Diversifying The Nigerian Economy

Plummeting oil prices and the announced austerity measures reveal an opportunity for revamping the Nigerian economy. This is an opportunity for the short, medium and long terms. But this is subject to a caveat; the managers and operators of the economy must see the silver lining at the end of the thick cloud. Tapping this opportunity is also dependent on the managers of the economy unlearning and forgetting some of the dogmatic philosophies and received knowledge that their teachers and masters taught them in the classrooms and start using common sense and pragmatism as guiding principles to restore our economy. It is a fact of life that as a person sows, so shall he reap. An economy that is not guided towards production but only consumption is bound to collapse like a pack of cards upon the slowest headwinds.

Where do we start? There have been a lot of discussions by notable men and women of knowledge and incredible official noise over the years about the mantra of diversifying the economy. Various sectors including agriculture, manufacturing, hospitality and tourism and the knowledge economy have been postulated as holding the key to our diversification. Various documentations and reports have been launched as the linchpin for our growth and diversification. However, instead of being diversified, the economy has become more straight-jacketed and narrowed into the smallest ducts and vents of the oil industry. The leadership of the country over the years simply mismanaged the high oil rents and failed to use them as a spring board to develop other sectors of the economy or to further invest in the oil sector for enhanced revenues. But all hope is still not lost.

As we think of diversification, it may be imperative whilst investing in other sectors to dig deeper into the oil and gas industry. We can exploit further the potentialities of the natural resource endowment which we currently depend on and get more out of it. Let us imagine these simple scenarios. First, Nigeria, through the private sector or public private partnerships, invests in boosting local petroleum refining capacity. New refineries spring up and the ones operating as state-owned enterprises are privatised. We will stop spending money to import refined petroleum and the quantum of resources spent as subsidy will diminish. Thereafter, we double or triple that capacity to produce enough refined products to sell within Africa and other regions. This becomes another source of foreign exchange earner for the country. By stopping our fuel import bill on refined products and creating a new revenue stream from export of refined products, more resources to fund economic growth and development will be available.

Still digging deeper into the oil and gas industry, the idea of building petrochemical complexes that refine over 150 products from our crude oil will get more revenues into the private and public tills. Instead of selling a barrel of crude oil at between $60 and $110, the country will be making not less than $3,000 per barrel of crude oil after deriving various products from it. The next stage is to take our natural gas very seriously. What is delaying the investments of other tranches on the liquefied natural gas project? By the time we stop gas flaring and make the necessary gas gathering and utilisation investments, Nigeria will be thinking of making more money from gas than crude oil sales. The market for the gas is available as we need a lot of it locally for electricity generation and industrial production. We have been unable to meet the gas supply agreements to our West African neighbours and at some time, we were paying penalties to Ghana for not meeting supply obligations. The demand for our gas is also great in other parts of the world.

A number of Nigerians with the received knowledge mindset will quickly erect every imaginable argument about subsidies in the oil and gas sector as a reason why the investments will not be feasible. Wait a minute, emerging evidence shows that Nigerians are not just against removal of fuel subsidy. The Petroleum Price Monitoring Polls conducted by NOI Polls in early 2014 showed that only 57 per cent are not in support of the subsidy removal. With the heat generated by the subsidy crisis, one would have thought a much higher percentage – about 80 per cent are against fuel subsidy removal. Nigerians are rather against successive governments including the present one that have lied unintelligently to the people. At every opportunity when the oil price debate heats up, government has presented a new Nigeria where bachelors will get wives and spinsters will get husbands on demand, good education, health services and infrastructure as what will emerge after subsidy has been removed. Once the government removes the subsidy, the savings from the new oil price are never accounted for. It becomes another veritable source of fraud created for the men and women of power.

What did the Obasanjo government do with the increases in the price of oil? What is happening to SURE-P today? SURE-P is about endless stories and refusal to give concrete examples of how the money has improved the lives of the people. Pray, for, example, why is the East-West Road, Enugu-Onitsha Expressway not completed despite the purported SURE-P intervention? Can Nigerians remember the beautiful Nigeria marketed by government in the late 2011 whilst making a case for the removal of fuel subsidy? Even though the government did not fully remove the subsidy, can the government compare in a prorated manner what it promised and what it has done with the money today? At the state level, the SURE-P is a complete disaster; no state even pretends to account for the subsidy funds. The funds go into the bottomless pit of the state treasuries which the governors mis/manage at their pleasure.

Aliko Dangote, a private businessman, has raised $9bn to finance a refinery project with a capacity of 400,000bpd, just 45,000bpd less than the installed capacity of our four state owned refineries. A public-private partnership can afford to do better and financing can come from various sources. This will include local and international private equities, not just from institutional investors alone but opening up the process for every Nigeria to invest and buy a stake no matter how little in the projects. We will also get local and international commercial and development bank loans and also borrow with repayments specifically tied down to barrels of crude oil. It will not take more than one and half years to tie down the resources for the projected investments in refining and gas utilisation if the enabling environment in terms of rebuilding confidence in government is in place.

With diversified oil and gas investments, Nigeria will be realising not less than four times its current income. All that Nigerians and international investors want to see in the country to make the required massive investments is a responsible and responsive government that will not differentiate between stealing and corruption; a government that will be committed to the welfare of its people, fight corruption to a standstill and engender citizens’ confidence. We need a charismatic government that is not run on received dogmas; that will lead the way for Nigerians to follow. Nigerians will be willing to pay more for fuel if they are sure the proceeds will be properly managed for their development.

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