It is no longer in doubt to anyone that the Covid-19 pandemic has caused a grave devastation of many economies, and disrupted the way nations, their citizens, and businesses conduct their affairs. Several media talks, meetings, discussions, seminars, and conferences have been held and are still being held (online and offline) in dimensioning the scope of impact, the consequences, and possible solutions to the enormous adverse socio-cultural and economic effects of the pandemic.
I was privileged to be invited as a panellist in one of such robust conversations – a recent special zoom meeting sponsored by the Transform Nigeria Citizens Initiative and the Concerned Nigerians Forum – in which we engaged Prof. Chukwuma Soludo (one of the world’s best heads in Macro-economics) in discussing the best strategies Nigeria can employ in weathering the storms of the pandemic. The focus of my presentation in the conference was on the underlying opportunities that are staring Nigeria and Nigerians in the face in the midst of the pandemic.
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The saying, “never let a good crisis go to waste” attributed to Winston Churchill is very apt at this time. There are always opportunities in every crisis, and it takes discernment and transformational leadership to explore and capture them. I am therefore very convinced that as the Covid-19 pandemic has (like similar challenges in the past) exposed the many vulnerabilities of the Nigerian system, especially the unsustainability of our economic and governance practices, we have another special opportunities to reinvent, reconstruct and reposition our economy, businesses, finances and other important aspects of our lives.
I will share ten(10) such opportunities in the following paragraphs.
Weaning Nigerian Economy From Oil Dependence
Despite the fact that the oil and gas sector contributes only about 9 per cent of Nigeria’s Gross Domestic Product (GDP) by composition, crude oil exports alone constitute over 90 per cent of Nigeria’s foreign exchange earnings while revenue from oil and gas sales contribute over 50 percent of the nation’s annual budget revenue figures. In fact, if you build in the tax and similar revenues from oil and gas and associated activities by businesses, one could safely say that oil and gas sector contributes over 60 per cent of the nation’s revenue for funding her budget. This is a worst form of the popular “Dutch disease”, and clearly shows how Nigeria’s successive governments have lacked the vision and capacity to enhance the capability of the remaining sectors of the economy that make up over 90 per cent of its GDP to contribute meaningfully to creating economic prosperity and growth for the nation.
With Covid-19 nearly halting economic activities around the world, resulting in an unprecedented crash in the demand for oil, global oil prices have seen their worst levels in decades. In fact, on April 20, 2020 the futures for crude oil US benchmark (the WTI) went into a negative territory – meaning for the first time in history, producers would pay traders to take oil off their hands. Nigeria’s crude oil benchmark (the Brent Crude) has been slightly luckier though prices crashed to as low as $19 per barrel before recently rallying towards $30 per barrel as many economies around the world begin to ease lockdown gradually.
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Several factors, beyond the Covid-19 effects, which include the campaign for climate change initiatives, increasing demand for more fuel-efficient aircrafts by world airlines, electric cars and machines innovations, continuous improvement in the alternative energy sources, artificial intelligence (AI), and several other innovations that tend to reduce human activities, point to the fact that the future of oil as a major driver of human and industrial activities is bleak. The Saudi Arabia’s recent partial divestment in the world largest oil company, ARAMCO, is a strong indicator to this position.
Therefore, Nigeria can no longer afford to close its eyes and ears to the reality that oil dependence is becoming increasingly foolish and extremely risky. Every time there is an oil price shock/ crash, Nigerian economy goes into a recession, the government goes into massive unsustainable borrowing, and our currency crashes in value despite the wasteful interventions by the Central Bank. We can no longer pay lips service to economic diversification which we never take seriously once oil prices rally. Let a serious team be set-up with private sector participation to drive the economic diversification objectives as envisioned in the Economic Recovery and Growth Plan (ERGP) strategy. We must allow Covid-19 provide us the needed “anti-body” to cure our nation of its long-lasting Dutch disease.
Reconstructing Nigeria’s Fiscal Federalism
Covid-19 has presented Nigeria with another special opportunity to review and reconstruct our fiscal structures in the federal system of government. A system where the component states that make up the federation are not sufficiently motivated to explore all available avenues or sources to raise revenue while driving innovative and value-adding economic activities is hugely unsustainable and sub-optimal. Apart from the false financial security provided by the oil revenue to all the states of the federation (even when many of them have no business with oil for that matter), the tax accounting system seem to give no push for states to work very hard at generating internal revenues. In fact, states that do nothing at all seem to be rewarded for their laziness while the hardworking states have little or nothing to show for it. When most of state funds come from the “free” oil revenue, the nation murders innovation, creativity and the spirit of enterprise.
With Covid-19 rubbishing our nation’s dependence on oil revenue – as captured in point one(1) above, there is no doubt that Nigeria needs to now deconstruct and reconstruct our fiscal federalism in a way that would challenge the federating units to drive innovation, economic efficiency, and fiscal responsibility. States must be enabled to benefit somewhat directly from certain taxes and tariffs that today go solely to the Federal Government or are shared non-proportionately by all the states.
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