“History does not
repeat itself;
man does”.
Barbara
Tuchmann; the
world’s leading
historian on 13th
and 14th
centuries in
Europe.
In the first part
of this series,
the price of Brent
Crude, which is
closer to the
Nigerian light
crude, was
quoted at $95.56
per barrel on June
20, 2012. On June
28, 2012, it came
down to $93 and
that was on
account of the
strike in Norway,
the world’s
eighth largest
producer.
In between, it
actually dipped
closer to $90 in
one day – all on
account of the
intractable
economic and
financial crisis in
several European
countries –
including three of
the largest four,
namely, Portugal,
Spain and Italy.
Spain had been
forced to borrow
at exorbitant
rates in order to
keep its economy
from collapsing
totally and
dragging down
the Eurozone
with it.
That implies
dragging down
Nigeria’s crude oil
exports as well.
When the
Spanish Prime
Minister, Mariano
Rajoy, warned
that Spain cannot
afford high
[lending] lending
rates for long, he
made clear that
he was not
speaking for
Spain alone but
for other nations
in Europe as well.
According to him,
“It is happening
in Spain; it is
happening in
Italy; and it is
happening in
other countries”.
Meanwhile
European leaders
demonstrating
what, Russian
President called
“action deficit”,
are as far away
from finding any,
talk less of a
lasting, solution
to the gravest
economic crises
the Western
world has faced
since the end of
World War II. It is
crisis which will
affect us in more
ways than many
in government
imagine. Our
over-reliance on
crude oil and our
refusal to make
the hard choices
that would lead
to diversification
will eventually
lead to our
economic ruin – if
care is not taken.
Unfortunately, it
is not being
taken.
FROM BOOM TO
DOOM
Crude oil, which
had been the
catalyst
propelling our
country to
unforeseen
prosperity is, at
the same time,
the potential
harbinger of our
economic ruin.
For almost
fifteen years
after crude oil
was discovered
in Oloibiri, oil
played a minor
role in the
economic
activities of the
country. We had
a truly balanced
economy – with
each of the three
(later four)
regions
contributing a
significant
percentage of
the
government’s
revenue.
No single region
could hold the
entire nation to
ransom; as we
have now. We
also had true
fiscal federalism
– which
encouraged the
federating units
to compete in
developing the
abundant
resources we
now proclaim but
fail to exploit.
Nigeria’s
economic fate,
as well as those
of other nations
of the world
changed abruptly,
as they are
about to change
again, in 1973.
This time,
starting from
2012, it might be
a change for the
worse. The
boom, which
started in 1973
and ended in
1982; resumed
briefly again in
1992, and had
continued from
1997 till last year
is coming to an
end. The doom
which followed
the first boom, in
the mid-1980s till
1997 is about to
repeat itself
because Nigerian
leaders, at all
levels, were slow
to read the
handwriting on
the wall and to
take appropriate
measures to
prevent turning
an economic
crisis into a
catastrophe.
Reading, in the
newspapers, the
number of
Commissioners
and Special
Advisers which
the least
profligate of our
governors had
appointed, it is
clear that our
desdcent into
distress would
be deeper and
longer. Nobody,
except one,
thinks of a
Nigeria without
substantial crude
oil revenue –
NONE.
Global trade
experienced a
revolution, on
account of an
event which
occurred on
October 6, 1973.
It was the eve
of the Yom
Kippur, the
holiest of Jewish
holidays, during
which Jews were
restrained from
bearing arms.
Egypt took
advantage of
this and attacked
Israel and initially
made headway;
but soon the
holidays were
over and Israel
handed the
Egyptians their
third defeat since
World War II.
Humiliated once
again, the Arab
nations turned to
their remaining
strength – they
imposed on oil
embargo on the
West. Before it
was over, the
price of crude,
which had
remained at the
$3 per barrel
dictated by the
West shot up to
$12 per barrel.
The Organisation
of Petroleum
Exporting
Countries, OPEC,
was formed and
suddenly the
producers, not
the consumers,
of crude oil were
dictating the
price.
The effect on
the Nigerian
economy was
almost
instantaneous –
crude oil, by the
end of 1973, had
become the
nation’s largest
revenue earner; a
position it retains
till today. Money
and madness are
close allies; but
when the
bonanza is so
large as to
exceed fairy
tales proportions,
it certainly
induces lunacy.
Nigeria went on a
spending binge
about which
many of the
public office
holders, at the
time, and still
alive, would
certainly not
want to be
reminded for the
wasted
opportunities
involved in public
policy at the
time.
For instance,
many public
servants nearing
retirement, who
rushed out to
buy new cars,
refrigerators and
television sets,
after the Federal
military
government
under Gowon
declared the Udoji
Awards, paying
workers nine
months arrears
of salary and
increasing take
home pay by
300% were not
able to maintain
those items.
Invariably, it was
the first and the
last. Meanwhile,
the hyperinflation
which the
awards triggered
lasted for more
than twenty
years.
Meanwhile, the
price of crude
jumped on an
upward moving
escalator such
that
government, it
seemed, could
not spend the
money fast
enough. It would
have been better
if they had spent
most of it on
education,
infrastructure,
power and
health. Instead, it
went on
vainglorious
projects; on
unsustainable
salary increases;
on maintenance
of office holders
and lastly, it
disappeared
through
corruption.
The Udoji awards
induced a mania
for imports to
the extent that
many ships
loaded for Nigeria
sank with their
cargo, after
waiting for
weeks to berth,
and the
government paid
for the
undelivered
goods and the
boat –
sometimes more
than the entire
lot was worth.
The attitude
was, “why
bother, there is
more money on
the way?”
Even then some
lonely voices
were warning
that the price of
crude could not
rise forever, they
were ignored by
government
officials and the
“technocrats” of
the Organised
Private Sector,
OPS, who,
collectively, did
more to ruin
Nigeria than any
group of fellow
Nigerians.
It was not until
the price of
crude, which had
gone up as high
as $28 per barrel
by 1981 started
a relentless
decline to less
than $15 per
barrel, under
President Shagari
and later, went
under $10 per
barrel during
President Ibrahim
Babangida’s
administration
that Nigerians
learned the age
old lesson –
nothing lasts
forever. By the
time IBB
announced the
Structural
Adjustment
Programme, SAP,
the “party was
over” for Nigeria.
Several years of
hardship would
follow.
Then we had a
brief respite
from 1997 till
2007. Then
despite rising
crude prices,
corruption and
wasteful
spending took
over. Since 1997,
crude prices had
been going
steadily up as
global demand,
thanks to China,
India and Brazil,
as well as
Europe, whose
economies were
booming raising
demand for crude
worldwide. We
also benefitted
from wars in the
Middle East which
kept prices up. By
last year and
early this year,
crude prices
went as high as
$142 per barrel.
Yet, the high
prices were not
enough to stave
off impending
doom – even if
Europe had no
problems. For
twelve years, in
a row, we have
successfully
practiced the
presidential
system of
government,
which is very
expensive and
made more so by
several
provisions in our
own constitution.
Even at $200 per
barrel, the Nigeria
economy would
have collapsed
under the political
weight of the
presidential
system. It was
only a matter of
time. With our
trading partners
– including Brazil
now – in trouble;
the monster is
already at the
gate.
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