Our Overdependence on Oil, our Achilles’ heel -By Abdulsalam Jubril

Abdulsalam Jubril

With the current realities we face as a nation, without a shred of doubt, over-dependence on oil is the major problem facing Nigeria. Since the discovery of oil in commercial quantities during the 1950s, and the oil boom in the 70s, oil has been the mainstay of our economy. It accounts for about 90% of exports and over 80% of total government revenues. Hence, our economy has thus been substantially unstable. The 70s oil boom regrettably led to the neglect of agriculture, over-bloated public sector, financial indiscipline, corruption and lack of accountability, hitherto. Subsequently, our over-dependence on oil has exposed us to the vagaries associated with oil price volatility which has thrown the country’s public finance into disarray. Moreover, since oil revenue dominates the Federation account, the sharing of oil rents dominates intergovernmental fiscal relations in the country with ongoing tensions between agitations by oil producing states for greater share of resources and demands for redistributions from other regions.

As one of the top 10 oil producing nations in the world, erstwhile administrations focused primarily on the oil sector neglecting other sectors that could considerably grow the economy. Such administrations inability to think outside the box, believing that global economic growth would fuel the continual demand for crude oil which would in turn guarantee sustained high prices. However, bursting the bubble, the slow global economic growth in China – the 2nd largest economy in the world and largest importer of crude oil, have contributed in halving crude oil price since last year which is currently below $50 per barrel. Similarly, the advent of shale oil in the US and the refusal of OPEC to cut down on supply have added to the low crude oil prices and to our woes.

Growth and activity in our economy has stalled as low oil prices have further shrunk government revenue, negatively affecting growth and profitability in the economy. With no other major export, the government has been forced to increase borrowing to make up for the shortfall in revenue. As a country whose economy and national budget has always been dependent on revenues from high crude oil prices, we are currently in uncharted territory. The lack of diversification in the economy over the years has thus put us in a perilous. Despite our vast human and natural resources though, economic mismanagement has left us unable to create adequate and gainful employment for our huge labor force and exploit all of our natural resources. The famous groundnut pyramids that were a pride to our nation once upon a time are currently non-existent. The many textile industries in the Northern parts of the country and plethora of factories spread across the country that once employed over 3 million people are just few examples of our vibrant industrial sector that have been abandoned since the discovery of oil.

Like other oil over dependent nations such as Venezuela, we are insidiously sliding into a spiral of economic damage and uncertainty from the plunge in world oil prices. The Naira is weakening, government revenue is dropping alarmingly, salaries are delayed, systematic layoffs have begun and many construction projects have been suspended. The FCT which is usually the hub of affluence, precipitated by the seemingly inexhaustible spending of the national government and political elites, is also currently feeling the pinch of the gloomy economic realities we currently find ourselves in. As a nation, we must plan differently in order to generate non-oil based revenues. Looking up to our current “change” leaders, much is expected from them. They would have to think outside the box and show significant investment and stellar leadership, which is needed to diversify the economy and remove us from the status-quo of the over-dependence on oil.

Much ado has been said about agriculture but no tangible development has been recorded in the sector. As the present government looks to diversify, it should replicate and improve upon the boom in the agriculture sector that was recorded during pre-independence and early post-independence. It is a well-known fact that cash crops such as cocoa, cotton, groundnuts, oil palm products and rubber formed the majority of our exports in the 1960’s. If we get it right, there will be increased productions to amounts that will cater for the needs of the populace, thereby reducing the need to import and still have enough to export.

More importantly, there is need for us as a people to look inward for development. Our economy will be better if our “change” leaders can earnestly invest on human capacity, like what is obtainable in the US and other developed climes. Human capacity which refers to the collection of resource – all the knowledge, talent, skills, abilities, experience, intelligence, training, judgment and wisdom possessed individually and collectively by individuals in a population – if properly harnessed can positively add to the development of the economy and country. Human capital, the total capacity of the people that represents a form of wealth, can be effectively directed to accomplish some of the goals of our country; thus promoting economic value. Education particularly, is an investment in human capital that pays off in terms of higher productivity. The entertainment sector has presently shown it can hold its own in contributing to the economy. Innovation in science can play a key role in developing the country. Also, investing in services and information technology will enhance rapid development and possibly have a multiplier effect on the government and the people.

Written by Abdulsalam Jubril
You can follow me on Twitter via @Abdul_Jubril