Three months of economic hardship?

ON Wednesday, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mr.Mele Kyari, warned Nigerians to prepare for more economic trouble in view of the current multi-year low level of crude oil prices at the international market. Mr. Kyari reportedly spoke against the backdrop of the spread of COVID-19 in  over 90 countries, the shut-down of large economies, and the price war declared by Saudi Arabia to punish Russia for its refusal to accede to further production cuts, resulting in the lowest oil prices since 1999. Speaking at the Second Consultative Roundtable with the Central Bank of Nigeria (CBN) Governor, tagged Going for Growth 2, in Abuja,  Kyari  lamented that Nigerian banks were still too limited to finance the oil industry, the most important sector of the economy. He then advised Nigerians to prepare for at least three months of economic hardship, adding that even if the market recovered from the price shock immediately, it would take time for the effects to wear off. He said: “We must assume that prices will remain low. The assumption for this year is 60$ per barrel crude oil price as an average. Now, we are facing 30 and we haven’t seen the bottom. Today, there over 12 LPG cargos stranded globally because they have no hub because of the abrupt collapse in demand associated specifically with coronavirus. It is obvious and it has also hit other sectors from the production stage which is the liquid crude.” Instructively, at the event, the business mogul, Alhaji Aliko Dangote, expressed disappointment at the perennial mouthing of plans to diversify the economy once there was a crash in oil prices.

Truth be told, asking Nigerians to prepare for three months of economic hardship is rather tongue in cheek. Nigerians have been in economic hardship for years, and the current administration has already heightened their misery. Nigerians, in the words of the late Afrobeat maestro, Fela Anikulapo-Kuti, are no strangers to government-induced hardship, simultaneously “suffering and smiling.” For instance, as the sharp drop in crude oil prices on the back of the spread of coronavirus reportedly wiped off subsidy on petrol, the expected open market price of Premium Motor Spirit, popularly known as petrol, dropped to N114.53 per litre, N30.47 lower than the approved pump price of the product. According to media reports, the landing cost of petrol plunged to123.88 per litre on February 27, and N95.16 per litre on March 10 from N115.52 per litre on March 6.With the recent steep fall in crude oil prices, the cost of petrol plus freight dipped to $379.37 per metric tonne (N86.84 per litre) on Tuesday from $466.43 per MT (N106.78 per litre) last Friday, according to the Petroleum Products Pricing Regulatory Agency (PPPRA). But Nigerians would certainly not be surprised if no adjustments in price are ever made to reflect the change in crude oil prices.

Besides, exactly how are Nigerians to prepare for these three months of hardship?  And what really would three months of suffering mean to a population almost perpetually harangued by governmental insensitivity and neglect? In the face of debt peonage, and in defiance of warning by global financial institutions, the Federal Government has been piling up loans. Only recently, it got set to take a new loan valued at $2.8 billion. This concessionary loan meant to partly fund the 2020 budget is apart from the $3billion loan it is seeking from the World Bank to fund the power sector. And while Nigerians were lamenting over its gradual plunging of the country into economic ruination, the Senate approved the $22.79bn external loan request by the President Muhammadu Buhari (retd.). The funding agencies for the loan, according to the Senate, are the World Bank ($2,854,000,000), African Development Bank ($1,888,950,000), Islamic Development Bank ($110,000,000), Japan International Cooperation Agency ($200,000,000 ), German Development Bank ($200,000,000), China-Exim Bank ( $17,065,496,773), and the French Development Agency ($480,000,000).

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As we noted in previous editorials, the administration’s appetite for debt accumulation took the country’s public debt to N26.215 trillion, as of September 30, 2019, from the N12.118 trillion it was at the end of May 2015 when it took over, meaning that the country’s debt profile grew by over N14 trillion in less than five years. We have also noted that, as usual, the Federal Government will continue to commit close to 90 per cent of its net spend on recurrent expenditure, meaning that for every naira that it spends, only 10 kobo will go towards any kind of capital expenditure. It is lamentable, though perhaps not surprising, that the Federal Government has not indicated the plans it has put in place to insulate Nigerians from the effects of the expected plunge in revenue from crude oil. By contrast, the government of a state like Oyo has at least expressed its preparedness to insulate the state from the impact of the impending reduction in federal allocation following the crash in oil prices at the international market.

If only because Nigeria is the current global capital of poverty, it is pointless asking Nigerians to prepare for at least three months of economic hardship as if their living conditions will improve with the normalisation of crude oil prices. With the government’s poor handling of the economy and, more significantly, the faulty leadership recruitment process in place at all levels of governance, there is no change on the horizon.



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