Confronting the curse of oil
The monthly Federation Accounts Allocation Committee, FAAC, meeting was held the other day in Abuja, with the representatives of state governments again cap in hand, asking for their share of federal revenue – read: oil revenue, or better still, national cake, or our money. A paragraph in the report by the online newspaper, Premium Times, caught my attention and here it is: “But at the Federation Accounts Allocation Committee, FAAC, meeting, representatives of the 36 state governments went home SAD (emphasis mine), as they were handed parlous shares from a total N299.75 billion statutory allocation for the month, the lowest allocations in more than five years.” For the month of March 2016, the states shared N55.34 billion, compared to N64.52 billion in February 2016. I have deliberately emphasized the word sad, because the day may well come when after the sharing of national revenue, we may be told that some Commissioners of Finance left the meeting crying, or wailing.
To prevent that happening this time, the Federal Government chose to suspend deductions of salary repayment loans owed by the states. When such deductions were made in February 2016, at least one state, Osun, went back home with a paltry N6 million only. The truth is that most of the 36 states are in dire straits, worst hit by the economic crisis that the country faces. About 27 out of the 36 states of the Federation are effectively insolvent, if not bankrupt. In July 2015, the Federal Government not only bailed out the states financially, the Central Bank of Nigeria further extended the repayment period for bank loans taken by the states from a period of seven years to 20 years. So far the affected states have collected salary assistance loans from the CBN to the tune of N689.5 billion, with an additional N310 billion as loans backed by the Excess Crude Account.
Across the country, these states are owing staff salaries, in some cases up to seven months. Pensioners have not been paid their arrears. Civil servants are angry because their allowances are being withheld. Most of the states (24) have not been able to improve on their internally generated revenue. The people are angry, wondering what this change has brought to their doorsteps. In January 2015, former CBN Governor, Charles Soludo, had sounded a cautionary note of warning in a piece titled “Buhari vs. Jonathan: Beyond the Election” wherein he argued that under President Jonathan, economic prosperity (oil boom) rather than generate wealth and opportunities resulted in greater pressures and the handing over of the economy to “self-conflicted traders and businessmen.”
He warned that the future of the Nigerian economy appeared bleak in the event of a slide in the spot price of crude oil. In November 2015, Soludo wrote a post-election piece titled “Can a New Buharinomics save Nigeria?” in which he slightly revised his trenchant attack on the Jonathan administration and argued that President Muhammadu Buhari had in fact inherited strong economic indicators and that in spite of the dwindling oil prices, he had an opportunity to further strengthen the Nigerian economy, given the right choices. The economist called for a debate on the subject, made his own recommendations and asked for the immediate setting up of a WAR ROOM on the economy.
Between January 2105 and March 2016, Soludo has been proven right in many respects; if you discount the politics of his January 2015 piece, that is, and focus on the analytical prescience of his contributions, you would easily agree that whatever may be happening in the economy today is foreseeable, foretold, and perhaps preventable. There is no challenge more urgent in Nigeria today than the economy. The health of the economy is linked to the well-being of the people. A recursive economy brings hardship and perhaps the last time Nigeria found itself in similar circumstances was truly between 1981 and 1985; the mismanagement of that challenge then, rather than improve our situation resulted in an uncontrollable decline, the effect of which has had Octopal implications for the well-being of the entire society. The concern of the concerned intelligentsia is that things should not get worse than they are now.
Because things are not really looking good, right now, President Goodluck Jonathan, for example, has had the great opportunity of engaging in an inevitable chest-beating-if-nobody-praises-me-I-will-praise-myself presentation in Newark, United States a few days ago. What he didn’t spell out is in the sub-text of his commentary. The current indication is that Nigeria’s GDP growth has dropped to below 3% in 2016 from about 7% in 2014. Income levels have similarly dropped. Inflation has jumped from single digit to a frightening double-digit range (12.11%). The manufacturing sector, which was on the rebound as at 2014, is now below 3% of GDP, which is as bad as saying there is no manufacturing going on at all and that the real sector is prostrate. The country’s reserves have been drained. Government deficit is rising. Unemployment has risen, even if one West African country is nonetheless asking Nigeria to come and help it solve its unemployment problem – I hope we will not again go and give what we do not have at home! Fuel queues are back as a feature of national life. Many Nigerians have not had an hour of electricity supply in the last four months. The people are angry and hungry.
In his November 2015 article, Soludo asked for a War Room. In March 2016, the Federal Government organized a Talk Shop in the form of a 2-day retreat of the National Economic Council (NEC) which came up with 71 proposals to revive the economy. 71 proposals! Sadly, there is nothing new in those proposals. Soludo called for a debate and pro-active measures. The administration is obviously not interested in what he has to say. Instead, there has been a lot of blame-this-blame-that going on. My take is that we cannot leave economics to the economists. Economists are fundamentalists; between the market fundamentalists and the state capitalists they only manage to produce problems, and that is perhaps why the idea of a War Room may be the wrong idiom. I also don’t consider the blame game helpful. Whatever is wrong with the Nigerian economy is an open secret that does not require any prolonged movement of the mandibular.
We are, to say the truth, paying the price for the failure of the Nigerian leadership elite to diversify the Nigerian economy and expand the country’s revenue base. We found oil in 1958, and since then we have been as a country, a victim of the curse of oil. The curse of oil in our context has meant indolence, the emergence of a rentier class, a squandering of riches and the alienation of the poor by the rich. Every country afflicted by the curse of oil has found it difficult to escape from the curse. In our case, it is worse. Crude oil accounts for 90% of Nigeria’s exports, 70% of Federal revenue and about 15% of GDP. The point has been made for years that without oil, or with great falls in the spot price of the Brent crude, Nigeria will be in trouble. Every scholar has spoken about the need for diversification, but oil money is so cheap, it does not allow our ruling elite to think. I wrote the foreword two months ago to a book tilted Memories of Yesteryears written by Akpandem James, formerly of the Independent Newspaper and in one of the chapters he reminisces about a long list of plantations across the South-Southern part of the country, but those plantations are no longer there, either in the South South or the North or the East or West, because over the years, Nigerians got used to the easy money that comes with oil.
Oil, everyone said, is a wasting asset. But our leaders never listened. Instead, they argue that we have more gas than oil and that if nobody buys our oil, shale oil or no shale oil, Nigeria will sell gas. A country built on a philosophy of wealth without work or sense, commits a grievous sin. We have confronted the curse of oil on so many occasions. It caused the civil war of 1967-70. It resulted in the desperation of the North to seize Federal power and get a bigger share of the national cake by all means. It led to the agitations in the Niger Delta, the death of Ken Saro-Wiwa and the Ogoni Eight, pipeline vandalism, Niger Delta insurgency, environmental degradation and the potent threat of a resurgent militancy in the Niger Delta, which is bound to cripple the Nigerian economy finally and tragically. The curse of oil is the source of a national cake mentality that has turned public service into an arena for primate accumulation. It is the root of corruption in Nigeria.
It is not a Buhari vs. Jonathan apotheosis therefore. To reduce it to that level is to ignobly avoid the messages of history. If anyone must be blamed, it must be all Nigerian leaders from independence at all levels. They have focused more on the fundamentals of ethnic, religious, regional and personal benefits, more than the fundamentals of national benefit. The leaders at the state levels are no better than gluttonous beggars. Elsewhere, states are centres of productive, economic activities. In Nigeria, every Governor is interested in what comes from the easy monthly allocation from Abuja. For IGR, they tax the people, multiple, punitive taxes. They create the impression that government exists to punish the people. Not every problem is Abuja-sourced. We need Governors who can think creatively economically and turn their states into economic units, not cowboys who spend more time in Abuja doing eye service. Truth is: some Governors are so cheap when they go to the Villa, they even expect to be given transport fare!
There are other issues: enhanced financial transparency will help, fraud has to be checked; there should be greater oversight scrutiny by civil society and the legislature; too many lawmakers are too busy trying to get their own bite of the national cake – can they please keep their rumbling and insatiable stomachs in check? And finally, the cost of governance must be reduced: Lawmakers who proudly ride vehicles worth N36.5 million are bandits not servants of the people. Governors who live ostentatiously and claim that there is not enough money to pay salaries are wrong. President Buhari is fighting corruption: he should allow states being run corruptly to sink if they must.