The recurrent mistake we keep making
as a Nation is failing to anticipate and plan for our oil windfalls. There have
been many boom opportunities since Nigeria joined the Organisation of Petroleum
Exporting Countries (OPEC) in 1971; Oil prices increased by 400% in six short
months after the Yom Kippur War following the Arab Oil Embargo. Crude prices
doubled from $14 in 1978 to $35 per barrel in 1981 following the Iran/Iraq war.
The price of crude oil spiked in 1990 with the uncertainties associated the Iraqi
invasion of Kuwait and the ensuring Gulf War – the so called ‘Gulf
War windfall’ under then Head of State Ibrahim Babangida. Data from the
U.S. Energy Information Administration shows that the latest windfall happened
between February 2011 and August 2014, under the Goodluck Jonathan presidency,
when oil prices were much in excess of $100 per barrel. Another golden
opportunity was squandered, characterised by organised kleptocracy of epic
proportions as has now come to light.
During this same period Saudi Arabia
has amassed a whopping $593b in foreign exchange reserves and has recently
announced that it is creating a $2 trillion mega-sovereign wealth fund, funded
by sales of current petroleum industry assets, to prepare itself for an age
when oil no longer dominates the global economy. Coming closer home, Algeria,
the second biggest African oil producer, with 1.9mbpd has accumulated foreign
reserves of $156b and a sovereign wealth fund of $50b. Nigeria, by far the
biggest producer in Africa with 2.5mbpd has only managed foreign reserves of $28b
and a sovereign wealth fund of a paltry $2.9b – about 5% that of Algeria. The
major difference being that while the Algerians saved for a rainy day during
the boom years, Nigeria was busy squandering her wealth, with nothing to show
by way of infrastructure or any solid investments.
Yet Nigeria was able to balance her
budget, pay off her debts and save over $62b in foreign reserves during the
Obasanjo presidency from 1999 to 2007, even though the price of crude was
mostly under $40 per barrel, except for the two years between 2005 and 2007
when it hovered between $50 and $75 dollars per barrel. It is bothersome that
with the same level of oil price, Nigeria today is struggling to balance her
budget and has resorted to aggressive borrowing to finance the deficit,
inadvertently driving us back to where we were before escaping from the huge
burden of sovereign debt and the attendant debilitating impact of debt
servicing.
I believe that Nigeria can save as
much as $36.5b in the coming year if oil prices recover towards the end of 2016
and through 2017 to the projected $80 per barrel. This assumes we have all
agreed that the current crises is much too painful and too precious to waste.
It can actually be a blessing in disguise, affording us the much needed
leverage to deliberately diversify our economy away from the over dependence on
oil, and attempt to become self-sufficient in every low hanging opportunity
such as feeding ourselves. There is a reason why the Chinese use the same word
for challenge and opportunity; behind every challenge is an opportunity. We
must seize this golden opportunity with both hands and make the structural
changes that will lead us to true prosperity as a nation. Almost every third Nigerian
businessman you come across claims to be into Oil and Gas; usually, briefcase
contractors who manage to have their ‘papers’ stamped, and proceed to collect
money from the treasury of our commonwealth. Yet oil contributed only 6.4% to
GDP growth in 2015.
An often overlooked area for rapid
economic growth is telecoms, entertainment and media. At a recent event in
Lagos, Dr. Doyin Salami, lecturer at Lagos Business School, remarked that ‘The telecommunication sector grew Nigeria’s
GDP by 8.7% in 2015, generating spill overs, with uptakes in financial
transactions technology and payment systems, e-commerce facilitation and
proliferation of transport services, while making the offering of the
burgeoning entertainment industry ubiquitous’.
Quite simply, if each of the
34 million MSME’s in Nigeria could be supported with technology to improve
their businesses through online presence and seamless bookkeeping to the point
of employing one more staff, they would create an additional 34 million jobs,
much more than the government can ever provide. I totally agree with Dr. Salami
that Nigeria’s economy has systematically and strategically diversified along
the lines of technology and other services sector without Nigerians
noticing. The services sector today contributes
as much as 52% of Nigeria’s GDP.
Agriculture is also another sector
that could do with special attention. If we strive to produce what we eat, we
will not only be saving a whopping $6b from our import bill, but also provide
the opportunity for inclusive growth, with the spill over effects down the value
chain, from logistics and transportation to light manufacturing. But we need to
make the right investments in infrastructure such as roads and rail transport
linking farms with their food processors and markets.
The change that will make all this
happen is not the ‘outsourced variety’ where we believe that we can carry on
with business as usual, or sit back and fold our arms while only the President
delivers the promised change. All hands must be on deck, and we each have to be
the change we desire.
The elephant in the room question is;
who
says oil prices will reach $80 per barrel?
*Austin Okere is the Founder CWG Plc and Entrepreneur
in Residence, Columbia Business School, New York. He also serves on the World
Economic Forum Business Council on Innovation and Intrapreneurship.
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