2017: The year of doing your best
Happy new year! I wish you a very prosperous new year, come what may. With that, let me welcome you to the last full year of governance before politics and electioneering fully take over towards the 2019 elections. We can expect the government to perform at normal levels this year, however you define normal performance.
There are some hopeful things to look forward to. The biggest one is that the private sector now has a greater role to play in funding oil production in Nigeria. The FG has been a JV ‘partner’ for years but it is a special kind of partner that only collects payment but mysteriously disappears when it’s time to invest in more production. Naturally, its unpaid share of the JV costs have been growing even when oil prices were high.
Last year, the garri was finally submerged by a deluge of water and something had to be done. The new arrangement is slightly complex but the gist of it is that the private sector will fund production and take anything they produce above a certain number of barrels per day as their reward. Things work better when incentives are properly aligned.
No serious person expects oil prices to go back to $100/barrel anytime soon – a price last seen in August 2014. You can take this as a positive because it means that most people have now had more than 2 years to get used to the new reality. No one is making plans based on anything as high as even $70/barrel. If it comes it will be a pleasant surprise. So from the point of view of Nigeria, there are two other factors that can bring about stability in oil prices in 2017 and help to avoid those damaging negative shocks.
If the OPEC deal holds, prices should be able to stay above $50. That ought to be enough for any Omoluabi. Banking on more than that is setting yourself up for disappointment. The other main factor is the militants in the Niger Delta. This is a precarious balance. If oil prices go up, they get more of an incentive to not only blow pipelines to make a point but also to fund themselves with stolen oil. Or they might not like the look of someone’s face in government and blow a pipeline just because. None of these two factors will be easy but they are at least controllable in that Nigeria has more of a say over them than over what happens with the shale oil guys in Texas.
But Nigeria’s biggest challenge this year will be politics. You cannot take all the possible political factors and put them on a graph to plot what might happen. The tapestry of Nigerian politics is made up of bad actors, opportunists, quiet and powerless reformers, incompetent noisemakers, street smart politicos and more bad actors. The mix is very combustible and often, it only needs a small gust of hot air to explode and burn even people who were just minding their business nearby. And the fact that we cannot reliably predict how things will turn out politically this year is in itself a big problem given the uncertainty it creates. It is not enough for a policy to be obviously bad and need changing. What interests have aligned behind that policy, bad as it is, and are now thriving on it? This is a question that is very difficult to answer. The day when Nigerian politics can be called a noble profession is still some way off.
Of course, we have to talk about the forex situation. The enemy has come into the Nigerian economy like a flood and the country has no dollars with which to raise a standard against it. Sad. The worst part of the forex policies is that the Central Bank banned some items and effectively fixed exchange rates while announcing that certain sectors would be prioritised. When you set your policy stall like this, it is expected that you be able to back up your position after running your numbers. The price you fix at should satisfy those you have prioritised. The opposite of this is what has happened. The loudest complaints about lack of forex has been coming from the very people – manufacturers – that CBN has supposedly prioritised. What then is the point?
But this problem no longer has any easy solution. If CBN floats the currency today, there will be another round of painful inflation which will take at least one year to wash through the economy. From a political viewpoint, Nigerians will then head to the polls feeling like all they did for four years was suffer. That is, if you want to float your currency, do it early so voters can go to the polls with the pain behind them.
Forex also has a big effect on petrol prices so there’s an extra incentive for the FG to avoid liberalisation. Of course, if oil prices go up the N145/litre will come under pressure, too. For this one, you can expect the return of fuel subsidies. Reversion to the mean is strong in Nigeria. Unless something painful happens to force the FG’s hand, the best that one can expect in 2017 is for the forex policy to continue as it was in 2016.
These are tough times for Nigeria. The sheer scale of job losses in the last year alone is enough to make grown men cry. But a wise man once said a problem is a chance for you to do your best. It is the most anyone can ask of any Nigerian right now. I pray the year rewards your honest efforts.