By Noel Onoja
In 2015, Why should our economic outlook be submerged in the downturns of oil fortune? how did we hang on for so long on a lop-sided string for economic sustenance? Well, answers cannot be far-fetched! From corruption to mismanagement, to lack of foresight and even a lack of political will.
In all ramifications, the current trendy fall in international oil prices is a total blessing to Nigeria, a boon, its an ‘off-period’ to re-strategise by using the same positive fallout from the oil price decline to revamping other internal variables which we will also look at in this write-up.
The price of oil dropped by half last year, the second-biggest annual decline ever, hitting a five-and-a half-year low. Oil prices have a knock-on effect on the price of food, which fell for a third straight year in 2014
It is a case for instance, of having a constant income stream from a particular business over a long period of time, obviously you’ll get used to receiving that money and over time you become complacent and reluctant to diversify from your trusted source
Retracing Our Steps:
Back when agriculture was the main stay of Nigeria’s economy the country thrived with a stable economic outlook, low food prices and even better income per capita. In Nigeria today, energy and transportation cost have been a huge burden for existing businesses and a hindrance to other intended small scale start ups
Today Nigeria’s consumer price index which measures inflation level in the economy has risen to 8% according to the National Bureau of Statistics (NBS) report released on tuesday, same report also indicated that food prices edged slightly higher by 9.2 per cent (year-on-year) from 9.1 per cent in November as a result of the festive period. What this means is that as oil prices rise the resultant effect will translate to lower cost of food, energy and transportation, petroleum by-products becomes cheaper to produce for export and so on.
When oil prices spiked in 2007-2008 in tandem with food prices, poor city-dwellers in most growing economies rioted, but today reverse is the case.
The gains are simply visible, in this era of global oil decline, regulators in Nigeria can simply end the subsidy regime and allow internal market forces to determine oil price, we can also begin a radical change in converting petroleum by-product into a manufacturing avenue and encourage small and medium scale industries.
If the money saved by lower energy expenditures is invested in agricultural research, roads, and new technologies, the poorest of the poor could benefit from current trends, the benefits are in lump sums, while Nigeria’s subsidy figures runs into trillions of naira, Globally, subsidies for fossil fuel consumption totaled $548 billion in 2013, according to the International Energy Agency.
So industry regulators should focus on refining our crude locally and making fractioning and horizontal billing a strategic policy for the industry, fractioning may include using petroleum by-products like fertiliser, chemicals, lubricants, road construction elements like asphalt and others in a beneficial way, this will allow for food, transportation and energy cheaper thereby encouraging manufacturing.
If tomorrow the oil prices stabilise and eventually begin to climb – although there are indicators that Shale oil might continue to keep crude prices low, if either outcome happens we might not worry much because we would have developed and diversify our economic earning through agriculture, manufacturing and export.
Until quite recently, few appreciated quite how big the American shale revolution would become. The high oil price of recent years incentivised a tsunami of new development; and in the same manner industry watchers expect the downward trend in global oil price to kick-start a tsunami of alternate development, in the case of Nigeria, we should begin to witness an attendant decline in food prices and other energy cost albeit not immediately, a revolution should become of our agricultural and manufacturing sectors, this is our golden opportunity, let the hays days be recalled.
Noel Onoja writes from Abuja