimming in petrol dollars. Looking at government figures, economists
determined that Nigeria’s total crude oil sale came to about $470B in all 5
years of President Jonathan’s administration and $489B for Yaradua, Obasanjo,
Abdusalami, Abacha administrations combined. Adjusted for inflation, the
numbers are $488.8B for Jonathan and $594B Yaradua, Obasanjo, Abdusalami,
Abacha combined. The boom is reflected in the budgets, too. In 2004, Nigeria’s
budget was N1.79 trillion. In the
last year of Obasanjo’s administration(2007), Nigeria budgeted N2.26 trillion. But
the lowest budget in the last 5 years of Jonathan’s administration was N4.2 trillion.
The additional money did not just
come from the revenue from crude oil. Nigeria’s gas production within this same
period has tripled. In his declaration speech, President Jonathan reported
that, “in terms of gas supply, we have grown from less than 500 million cubic
feet per day, 4 years ago, to about 1.5 billion cubic feet per day currently.
Our goal is to attain 4 billion cubic feet per day, over the next 4 years.”
These increases in revenue had not
translated into a stable economy that could withstand a shock as normal as a
change in oil price. In fact, as more money came, Nigeria became more unstable.
If there is a worst time for
Nigeria’s economy to be in distress, it is now. With the insurgency in the
Northern Nigeria, each day causing more havoc, creating more victims, more
destructions and more distrust in the economy, Nigeria is potentially coming
face to face with that perfect storm it has avoided for decades.
If Nigeria collapses in 2015, don’t
look anywhere else for the blame; put the blame where it belongs- squarely at
the feet of Nigeria. In the last 15 years of democracy and relative peace,
Nigeria had a chance to build a strong economic and political base. But like
all the other opportunities the nation has had, we squandered it. For so long,
Nigeria has been in denial about the unsustainability of the corruption within
its system. In time of boom, the nation can endure the waste, but in time of
austerity, corruption will eat up what remains of the nation.
In January of 2012, a presidential
committee on public service reform discovered that top government officials in
Nigeria take home N1.126
trillion a year in salaries and allowances – out of a national budget of N4.6 trillion. These
public officers constitute just 0.013 per cent of Nigeria’s population. They
include 108 senators who each make over $1.7m a year. That alone is $183.4 million
(N28 billion). Then the
360 members of the House of Representatives each takes home over $1.2 million,
which amounts to $432 million (N65bn).
Again, each state governor collects an average of N200 million naira a month just as
security vote. In a year, they each get N2.4
billion naira. So, our 36 governors take home N87
billion naira on security votes alone every year. Add our 38 ministers and
ministers of state, 100 plus heads of federal and state agencies, over 432
state commissioners, 774 local government area chairmen or caretakers,
almost 10,000 councillors and you will understand where the N1.126 trillion goes.
Nigeria had a chance to trim down
this N1.126 trillion waste
but the leadership of the country, who are the beneficiaries, did not have the
will-power to do so. Like the N260
billion naira spent from 2009 to 2013 on ex-Niger Delta militants, these wastes
are nothing but hush money paid to postpone doing the right and difficult
things needed to birth a modern socio-political structure that is fair and
balanced, a structure that is sustainable in the long run.
Sadly, the day of reckoning is
here. The consequence of Nigeria’s self-denial is staring us all in the
face.
A ministry of finance committee led
by Mr. Aigboje Aig-Imoukhuede looked at the subsidy claims of 2011 and
discovered that the Federal Government had overpaid importers and marketers of
petrol by a whopping N430
billion naira. In 2012, Ngozi Okonjo-Iweala proudly announced that Jonathan’s
government had recovered N29
billion naira from oil marketers out of N234
billion certified as stolen. Whatever happened to the rest of the stolen money?
Have we stopped paying subsidies two years after? Of course, not. Whatever
happened to the promise to retool and repair our refineries? How much did we
waste trying to repair our refineries? How much are we paying in subsidies
today? Shouldn’t the subsidies we are still paying be coming down now that oil
price is falling?
You will think that those handling
our economy will be answering these questions publicly. But no, they are not.
We are beneath them. The subsidy scam is part of the elaborate corruption
industry that feeds the mammoth Nigerian unsustainable structure. It has become
so entangled in the fabric of the nation that a half-hearted attempt at
disentanglement will result in chaos. What could not be done in a time of
economic boom cannot be done in a time of economic crisis. A lot of people in
Nigeria have been fed fat by corruption. In crunch time, as the nation tightens
its belt, the corruption industry will morph and move and when pushed hard will
marinate the nation and serve the country for the forces of destruction to eat
up.
Since 2009 crude oil thieves have
been increasing the amount of Nigeria’s oil that they steal. According to the
2012 Ribadu Report, crude oil thieves in 2011 stole over 100,000 barrels a day.
That is over $3.6 billion dollars a year. Some foreign sources put the figure
of oil theft at 250,000 barrels a day. Mrs. Okonjo-Iweala in 2012 told the
Vanguard newspaper that the loss to oil theft could be up to $12 billion that
year. If Nigeria had closed avenues for oil theft, that oil could be
shipped abroad and refined for Nigerian use, allowing the citizens to enjoy low
fuel cost like other oil producing countries when they pay for just the cost of
shipping and refining.
Meanwhile, as oil price falls, the
oil thieves are not going to go out of business. Instead, they need to steal
more to make up for the losses due to falling price. With their children in the
most expensive schools abroad, dozens of girlfriends to show the good things in
life and with private jets to maintain, the oil thieves and all the other
looters of the Nigerian economy, are going to do whatever is necessary to
maintain their lifestyles.
In the political arena, the 2015
election is shaping up to pitch two candidates, like none that we have ever
seen, against each other. Oh, yeah, they probably have met each other in a
presidential election before, but they have been transformed in some unique ways.
In past elections, we used to have two distinct options that fitted into our
overall narrative, which was that “the best is impossible and the worst never
happens.” A foreign newspaper once described the two candidates offered to
Nigerian electorates thus: “one is a fool surrounded by idiots while the other
is an idiot surrounded by fools.” What is shaping up for 2015 is an unpalatable
option for a weary nation. The option for 2015 is simple: If Nigeria votes for
candidate A, Nigeria is finished. If we vote for candidate B, Nigeria is
finished. That’s a no-win situation for a country of 170 million people.
The scenarios are clear enough to those of us who care to disturb our so-called beautiful dream. The one thing that Jonathan administration can do to reverse the impending collapse is to acknowledge in words and in deeds that what is not sustainable is really not sustainable. And that includes this government itself.
This article was first
published on saharareporters.com
Op-ed pieces and contributions
are the opinions of the writers only and do not represent the opinions of
Y!/YNaija.
No comments:
Post a Comment