By Henry Nosegbe


The most annoying and depressing news I hear every month is that of the monthly ritual undertaken by the 36 state commissioners of finance, when they gather at an “enclave” in Abuja to “share” statutory allocations from crude oil receipts. It appears to me that our leaders are content to keep “sharing the national cake” rather than thinking of how to expand it. As a consequence, I’m sometimes tempted to pray for our oil to dry up sooner rather than later. How else can our hopelessly indolent leaders be compelled to use their brains to think up creative, sustainable means of making money?

Our current predicament is quite reflective of a term in economics known as the “resource curse” or the “paradox of plenty”, a phenomenon witnessed across many resource-rich countries (the Democratic Republic of Congo being one of the most extreme examples). The most dangerous consequence of being a resource-rich country, in my opinion, is the proliferation of a “cabal”, a prebendal class with a sense of entitlement over the entire country’s resources, accompanied by a decline in the performance of other, more productive and value-adding sectors of the economy (witness the near-collapse of Nigeria’s agriculture sector from the 1970s, the same period when oil became our primary source of revenue). According to a study conducted by T. Gylfason and published by the European Economic Review in 2001, average Gross Domestic Product (GDP) per person in OPEC countries (Nigeria is an OPEC country) fell by 1.3% between 1965 and 1998, and grew by 2.2% across the rest of the developing world.

An important drawback to being resource-dependent is that commodity prices, by their very nature,

are extremely volatile. A country like Zambia, for instance, which is heavily dependent on copper for most of its revenue, can be severely hit by a decline in copper prices, which of course are market-determined and lie outside its control. In contrast, a manufacturing nation like Germany not only reaps the benefits of value added for its exports, it has far greater leeway in fixing prices, thereby having a more reliable flow of revenue and enabling better preparation and execution of annual budgets. Given these advantages, no country, Nigeria inclusive, can afford to be content with basing its entire economy on a finite, non-renewable resource like crude oil.

One thing that is quite obvious is that this resource curse has deluded us into thinking that we are a rich country. On the contrary, Nigeria is actually very poor, relatively speaking. Some comparative analysis will suffice to buttress my assertion. Nigeria has a population of about 160-170 million people (how come we don’t know the exact figure, by the way?) while Brazil has about 192 million (2011 estimate). Our National Assembly passed a budget of about N4.75 trillion (approximately US$30 billion) for 2012. It will interest you to know that the Brazilian city of Sao Paulo made over R$90 billion (US$52 billion) in taxes as far back as 2005. If the budget of the entire country is only 60% of the revenue of Brazil’s largest city seven years ago, can we then claim to be a rich nation? I think not. Methinks our delusion is fuelled by the fact that we are used to hearing of figures running into trillions of naira in our budgets, due to the fact that our currency is so weak. Converting these “trillions” to dollars, pounds or euros and carrying out a comparative analysis with similar-sized developing countries will give us an idea of how poor we really are.

That having been said, I think it necessary, at this point, to point out the insidious effects of this monthly “cake-sharing” exercise on the economy, especially on macroeconomic indicators such as inflation and liquidity. When naira funds are issued by the Central Bank of Nigeria (CBN) to the tiers of government in line with the revenue-sharing formula, it creates excess liquidity as there is excess cash in the hands of government. Basic economics tells us that where too much money is chasing too few goods and services, inflation is the natural consequence. The CBN is consequently forced to raise interest rates and sell treasury bills to banks at ridiculously high rates (minimum of 12%) as part of Open Market Operations (OMO) in order to curtail this systemic inflationary trend. Since the banks will readily jump as this risk-free “investment vehicle”, is it any wonder, then, that the average businessman cannot access loans at reasonable interest rates? Is it any wonder, then, that government is forced to budget N540 billion for debt servicing?


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Nigeria will be Nigeria with or without oil.
Reasons?

Greed, selfishness, wickedness, cowardice, illiteracy and TRIBALISM!

Hmmm. I see someone published the article already. Issokay. . .