Prologue:
The 'shocks' in the oil price as experienced these days is a mixed growth and recession for most economies in the world. For a mono-product economy like Nigeria it is an impending issue that has presented one of the most challenging time in the history of the country.
Petroleum production and export play prevailing role in Nigeria’s economy and account for about 90 per cent of her gross earnings with attendant implication on economic growth posed by mono-product dependency. This dominant role has pushed agriculture which was previously the traditional mainstay of the economy, from the early 1950s and 1960s, to the background and has placed the economy on a fragile pedestal of global oil outlook.
Looming Issues:
The issue with Nigeria is double edged, first, the export proceeds dwindle and government is running weak of fiscal energy to fund the budget. The low oil export proceed over the months has left the country current account in negative position with high negative balance of trade and significantly low reserve which has resulted into foreign exchange hike. Worst still, manufacturing sector is in comatose and so Nigerians import almost everything in use hence high foreign exchange has led to high prices of good and service and of course, inflation is out of control and business environment is hash with no developing space for SMEs.
Second, Nigeria is a net importer of refined petroleum product, FX hike has price adjustment implication which made the government to muscle ‘political will’ to remove subsidy, good, but there are unforeseen issues ahead as the price worksheet might not be pure after all. The argument on that is for another day.
Subsidy has been removed and so what? Can the price of petroleum products be sustained? What are the palliative measures put in place to ameliorate the suffering of the masses?
The End of Oil
This is double negation on the economy.
If petroleum no longer sell, what will become of Nigeria?
We don't need to talk of the crude oil reserve in Nigeria, it might be in abundance with new discoveries and production in Lagos and exploration opportunities in the North. What we need to talk about is the end of the demand for oil.
Would the world stop needing oil? YES! How?
First, there are new and ultra-technology to find and explore oil in places least expected and we have seen the beginning of shale oil exploration in commercial quantity. The super-economies will soon be oil-sufficient, the US is producing oil in commercial quantity now and China is taking over territorial waters, creating artificial Islands all around the China sea with threat on small economies like Philippine all in the guise of oil prospecting. EU might not sustain its grip on unity post- brexit as frexit looms and each country will start looking inward with exhibition of self-determination.
Second, the auto industry is a major use of refined products of oil. There are new technologies that will see to the end of oil. Tesla Motors is leading in Electric car innovations, Google is not finding sleep on self-driven electric car and in Brazil, green energy innovation is exchanging petroleum for biofuel. In some years to come, oil will no longer be needed as coal is not today.
Third, the environmentalists are advocating for sustainable ecosystem and there has been so much talk about carbon economy and most world powers including China want to reduce use of carbon energy as fast as possible with incentives to organisation that run less of carbon energy. There is so much work on alternative energy today and if there is a good development in this tomorrow, it will reduce the use of oil significantly. Power generation is tilting towards clean energy now than ever before.
Finally, it is expected in a cycle of life that the same way coal is no longer suitable for energy generation and the use is been monitored in some countries, so will oil not be needed soon. Before Standard oil started producing oil in commercial quantity, coal was best for the world energy and so it would be that before Tesla motor started producing electric cars, petroleum was the source of running cars.
Fiscal Responsibility:
If all these are coming, what would Nigeria do?
It is high time government looked inward and have a road map first to reduce the oil dependency to 50% in a sustainable way and not the paper economic calculation called ‘rebasement’ that does not have any positive impact on the wellbeing of the people.
In my opinion, there are two ways to do this. First is to empower the SMEs and allow free market. SME is the engine room of any economy and if they are empowered, there would be innovation, invention and productivity will become high. Second is to invest in education. if the road map to liberalise the Nigerian market is 20years, government will need to invest sporadically in education. Empower young people to think, innovate and invent and only then will the future be sure. Then, government should invest heavily on infrastructure which is secondary because the young people you develop today will invent new ways of generating electricity tomorrow and so on.
Without dulling you with long notes, the end of oil is fast coming, the whole export proceed will soon implode and Nigeria needs to be in a hurry to change the mathematics of the economy else....? What will happen to the businesses when this happen?
Personal Responsibility: Heralding a New Age
Lets’ assume government as it were will not fulfil its fiscal responsibilities for so many obvious reasons, what should Nigerians do? Take to the Street? No!
This is a new age where Nigerian needs to exhibit entrepreneurial prowess beyond government participation instinct because our governments have failed us and the messiahs of Nigeria are those individuals that will arise and invent from the scratch. Nigeria needs reformers that will stand for nothing less than creativity, that will think, act, set goals and create ventures with eyes on developing a new Nigeria. It is time for Nigeria (government) to start depending on Nigerians and not Nigerians on Nigeria (government). At the end of oil, politics will no longer be a lucrative business and government functionaries can be at the middle of messy situation and resign like David Cameron of Britain, politicians will depend on business people to run the affairs of state, they will become rent seekers and not penthouse owners.
It is time for Nigerians to start thinking like Fola Adeola who got tired of how banks were run in Nigeria and he created GTB; it is time for Nigerians to start acting like Aig Imoukhuede who after attending a course in Harvard was mind itching to take over Access Bank and turn it around-which he did; it is time for young people to start thinking like Elon Musk who taught himself programming at age 12, develop a code at that age, sold it and today he is changing the world of business; we must start having the perspective of Jack Ma who was a Teacher earning an average of 12 dollars monthly but went ahead build Alibaba from the scratch to the eye of the world. There are many more that will be detailed in an about to be published book.
There are enormous opportunities in Nigeria beyond the cry for government inactive intervention.
The only solution to Nigeria issue is for Nigerians to build product and services for Nigerians and the rest of the world. We must start exporting product and services to the world, our net service figure as at 2015 is in huge import figure and we have 180million people who are vibrant and intelligent but who only think locally. We must start thinking globally. It is interesting that while Nigerians go to school to find job, the Americans and Chinese go to school to create jobs and that is why it is not given that an American must finish school, as soon as they find what they are looking for, they will drop out to pursue it…Bill Gates did it, Mark Zuckerberg did it even Elon Musk didn’t complete his PhD program at Stanford University. Our future is not in the job we find after school, our future can only be bright if we come out of school and create brands and put food on the table of millions of people.
Lets’ start creating jobs, lets’ think from the scratch and have the patience to build our idea to prominence, it might take some years but if you wait on it, it will work.