OPINION BY SIMON KOLAWOLE: The collapse of common sense, The Cable

In my previous article, I tried to remind us of what we have always known and talked about: that oil boom flatters to deceive.

The world is, meanwhile, desperately looking for alternatives to crude oil — with several advanced countries setting dates, starting from 2025, to phase out vehicles powered by fossil fuels such as petrol and diesel. Sadly, Nigeria’s economic (and, perhaps, political) fortune is tied to the price of crude oil. The higher the price, the happier we are, and the merrier our mood.

A little fall in oil price and the entire economy goes into a spiral: naira depreciating against the dollar; government revenues plummeting; public debts piling up; and inflation digging holes in our pockets.

Typically, oil exports account for 90 percent of government’s FX earnings. For a nation that imports far more than it exports, this is absolutely scary, especially as oil prices are not what they used to be and lower production quotas mean we are losing on at least two fronts.

How can the currency ever gain value? To worsen matters, half of government revenue comes from oil, although this is a form of progress as it used to be up to 80 percent not so long ago.

We can blame the COVID-19 pandemic for the current public finance crisis if we want, but the truth is that we have, for decades, been failing to put our house in order. We are only reaping what we sowed (pardon the pathetic pun). 

There are still people out there who keep thinking the reports of the imminent death of crude oil are grossly exaggerated. They think that the black gold will continue to be the king in the energy ring — and this is EXACTLY our downfall in Nigeria.

We are always waiting for the next oil boom. We are thinking oil will hit $100 again. We think the alternatives are neither “viable” nor “sustainable”. Is this not why, during the time of plenty, we usually embark on a spending extravaganza, launching white elephant projects, ballooning the cost of running government and saving little? “After all,” we humour ourselves, “Nigeria is a rich country.” Until the next oil price crash!

I did point out, in my previous article, that Indonesia earned $10 billion from exporting palm oil alone in 2019. That was just about 6 percent of its export earnings. In simpler words, what Indonesia made from palm oil exports alone, which accounted for a negligible fraction of their export earnings, compared favourably with what we made from our almighty crude oil. Ironically, Nigeria is not less endowed with cash crops.

Given the right thinking and conducive environment, we can do very well in cocoa, oil palm, rice, cotton, groundnuts, ginger and sesame, but the ease with which petrodollar floods (or used to flood) our treasury has been damaging our mentality since the 1973 oil boom.

Over the years, several governments have launched initiatives in cassava, rice, pineapple, cattle farming and all. So you ask: if it is that easy to push crude oil to the background, why are we still where we are — awfully chained to petrodollars? 

My answer would be beyond the rhetoric, can we sincerely tell ourselves we have put in our highest commitment into liberating our economy from the slavery of crude oil? Even when reform policies are making progress, there are people waiting to politicise the gestational pains and incite protests and strikes. We engage the reverse gear and go back to square one. It is like the snake and ladder game. That has been our lot, basically.

If we can make as much FX from palm oil or rice exports as we make from crude oil, why are we not making it then? Shouldn’t that excite and energise us? Why would you want to continue making the bulk of your FX earnings from a single product when you have so many viable alternatives? If it is so simple and profitable to diversify public revenue, why not just do it?

By Simon Kolawole, founder the Cable

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