by Mark Chieshe
The over 40 per cent plunge in global oil price is an ominous sign that the economics of oil has changed. It has caused the devaluation of the naira and necessitated fundamental changes to the 2015 budget estimates. This trend might linger as low demand for oil persists due to insipid global economic activity and a growing switch away from oil to other fuels. Second, production in Iraq and Libya is climbing back to pre-crisis levels. Thirdly, America has become the world’s largest oil producer. Though it does not export crude oil yet, it now imports much less, creating a lot of spare supply. Finally, the Saudis have decided not to sacrifice their own market share to restore the price. They could curb production sharply, but the benefits would go to countries they detest, such as Iran and Russia.
Because of this, Nigerians are understandably agitated. They want to know what steps are being taken by their government to put the economy on a sustainable footing. They want to know the level of importance being given to the diversification policy of the government and also what provisions are being made to protect the poor and vulnerable within this period of adjustment. This development has also become a big political issue between PDP and APC with so many lies and misinformation being peddled to scare people and smear the government. But this is predictable since the elections are only a few weeks away.
Contrary to the constant refrain in the media that this government is clueless, indisputable statistics are loudly proving otherwise. Despite the fall in naira’s value, there has only been a marginal increase in the price of food. In fact, figures from the National Bureau of Statistics showed that, incredibly, prices of popular food items sourced from Bodija Market; Dawanu Market, Kano; Mile Two Market, Lagos and other major markets around the country were generally stable and even falling during the Christmas period. That is conclusive proof that increased food production and better economic management are having a positive effect.
The Federal Government had the foresight to pursue an aggressive diversification drive that is now yielding massive results. Our economy today is a lot less reliant on oil revenues than ever before. In the last few years, the non-oil sector has been growing at an average rate of 8 percent. Food Imports have declined considerably from N1.1 trillion in 2009 to N684 billion in 2013. Inflation has also eased to 7.9 per cent as at November 2014 as a result of slower rise in food prices. This means the Agricultural Transformation Agenda (ATA) is fully working and delivering real practical results.
As a keen observer of events, I have not forgotten that we faced this sort of situation in the 1980s when oil prices fell to as low as $8 and again in 1998 when it fell below $10. During those times, the government owed salaries for months and things turned embarrassingly bad. However, this time, the government was not taken by surprise. The Federal Government currently has about $4billion in the Excess Crude Account as a buffer to help manage the situation. Despite the N142 billion shortfall in the 2015 budget as a result of the oil price plunge, smart initiatives are being implemented to manage the situation. It is pleasing to know that an aggressive drive is already underway to further increase the Federal Government IGR which peaked at N328 billion as of October 2014 by closing more leakages. The projection for 2015 is N450bn!
By strengthening tax administration, reviewing tax waivers /exemptions and imposing surcharges on luxury goods, the FG hopes to increase revenues by over N200billion in 2015! In addition to this, the government has also announced clinical budget cuts to non-essential/developmental expenditures and rationalisation of agencies to save N82.5 billion. The deployment of more IT systems has helped weed out 60,450 ghost workers saving N185. 4bn for the government.
I am a firm believer in the possibility of Nigeria building an economy that places the non-oil sectors with the private sector in the driving seat. It is therefore exciting to know that beyond the budget and spending cuts, the government has plans to pursue policies that will motivate the private sector to invest and spark serious growth in some key sectors of the economy.
The launch of the Nigerian Mortgage Refinance Company in January is a poignant testimonial to the above. Contrary to the delusion of his critics, the Jonathan administration opened a new chapter in the annals of the country’s mortgage sector by this singular action which seeks to facilitate access to affordable mortgages for Nigerian workers that are repayable over 15 to 20 years. This development has being hailed by business and development professionals as having the potential to change the face of mortgage financing in Nigeria and also reinvigorating the housing and construction sector. It is relieving to know that a total of 10,000 applicants are already being processed.
What is happening in the agricultural sector is nothing short of a full blown revolution. In addition to a N50 billion Farm Mechanisation Support Fund set up by the Central Bank to establish 1,200 agricultural equipment hiring enterprises, a $100 million Government and Donor Fund for Agricultural Financing in Nigeria (FAFIN) has been launched to provide long-term financing for agribusinesses. We have also witnessed the launch of the Youth Employment in Agriculture Programme (YEAP), as well as the Nigerian Schools Agricultural Programme (NSAP). These are new, creative schemes meant to inspire our youths to engage in large-scale agriculture as entrepreneurs. Government plans to develop over 750,000 young Nagropreneurs by the end of 2015.
In spite of the deliberate falsehood being spread, the job creation initiatives of the government like YouWin are actually working and delivering good results. Over 2,400 young entrepreneurs and 22,000 jobs have so far been nurtured and created. The G-WIN program targeted at women and girls has also yielded positive results with up to 2,285 young women trained in ICT and 2,362 patients treated for VVF. These initiatives will be invigorated in 2015 and beyond.
In addition, the Jonathan administration has made the most efforts at putting together an effective framework and resources for tackling poverty which has resulted in the setting up of a Social Safety Net with the World Bank supporting with US$500 million. This program is set to cover about 13 million people within a 10 year period. Nigerians should celebrate that for the first time, Nigeria has put together a robust national system for effectively targeting the poorest for social assistance.
Implementation of this project and other similar strategic presidential initiatives like the Safe School Initiative and the Presidential Initiative for the North East (PINE) in the North East states of Yobe, Borno and Adamawa will help to mitigate the suffering of the people and rehabilitate the infrastructure. Also, the Presidential Victims Support Fund will administer palliatives to the victims of recent terrorist activities in the region.
In conclusion, it is clear that as rude as the oil price shock is, what really counts is our reaction to it. We cannot control the price of oil but we can control our reaction to it. Panic is not a strategy. I am happy that Jonathan administration is already working hard to achieve a diversified, post-oil economy and is implementing effective policies to help the country manage and stabilize the economy. The efforts directed at diversifying the economy are paying off, thereby making us less reliant on the oil sector for revenues. The pro-poor policies and safety net programmes have been structured to protect the poor and vulnerable more than ever before.
The opinions expressed in this article are solely those of the author.
