A combination of lower demands as a result of acute global economic paralysis arising from the outbreak of the deadly corona virus pandemic and an oversupply arising from a Russo-Saudi energy war have forced crude in oil prices in the international market crashing down to a record low of below $25 per barrel. The ravages of the corona virus otherwise known as covid-19 pandemic, which has left nearly 2 million people infected and has resulted into about 200,000 deaths is an existential threat to mankind. To contain a pandemic that is highly contagious through to a human to human contact, the nations of the world have shut down on economic activities both domestically and internationally through enforcements of lockdowns and social distancing of the human race in a bid to contain the spread of covid-19; a viral disease that has no known cure or preventive vaccine. In addition to the harvests of death, the covid-19 pandemic has set off a chain of reactions that may see the world slide into a global economic meltdown.
Nigeria, a mono-economy, which derives over 80 per cent of its national income from crude oil revenues, which has so far recorded over 400 cases of covid-19 infections and 12 deaths, is set for another tumultuous episode of economic recession that may inevitably result into a depression. With current realities, Nigeria’s 2020 national budget of 10.59 trillion naira, which was bench marked by a crude price of $ 57 per barrel at an output of 2.18 mpb and signed into effect in December 2019 by President Muhammadu Buhari has become an unrealistic piece of fiscal fiction. To this end, the Buhari administration has proposed a wide range of fiscal adjustments to contain the emerging global economic realities.
As a result of the steep decline in demands and a corresponding fall in prices for crude oil in the international market, the federal government of Nigeria is proposing a downward review of the year 2020 bench mark crude oil price from $57 per barrel to $30 per barrel and cut in output from 2.18 mpd to 1.7 mpd. These adjustments will translate into a scaling down of revenue projections by 3.3 trillion naira from 8.41 trillion to about 5.08 trillion naira in the 2020 fiscal year in addition to the initial cut in the budget by 320 billion naira from 10.59 trillion naira to 10.27 trillion naira. Despite a truce recently reached between Russia and Saudi Arabia, which may see multinational oil cartel, OPEC, making an unprecedented crude oil production cut of nearly 10 million barrels in the coming months, the prospect of a price rebound is substantially diminished by the covid-19 pandemic induced global economic meltdown.
Nigeria, a heavily indebted country of nearly 200 million with more than half of its population miserable, hungry and poverty stricken, the initially proposed budget estimate of 10.59 trillion naira [$33.8 billion dollars] was barely enough to fund its enormous infrastructural and human development needs. Burdened by a combined domestic and foreign debt of over $80 billion, Nigeria’s incredibly high debt service ratio to revenue of 60% makes a substantial cut of 40 per cent in its grossly inadequate budget of $33.8 billion, economically disastrous for the Nigerian people. Nigeria seems poised to be one of the worst affected countries in the world in the impending covid-19 induced global economic meltdown.
However, Nigeria’s overt reliance on a single commodity for the bulk of its national income has made it susceptible to shocks in the international oil market leaving its economy vulnerable to perennial dislocations. The lack of a diversified source of foreign earnings and overreliance of crude oil revenues is an indication that Nigeria’s complex web of complicated economic problem predates the impending global economic meltdown caused by the worldwide outbreak of the covid-19 pandemic.
Like a ray of light in a dark tunnel, the COVID-19 pandemic and its consequent global economic crisis should ignite a new conversation on the state of the Nigerian state. Successful nation states in the modern world are those whose basis of structural formation and corporate existence are economically configured to compete in the race for global resources. Whether as liberal democracies, civilian dictatorships, monarchies or military regimes, successful modern nations whose structures of state are economically configured are usually well managed and competitive corporate entities with a distinguishing feature of national cohesion. These nations are made up by citizens whose hands are mobilized on the deck by a purposeful political leadership towards converting their internal economic potentials into an export driven competitive national economy. These nations of citizens will pull through the ravages of the covid-19 pandemic and make economic recovery afterwards with mutually beneficial collaborations with like nations but without necessarily asking for help.
On the contrary, Nigeria is a country with a collection of ethno-geographic nationalities that is yet to achieve nationhood. The structure of the federating units of the Nigerian state is delineated along primitive ethno-geographic fault lines, which effectively makes national cohesion impracticable in a fiercely competitive world. This faulty structure of state has rendered Nigeria a country of indigenes of the innumerable ethno-geographic nationalities and not a cohesive nation of citizens. Unfortunately, this primitive structure of the Nigerian state has entrenched a culture of ethnic identity politics in the selection of Nigeria’s political leadership, whose major role is to aggregate the sectional interests of the disparate sections of country over their share of Nigeria’s oil mineral revenue.
With a polity, leadership and indigenes that are fixated on the sharing of oil mineral revenues also known as the national cake, in furtherance of their sectional interests, there is a little consideration for increasing the size of the cake in the national interest of the Nigerian state. Rather compete with other nation states for global resources; Nigeria’s ethno-geographic nationalities are competing among themselves for revenues accruable from the exploitation of Nigeria’s internal deposits of oil mineral resources. Nigeria’s steadily growing population in the last decades and a daily crude oil production not exceeding a little over 2 mpd, the national cake has now become grossly inadequate for 200 million Nigerians.
However, with the outbreak of the covid-19 pandemic and the unprecedented fall in the price of crude oil, Nigeria’s major source of revenue, the grossly inadequate national cake has shrunk in size and rapidly diminished from continuous sharing. To shore up monthly allocations to Nigeria’s unproductive federating units in the face of dwindling crude oil revenues, the federal government of Nigeria having largely exhausted savings from the excess crude account, has plucked out $150 million from the Sovereign Wealth Investment Authority. And when Nigeria exhausts its meagre fiscal life lines, what happens next?
It has manifestly clear that only well managed, cohesive nations of citizens that have been economically competitive in global race for resources through exports and overseas investments are capable to enough to draw from their enormous wealth of nation to adequately cater for the welfare and security of their people at this difficult time. The political leadership of the Nigerian state, a politically configured waste land of economic opportunities has been going cap in hand seeking for external help in the form of billions of dollars of loans, aid or grants in order to keep the ship of state afloat in this perilous period of covid-19 pandemic. A heavily indebted and revenue strapped country like Nigeria can scarcely provide adequate palliatives for its 200 million “indigenes” to cushion the effect of its enforced lockdown to contain the spread of corona virus.
Going forward, if Nigeria survives the ravages of the covid-19 pandemic, its continuous survival in a post covid-19 world depends on its ability to restructure or re-configure its structure of state from a politically wired-to-fail-country into an economically programmed-to-succeed-nation by first replacing state of origin with state of residence.The replacement of state of origin with state of residence is the first step towards the transformation of Nigeria from an unproductive country of national cake sharing indigenes into a productive nation of national cake baking citizens.
Source: Premium Times