Stories by Chineme Okafor in Abuja
Experts in energy economics have offered the federal government proposals on how to move Nigeria away from its high dependence on oil for revenue which has left the country susceptible to external shocks.
Speaking on the platform of the Nigerian Association of Energy Economics (NAEE), the experts during a webinar focused on the impact of the COVID-19 on the oil industry, advised the country and its political leadership to henceforth consider oil as a means for value addition in the economy and no longer as a source of revenue.
The participants during the Webinar included the President of NAEE, Prof. Yinka Omorogbe; a former of Chief Operating Officer (COO) at the Nigerian National Petroleum Corporation (NNPC), Dr. Tim Okon; a former president of the NAEE, Prof. Wumi Iledare and the first president of the NAEE, Prof. Akin Iwayemi.
They explained that the fiscal condition that COVID-19 has brought upon Nigeria was almost predictable on the basis of the country’s huge reliance on oil which prices frequently fluctuate.
Okon, indicated that alongside a team which worked with a former minister of state for petroleum resources, Dr. Ike Kachikwu, simulated a fiscal situation that was to climax in 2019, and had advised the government to quickly begin to look away from oil as a revenue earner and focus on incentivising value addition from oil.
He said the team proposed to the government ways to manage the country’s oil industry better and realign incentives towards production and not to consumption as it were with petrol subsidy amongst other imprudent policies.
“We talked about the cataclysmic year and it was supposed to be 2019; we were just looking at the fiscal position of Nigeria based on oil prices; and there was no sustainability.
“My position was frank, and it was that by 2019, there will be no money left to be shared. This was presented to the Economic Management team and suggestions made,” said Okon.
He noted that while the team proposed a better management of the cost and price ratio in oil production, they posited that, “any event that took place or affected the prices of oil was going to affect Nigeria.”
Similarly, Iwayemi in his remarks noted that the country has failed to align its politics with sound economic judgements. He added that this has led the political class to prioritise politics over economic considerations.
According to him, the most preferable option available to the country to overcome the impact of COVID-19 and subsequently grow its economy would be to look away from oil revenue.
He said: “We need to get our economics right and have a judicious balance between politics and economics in order to transform our country. Politics should no longer outweigh economics and technological considerations.
“We need to look away from oil as a revenue generator but as value addition to the development of Nigeria. Countries have done it. Our federal constitution is about sharing and not producing. We should rework our constitution to bake the cake and not share the cake.
“Take a holistic view of our production, example in agriculture. Add value to agriculture and not the way it is talked about now. Nobody has evaluated the CBN anchor borrowers programme. If we don’t change our bad behaviour, it becomes a habit.”
While buttressing the views Iwayemi and Okon had, Iledare stated that totally discarding oil and looking at it as basically a revenue generator, will not help Nigeria in its diversification of the economy.
He thus suggested that using oil to create economic values that could drive growth was necessary.
“If the oil industry collapses, we will see the worst of us, and we need to find solutions to move the industry away from a source of revenue to value addition,” Iledare said while suggesting that the next phase of oil assets’ acquisition should be targeted to indigenous producers and entrepreneurs to amongst other things, save the country from foreign exchange pressures.
In her remarks, Omorogbe, noted that Nigeria had limited time to come up with ingenious solutions to the economic challenges bedevilling her.
She said: “We don’t have that luxury now and cannot afford a situation where politics outweighs economics. We were never able to feed in knowledge into leadership to the extent that it affects our development and how we should have progressed.
“If we manage mediocrity, it will be bad for us especially at this level and situation. We must have opportunities that will counter these.”