Nigeria: The Unplanned Economy (This Oil Thingy) 2

By Ikenga Chronicles December 12, 2017

Nigeria: The Unplanned Economy (This Oil Thingy) 2

—¬†Baron Roy

So we have established the impact of oil price on the Industrial Production Index of economies and we have revealed it to be insignificant! Yet, some folks try to situate the economic challenges in Nigeria as having resulted from the drop in the oil price, leading to recession. This is a blatant lie! All we had done all the while was to employ the oil income to sustain the lifestyles of the federal government and their state vassals; we had not done anything about the economy.

With the knowledge of the insignificance of oil price, we queried some of the variables especially the oil income itself. All these decades, we had erroneously assumed that whatever gross proceeds we got from oil sales were directly “shared” in our Food-is-Ready Economic Model. Nothing could be further from the truth. It is the Net Income that ought to be shared. But what is the Net Income?

Research has it that the Cost of Production per barrel in Nigeria averages $31.00, and we sell an average of say $51.00. Thus, we make $20 per barrel sold. The oil producers rake in about 15% of this as their share (petroleum profit tax and Royalties to Nigeria is about 85%) leaving a net of $17 per barrel. That makes it about $34 million per day to the federation. The federal government shares this, then turns around to pay for 1.2m barrels per day on the importation of petroleum products. In the final analysis, the effective net export is 600,000 barrels per day with Net Income of about $10m per day or $300m per month.

It might seem unbelievable as these numbers don’t tally with the billions of dollars of income presented in the budget. We had been budgeting for the Gross Income all the while instead of budgeting on the net. The effective budget summary is at least 50% lower than what is announced. Accountants now tend to work based on the Gross Income presented rather than the net. The federal government and their vassals share the bulk (which is small compared to needs) and have very little else for development. Nigeria is thus, effectively a very poor country. This is the very reason why the federal government and their vassals are in a perpetual state of lack. That is why Nigeria keeps declining on per second basis. We have been sold on the wealth of oil rather than making real attempts at wealth creation!

Despite this obvious lie about the oil income, successive federal administrations have predicated ALL out budgets since inception on the price of oil. We have predicated our very EXISTENCE on a Significance Level of less than 0.01%, yet we expect development? Seriously?

Despite the obvious lack of income as proved, the little that comes in is frittered on frivolities. The hapless citizens, knowing very little, are regaled with stories of corruption. Corruption on how much, really? In all honesty, the Oil Income is hardly enough to satisfy the projected budget of the Lagos State Government with a population of about 20 million talk less of the whole country with a population of 180 million!

The world is watching, amused, at how a people that boast of a high human capital, could be so blind to realities. That we could base our existence on a resource whose economic numbers don’t jive is beyond silly. The Breton Woods institutions know very well that we are being stupid depending on oil income, but they have us where they want us; with our misery, their dominance and regular source of income is assured. Why else do you think they prop the Caliphate against far more reasonable people? Why do you think they fight those who seem to know better in our polity? They realise that if we should understand the farce and get on our feet, we would be competitors and their dominance of the world economy would be wiped out. China and other South East Asian countries got their groove back and are competing with the West, and outperforming them. They don’t want those bloody Africans to get their groove and they use us here against us! The North wants the status quo, the South doesn’t!

Mr. Goodluck Jonathan got the report about the Oil Trap. His administration proposed to put a stop to it starting with subsidies. Then to car manufacturing, to agriculture. They were successful in the backward integration of cement and Nigeria suddenly started competing with major exporters. Then the backward integration in different aspects of the economy was taking off with Agriculture leading the way. We had started having drop in imports, and the structure of Nigeria was about to be tinkered with to be more robust. This was going to wipe out the influence and dominance of the UK, US and others alongside the influence of the Caliphate. This would not happen; Jonathan was toast.

But I digress! Weaning Nigeria of the dependence on oil income (which is economically insignificant) and making it a competitive entity is the only way to development. Hoping against hope that the oil income would bring a major shift in our economic enhancement is a mirage. It would NEVER happen even if an angel were the president, the numbers don’t jive!

I have a niggling feeling that the governors know about this– and some lawmakers too. But they are so sold on easy money that they keep mum and enjoy the groove. In all truth, were the income to be equitably shared among all citizens, it would be so little that it would make very little impact! The politicians are left with little choice but to appropriate it to themselves and their cronies! It is simply not enough to go round.

We are not creating wealth; we are enhancing poverty. The Nigerians of 1970 were better off than those of 2017. In 1970, we had a population of 52 million and produced 2 million barrels per day. In 2017, we have 180 million citizens and produce 2 million barrels per day still. Since we base our economy and budget on the oil income, isn’t it obvious we are far poorer? We have 4 times the number of people fighting over a constant volume of oil. And we are all fixated on the same oil still! Pathetic!

This is the model the North wants by resisting restructuring. The South doesn’t want the model but are doing exactly NOTHING about it. Rather, we expect one miracle worker to become the president and wave a magic wand? Unless the structure is changed, or the South steps up with intellectuals to organically change the Southern economy and hopefully affect the North, the next president or the next governor is just waiting to get into office and FAIL!

(To be continued)

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