SECURE ECONOMIC COMMONSENSE

It is oft said that commonsense – that intuition to respond in a conventionally ideal way to certain stimuli – is the most uncommon thing in the world. Following the reduction of petroleum pump price from 97 naira to 87 naira per litre, many Nigerians misunderstood it as a political inducement by President Goodluck Jonathan. However, those who understand the dynamics of global oil prices and its economic implications to oil-producing countries are in a better position to educate the general public on how the government is not doing us any favour by reviewing downward the price of petrol.

Great empires and countries are feared and respected for their ability to sustain themselves. In the holy books, records of prudent empires abound. We know for certain that one of the greatest empires of all time, the Roman Empire, had the resources to feed its people and prosecute wars for years, even if the production process was disrupted or earnings dropped. It is ancient practice to store wealth in times of surplus, to save for times of paucity. It is indeed for this reason that sustainability is one of the basic prerequisites for national security. 

It is actually basic math: When oil sold at $110 per barrel, Nigerians were buying subsidized petrol at 97 naira per litre. Now that the same oil is sold at less than $50 (i.e. over 50 percent price drop) we should be buying petrol for somewhere around 48 naira per litre. Even if subsidy is completely removed, a litre of PMS should not sell above 60 naira according to current market trends. However, the contradiction of our situation is that we are an exporting and importing country. We produce crude oil but import refined products because we lack the capacity to refine what we produce and consume.

While other Organization of Petroleum Exporting Countries (OPEC) were busy studying the markets and devising stopgap measures to tackle dwindling oil prices, we were depleting our meager foreign reserves and lobbying for our beautiful Petroleum goddess to become OPEC Chairman. From the standpoint of moral appropriateness, isn’t it a shame that Nigeria is presiding over an organization of self-sustained countries while we ourselves import fuel for use? It is a fancy position for the minister, but its futility is exposed when the same OPEC has refused to cut down oil production. This is because they are protecting their future by ensuring that the price is too low for countries that are engaged in fracking to pursue their course.

Saudi authorities said they could sustain their economy for the next 6 years if oil prices slide to 20 dollar per barrel. The country has over $700 billion reserve fund. Other forward-thinking OPEC countries, such as Kuwait and the UAE, are also prepared.

Our economic planners don’t seem to appreciate the significance of sharp revenue loss. We may not all drive cars and motorcycles or run generators, but we all rely on petrol in one way or the other. If the nation’s revenue continues to drop and there are no alternative sources to make up for it, demand for goods and services will drastically reduce and prompt redundancy. Big companies will downsize; many SMEs will pack up. When these happen and poverty levels increase, national security will be threatened. This is why sustainability is a matter of national security. We are already witnessing the effect of this in the NE and government shows its lack of capacity to secure the situation.

Countries whose wealth heavily relies on oil prices, such as the Gulf States, are diversifying their economies. Huge oil consumer-countries, such as USA and China, are seeking alternative ways of sourcing for energy. We, Africa’s largest oil-producing country, are standing by watching the world move away from us. For how long will our less than $40 billion foreign reserves sustain us if prices continue to drop? What plans have we to revamp our decrepit refineries and build new ones so that we can earn more on our exports by selling refined oil and gas, as well as attaining self-sufficiency in local consumption? Commonsense is indeed uncommon! 

 

There are other worries associated with the drop of oil prices. Oil prices are denominated in dollars, and since our economy solely depends on oil, a strengthened dollar indicates a devalued naira; a further source of inflation. Today, our biggest challenge as a nation – insecurity – is proving insurmountable. It will be dangerous to slum into economic recession while fighting insurgency on another front. We simply cannot allow ourselves to get into a situation whereby both battles are fought simultaneously. Already, some trade unions are feeling the impact of the nation’s dwindling income. Judicial and health workers have been on strike since 2014, while colorful and expensive political rallies persist.

   

Successive governments have shown a complete lack of understanding of what is required of them to do. They really do act as if we do not exist and the lack of Permanent Voter’s Card for 30 million of us is just another attempt at perpetuating themselves in power. We cannot agree to this and must insist on INEC producing our birthright. Meanwhile the soil in the NE runs red with the blood of our brethren. This situation requires change and change now.