Quakertellicus1:


1.Venezuela is a socialist economy that imported everything....even much of the toilet roll used in Venezuela was imported.

Nigeria,despite the mess we were in, still made most of its toilet roll...back in 2013.

2.Yes, APC is having a shambolic economic policy. But not in the way you people think.

APC is not facing the fact that we are a poor nation...and that we should set about getting industrial,instead of waiting for oil to rise again.

Which is what I am saying....but most of you here seem to think I am attacking PDP again....when really I am putting pressure on the APC government to shape up.

In my opinion, whoever takes over in 2019.....has to get us off oil. Ditto for whoever is in power now...ie the APC....by cutting waste, fighting corruption, and funding power and transport excessively, alongside technical education.

That is what I want my government to do.

It appears you are new around here. Stop wasting your time trying to reason with some people. Even if their being logical is all it takes for you, say, to get a miraculous recovery from a death stroke, they'd rather you die than imagine not blaming Buhari and APC for every misery in their little lives.

Just move on, your point is registered and you've made a good one.

Some enlightened posts in the house today, but then Nigeria is a place where principles and practices that worked elsewhere don't fly.

How do one explain a situation where Nigeria is suffering from Dutch disease but non oil export was booming?

As someone above pointed out, majority of us are averse to "thinking" out a solution especially when we stand to gain nothing (personally) in the short, medium or long term.

Quakertellicus1:


Well, the reason why Bubu ''hates'' investors has to do with the fact that the CBN is trying to restrict forex from leaving the country.

Nigeria needs forex to prevent the naira from falling down drastically.....so that we do not end up with N10000000 to $1.

At the end of the day....thanks to the fall in oil price...we are no longer the masters of our destiny. We need oil to be at $123 per barrel right now....so that we can have enough forex flowing to attract investors...and keep the naira buffered.

That is why I rave against oil. Really, oil reliance is the enemy....not GEJ, PMB or anyone.

I agree with you on most part but oil at $100 was considered abnormal by global economists and could have led to another global recession.

Considering the matrix of production, the real price of oil is $50. Government should just stop waiting for oil to rise. This was why anything above $60 was considered excess crude revenue but how we came to think that the "excess" crude price will remain forever baffles me

4Play:


The problem with your post which I took issue with is this: if you have been on Nairaland long enough you will notice that the PDP/APC propagandists who litter this forum seem to get circulated talking points (themes/stories) which they spout relentlessly for a period until the next set of talking points. The most recent talking point from the APC side is that the Nigerian government should be congratulated for its economic management since, despite being as oil dependent as Venezuela, Nigeria has not suffered the economic collapse that Venezuela has. This is, of course, nonsense as I pointed out as Venezuela's problems are deeper and predate the current oil collapse. Despite your slight backtracking on this thread, I can see you subscribe to this disingenous analogy to Venezuela.

Actually, I don't.I merely point out that Nigeria and Venezuela are alike in the sense that they are hooked up to oil

Also, you seem to be mistaken. I never said Nigeria's economy has not collapsed.It has collapsed / being in a bad state for a very long time. As I will explain shortly.

I will make a few other points. Yes, Nigeria has a certain oil dependency which arises in 2 respects - oil is the main source of government revenues and, more importantly, the main source of forex. However, the oil price slump alone does not explain the scale of the naira's and the economy's collapse. Look at the naira's performance in 2016 alone - at a time when other commodity-dependent emerging market currencies have rallied against the dollar. In reality, what we are seeing is the result of major policy missteps or inaction (the main culprit being the decision to maintain a fixed exchange rate which has now, thankfully, been largely reversed). My main bugbear is that people who beat this oil drum relentlessly are either uninformed or being disingenous - they are trying to mask what has been at heart an exemplar of economic mismanagement. By doing this, they inhibit the capacity of Nigerians to learn valuable lessons for the future.

Actually,the reason why other oil dependent currencies have not collapsed is two fold

1.They have enough money saved to buffer their currency . Saudi Arabia had $724 bn in its savings at the start of the oil drop. The riyal is strong because the Saudis have spent billions buffering it up. $124bn by the end of 2015 to be exact. Nigeria....even if GEJ saved would have at best reached $100bn.And all that would have been gone by 2017.

2.They are strong industrial powers/sectors like Russia and Norway. Oil is not their only busienss

Also I did support our fixed currency regime because quite simply we do not have enough dollars to support it....and because prices would have massively gone up, fueling inflation,and depressing our very limited manufacturing sector.But...it is inevitable that we would eventually have had to end the pretense and let the naira float.

Which is why I am saying Nigeria does not need oil money.

This brings me to the issue of the Dutch disease. The essence of it is the tendency for an oil/commodity boom to cause an appreciation in real exchange rates (i.e., inflation-adjusted)rendering the non-oil/commodity export sector largely uncompetitive. I will use a simplified illustration:

Dutch disease is not just limited to oil by they way.

I set up a cocoa farm to export cocoa. At the point of inception, the naira exchanges for 197 naira to $1. If the costs (fuel, labour, fertiliser, e.t.c) of running the farm is circa N180 million and I sell $1 million worth of cocoa in the first period, I should get N197 million for a profit margin of N37 million before tax. Supposing the government decides to fix the exchange rate at N197 to $1 whilst inflation is running rampant. If my costs increase due to inflation from N180 million to N198 million (assuming just 10% inflation), my margin will be squeezed to the point where, unless I find a way of cutting costs, my business is no longer viable.

Though not strictly speaking how the Dutch disease works, what the above illustration shows is that a policy decision to fix the exchange rate, as the present government did, increases the problem of oil dependency by making diversification to non-oil exports challenging. The Dutch disease was a major problem in the 1970s as we maintained a fixed exchange regime for years, but not really much of an issue since the post-Abacha period. In contrast, the period from 1999 had witnessed substantial growth in non-oil exports. See excerpts below:

It was an issue in the sense that Nigeria, even with increase in non-oil exports (which was not much of an increase, we were still dependent on oil by 80%)...was still depending on exporting non-oil agric products whose prices were controlled elsewhere.

Where is the international price of cocoa set? In London,not in Lagos.

And the fact is.....all those fuel etc costs could have been limited if we had fixed our refinereis and built five more.

Source: http://www.vanguardngr.com/2016/01/cbn-blames-declining-non-oil-revenue-on-low-export-loans/


[url]
http://thejournalofbusiness.org/index.php/site/article/viewFile/434/337[/url]

An increase from circa $400m to circa $10bn in non-oil exports in the midst of an oil boom is not reconciliable with the notion of a Dutch disease plaguing Nigeria. In the 1970s by contrast, non-oil exports contracted and with it our groundnut pyramids. Another factor to be weighed is that diversification of forex revenues may also come from capital inflow (like FDI and portfolio inflow) which grew significantly in the post-Abacha period. This declined following the present government's hamfisted attempts to fix the exchange rate making us even more reliant on oil exports as a source of forex.

1.Again,our non oil revenues came from things whose prices we did not control. Plus....FDI has not come to Nigeria asmuch as it should because we do not deal with things like corruption, insecurity, our poor power sector,and so on. Not because of forex rate.

Again, restrictions in forex rate,while ''wrong'' are meant to prevent us from losing forex. We are an over-importing naiton,and it is depressing our manufacturing sector..meaning we cannot export things whose prices we can control.......which is how Dutch disease works actually.....

If we lose forex.....and there is no chance that FDI would bring in more forex....especially as there is such a high cost of doing business in Nigeria...we would have unsustainable inflation....and end up in a Zimbabwe situation.

In reality, what we are experiencing in Nigeria is that policy ineptitude has made what would have been a difficult but manageable growth slowdown, arising from the oil slump, into a painful economic rout. Even if Nigeria was not an oil producing state, an attempt to fight a currency adjustment via a fixed exchange regime would have still produced an economic rout (arguably more so as we would likely have had a larger stock of foreign capital). By simply mouthing off about oil dependency, you are helping mask the government's culpability and doing a disservice to Nigerians for whom economic hardship can be a matter of life and death.

By singing about oil dependency.....I am criticizing our past government's failure to invest in power and education....and also putting pressure on our current government to do these things....so that we can industrialize and have a competitive economy, an economy that brings in forex, and brings in the jobs. It will take time....but that must be our goal as a nation.It is how China went from being behind Sierra Leone in 1973...to being a powerhouse today.....and that is the road we must follow.

P.S Your problem is with the fixed currency system. Whatever we do with our currency,it won't change anything....so long as we sell things whose prices we do not control.Whether agric, mining or oil.

menxer:
Some enlightened posts in the house today, but then Nigeria is a place where principles and practices that worked elsewhere don't fly.

How do one explain a situation where Nigeria is suffering from Dutch disease but non oil export was booming?

As someone above pointed out, majority of us are averse to "thinking" out a solution especially when we stand to gain nothing (personally) in the short, medium or long term.

Think about Dutch disease as being dependence on exporting raw materials(Not just oil by the way) whose prices are controlled elsewhere , and using the revenue from the exports to import stuff we are already making at home.

Add the fact that Nigeria's industrial sector is not innovative enough....we do not have the tools to compete with the imports because we have an educations system that produces clerks,not thinkers....and you have an economy that cannot export things whose prices we can set....and is dependent on the rise and fall of our raw materials whose prices we do not control

Dutch disease.

Quakertellicus1:


Think about Dutch disease as being dependence on exporting raw materials(Not just oil by the way) whose prices are controlled elsewhere , and using the revenue from the exports to import stuff we are already making at home.

Add the fact that Nigeria's industrial sector is not innovative enough....we do not have the tools to compete with the imports because we have an educations system that produces clerks,not thinkers....and you have an economy that cannot export things whose prices we can set....and is dependent on the rise and fall of our raw materials whose prices we do not control

Dutch disease.

So technically, it is not the economy that is diseased but the people, because economy does not think but people do.

It is like "we" are paralyzed by the mere thought of a cure for the Dutch disease.

menxer:


So technically, it is not the economy that is diseased but the people, because economy does not think but people do.

It is like "we" are paralyzed by the mere thought of a cure for the Dutch disease.

There is a cure....it involves us spending more on fixing the lights, and fixing education, and ending corruption.

We have an opportunity....and the solution is not selling more things whose prices we cannot control.

The problem is....it is going to take a long time. Frankly speaking, I hope our government is interested in doing this.

We cannot rely on oil again.

Quakertellicus1:


There is a cure....it involves us spending more on fixing the lights, and fixing education, and ending corruption.

We have an opportunity....and the solution is not selling more things whose prices we cannot control.

The problem is....it is going to take a long time. Frankly speaking, I hope our government is interested in doing this.

We cannot rely on oil again.

I never said there is no cure, from the enlightened posts here, but "we" always see things through party and ethnic lenses.

I agree with you, how do you think it can be done without some group crying "persecution" in the fight against corruption?

That is why I said thinking of a long lasting solution without overbearing personal, party or tribal interest won't be easy.