Recent events in the domestic and international markets, especially the rise in prices of crude oil, caused by the Russia-Ukraine war, copiously underscores the failure of past and present managers of the Nigerian economy to convert opportunities into national wealth. Most oil-producing nations in the same league as Nigeria have long taken advantage of the rejection of Russian oil at the international market. We believe this is the time for the current administration, which had promised to turn around the state-owned refineries in order to mobilize the needed resources for funding of infrastructure deficit, to reap from the oil situation around the world. Unfortunately, this has not happened.
Amidst concerns that the deficit in the 2022 budget is already way too high at N6.25 trillion, Nigerians are yet to hear the worst as recent happenings suggest that the deficit in the budget would be increased by another N2.55 trillion which the government has said would be borrowed to fund the scandalous petroleum subsidy regime that is milking the country dry by the day. By the time that is added to the N39.556 trillion (or $95.779 billion) current public debt, the nation would be heading to the red zone of debt distress. We must not get there.
Beyond frittering away what is supposed to be revenue accruals to the economy by way of oil subsidy, we feel more concerned that Nigeria has consistently failed to meet the 1.8 million barrels per day oil production quota set by the Organisation of Petroleum Exporting Countries (OPEC). As it stands, the nation’s average oil production is just 1.258 million/d. What is even more worrisome is that oil thieves steal about 400,000 barrels of crude per day in Nigeria, with the authorities appearing incapable of doing anything to halt the heist.
We believe that President Muhammadu Buhari-led government should at least live up to expectations and find a nexus between the need to free up revenue for the financing of critical public infrastructure and the troublesome issue of fuel subsidy.
It is indeed unpleasant for the nation to be talking about expanding its fiscal deficit at a time revenue from crude oil sales is at its peak, at $130 per barrel. This ought to be the time for Nigeria to rake in more revenue and build up the already depleted foreign reserves.
It is even more worrisome to hear government officials defending their collective ineptitude and passing the buck while the ordinary Nigerians suffer. The excuses are ubiquitous. According to reports, it is already established now that the Nigerian National Petroleum Company Limited is set to deduct a fresh N242.53 billion as subsidy on Premium Motor Spirit from the federation account this month.
The fact that oil contributes a small fraction to the Nigerian economy is more reason we think the authorities should as a matter of urgency do away with the decades of sole reliance on oil as the major source of revenue and give undivided attention to the non-oil sector. Successive administrations had trumpeted the need to diversify the economy away from a mono-product economy but little has been done to ensure this all-important economic shift.
Out of the GDP the National Bureau of Statistics said grew by 3.4 per cent in 2021, the oil sector contributed only 5.19 per cent in Q4 2021, while the non-oil sector contributed 92.76 per cent to the economy in the year under review.
It is evident that fuel subsidy negatively affects the country’s fiscal position while also increasing the fiscal deficit. The International Monetary Fund (IMF) has pointed out that despite much higher oil prices, the federal government’s fiscal deficit would be significantly worse at 6.3 per cent of the GDP, compared to 4.7 per cent of GDP in 2020.
For a country with 33.3 percent unemployment rate, with youth unemployment reportedly at 53.4 (about 13.9 million), a staggering low per capita income, high poverty rate, inflation rate rising to 15.7 per cent and the supply chain already affected by the overwhelming insecurity in across the country, we expect the fiscal authorities to employ both orthodox and unorthodox measures to quickly reverse the nation’s woes. But ultimately, Nigeria has to refine its crude, stop the oil theft and diversify into non-oil sectors to help the country improve and sustain its economic development.