₦airaland Forum

[size=15pt]How Nigeria May Collapse in 2015 By Rudolf Ogoo Okonkwo[/size]

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Nigeria has a very high ranking on all the lists of the most-unstable countries in the world. Last month, a UK-based risk analysis firm, Maplecroft, grouped Nigeria with the worst ten in Africa. Heading the team of most-unstable nations are Somalia and Sudan. Others are South Sudan, Democratic Republic of Congo, Central African Republic, Libya and Egypt. The ranking looked at conflict, terrorism and political pressure.

Forget the urban legend that there is a United States CIA’s plot to fulfill their purported prediction that Nigeria would cease to exist in 2015. If Nigeria collapses in 2015, the country to be held responsible, besides Nigeria itself, is Saudi Arabia.

Before you raise your hands in protest, it won’t be for the reason you think.

Nigeria has a very high ranking on all the lists of the most-unstable countries in the world. Last month, a UK-based risk analysis firm, Maplecroft, grouped Nigeria with the worst ten in Africa. Heading the team of most-unstable nations are Somalia and Sudan. Others are South Sudan, Democratic Republic of Congo, Central African Republic, Libya and Egypt. The ranking looked at conflict, terrorism and political pressure.

In another list compiled by Foreign Policy Group and Fund for Peace in 2013, Nigeria was ranked 16th in the world with a 100.7 points on the failed state index. The index indicators are factors like demographic pressure, human rights, uneven development, economic decline, delegitimization of the state, public service, security apparatus, factionalized elite and others.

The good news is that Nigeria is also on the list of the highest growing economies in the world. Some of the richest people in the world are Nigerians, too. So, all things being equal, the economic factor will balance out the instability factor and allow Nigeria to soldier on beyond 2015. In fact, that is how Nigeria has been soldiering on, defying all predictions of doom. When Nigeria last visited the precipice, which was during the civil war, it was able to pull back and survive, thanks to the oil boom that followed.

In his speech during the declaration of his interest for a second term, President Goodluck Jonathan touted Nigeria’s economic growth as one of his accomplishments. At 7% growth per year, Nigeria is one of the top performing economies in the world. The president gloated, “Nigerian economy is on the right path.”

Nigerian economy is not on the right path. In fact, it is in distress. Even the eternal optimist, the Minister of Finance, Mrs. Ngozi Okonjo-Iweala, is beginning to sound the alarm bell.

Here is how we got to where we are:

You must have heard of the declining crude oil price. Unlike past fluctuations in price of crude oil, this one is so bad that everyone is going to feel the effect. If the austerity measures announced by Mrs. Ngozi Okonjo-Iweala have not affected you directly, the recent devaluation of the Naira would.

All these are happening because Saudi Arabia is locked in a mortal fight to destroy the US crude oil production. Experts believe that the United States, with its 11 million barrels production a day this summer, became the world’s largest oil producer, beating the former number one, Saudi Arabia. Most of America’s new oil is produced through fracking, an exploration system that extracts oil from shale rock using the process known as hydraulic fracturing or fracking. This process of splitting rocks using high-pressure liquid is expensive and is believed to be profitable as long as crude oil price is high. The thinking in Saudi Arabia is that allowing crude oil price to fall below $60 a barrel will knock off the US shale production.

At the last meeting of the Organisation of Petroleum Exporting Countries, OPEC, in Vienna, the cartel failed to do what is needed to increase price – that is, cut the production quota of each of the 12-member countries. While Venezuela, Nigeria, Iran, Iraq, and Ecuador pushed for cut in production, Saudi Arabia, Qatar, Kuwait, and the UAE opted for retention of the current production quota. That failure led to a further drop in price of crude oil to a five-year low. At $72 per barrel of Brent crude, Nigeria’s oil is now selling below Nigeria’s 2014 budget benchmark of $77.5 per barrel.

What this means is that Nigeria will find a way to make up the short fall in revenue. Technically, nothing will be going into the Excess Crude Account until oil price recovers. And whatever was there has been all but depleted. Initially, Nigeria raided its External Reserve to support its expenditures but that move was not sustainable. That led to the decision to devalue the Naira and reduce pressure on the Central Bank to keep burning dollars in foreign reserve in support of the Naira.

On the American side, the fall in oil price has been a foreign policy political weapon. America’s lack of dependence on foreign oil means that it doesn’t have to worry about every little crisis that flares up in the Middle East. In other ways, the fall in oil price means that countries like Russia, Venezuela, Iran and Syria are under economic pressure. That helps America’s foreign policy entanglements with these countries. Iran is being forced to stay on the table to discuss its unclear ambition by a combination of sanctions and falling oil price. Russia has lost over $100 billion from falling crude oil price and is under severe economic pressure that it is moderating its ambitions in Ukraine and other parts of Eastern Europe. In Syria, ISIS that has been financing its campaign of terror from illicit oil sell is now having difficulty selling oil in a world market that is glutted. For Venezuela, America doesn’t have to worry about the radical leftist government in the country when declining revenue is forcing the government to deal with a growing number of disaffected citizens.

Given these economic and political conditions, there is little interest in America or Saudi Arabia to see an increase in oil price soon. What this means is that Nigeria must brace itself for a crude oil price that could fall below $60 a barrel. In trying to calm the fear of Nigerians, Mrs. Okonjo-Iweala assured Nigerians that the country would withstand crude oil price of $60 a barrel.

But what about a $20 dollar a barrel price of crude? Will Nigeria still stand or will it collapse? If by next year the price of crude oil falls to $25.42 a barrel that it was in May 1999 when President Olusegun Obasanjo’s started his first term as president, Nigeria may collapse. Here is why.

Lets begin with Nigeria’s budget. Nigeria’s budget can be divided into four parts: statutory transfers, debts services, recurrent expenditure and capital expenditure. In 2014, Nigeria budgeted N4.64 trillion. This is divided as follows: N399.7 bn or 8.61% for statutory transfer, N712 bn or 15.34& for debt service, N2.43 trillion or 52.35% for recurrent expenditure and N1.1 trillion or 23.7% for capital expenditure. The United Nations Development Programme recommends 70% of the budget to Capital Expenditure and 30% to Recurrent Expenditure.

In the last ten years, Nigeria’s budget allocation has not come any close to the UNDP’s recommendation. The best we have performed in the last ten years was in 2010 when Recurrent Expenditure got 56.77% while Capital Expenditure got 40.23%. Actionaid Country director, Hussaine Abdu, lamented about Nigeria’s inability to produce a progressive budget in line with UNDP recommendation. “No country develops under such provisions,” he said, “because what grows a country or builds the economy is the amount of investments you are making on infrastructure and other structural issues that you require to strengthen your economy.”

Looking at what the government could do with the current economic austerity, the budget would be a good place to start. With debt service taking up 15.34% of the budget, recurrent expenditure at 52.35% and statutory transfer at 8.61%, the only place that the government has room to maneuver without having to fire workers or upset bureaucrats, is in capital expenditure. So instead of increasing it, the government may be forced to decrease it further, never mind the recent non-budgeted ordering of N9.6 bn cooking stoves.

In the last four years, crude oil price has hovered around $100 a barrel. The Nigerian government has been swimming in petrol dollars. Looking at government figures, economists determined that Nigeria's total crude oil sell came to about $470B in all 5 years of President Jonathan's administration and $489B for Yaradua, Obasanjo, Abdusalami, Abacha administrations combined. Adjusted for inflation, the numbers are $488.8B for Jonathan and $594B Yaradua, Obasanjo, Abdusalami, Abacha combined. The boom is reflected in the budgets, too. In 2004, Nigeria’s budget was N1.79 trillion. In the last year of Obasanjo’s administration(2007), Nigeria budgeted N2.26 trillion. But the lowest budget in the last 5 years of Jonathan’s administration was N4.2 trillion.

The additional money did not just come from the revenue from crude oil. Nigeria’s gas production within this same period has tripled. In his declaration speech, President Jonathan reported that, “in terms of gas supply, we have grown from less than 500 million cubic feet per day, 4 years ago, to about 1.5 billion cubic feet per day currently. Our goal is to attain 4 billion cubic feet per day, over the next 4 years.”

These increases in revenue had not translated into a stable economy that could withstand a shock as normal as a change in oil price. In fact, as more money came, Nigeria became more unstable.

If there is a worst time for Nigeria’s economy to be in distress, it is now. With the insurgency in the Northern Nigeria, each day causing more havoc, creating more victims, more destructions and more distrust in the economy, Nigeria is potentially coming face to face with that perfect storm it has avoided for decades.

If Nigeria collapses in 2015, don’t look anywhere else for the blame; put the blame where it belongs- squarely at the feet of Nigeria.(Jonathan's Regime for mismanagement) In the last 15 years of democracy and relative peace, Nigeria had a chance to build a strong economic and political base. But like all the other opportunities the nation has had, we squandered it. For so long, Nigeria has been in denial about the unsustainability of the corruption within its system. In time of boom, the nation can endure the waste, but in time of austerity, corruption will eat up what remains of the nation.

[b]In January of 2012, a presidential committee on public service reform discovered that top government officials in Nigeria take home N1.126 trillion a year in salaries and allowances – out of a national budget of N4.6 trillion. These public officers constitute just 0.013 per cent of Nigeria’s population. They include 108 senators who each make over $1.7m a year. That alone is $183.4 million (N28 billion). Then the 360 members of the House of Representatives each takes home over $1.2 million, which amounts to $432 million (N65bn). Again, each state governor collects an average of N200 million naira a month just as security vote. In a year, they each get N2.4 billion naira. So, our 36 governors take home N87 billion naira on security votes alone every year. Add our 38 ministers and ministers of state, 100 plus heads of federal and state agencies, over 432 state commissioners, 774 local government area chairmen or caretakers, almost 10,000 councilors and you will understand where the N1.126 trillion goes.
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Nigeria had a chance to trim down this N1.126 trillion waste but the leadership of the country, who are the beneficiaries, did not have the will-power to do so. Like the N260 billion naira spent from 2009 to 2013 on ex-Niger Delta militants, these wastes are nothing but hush money paid to postpone doing the right and difficult things needed to birth a modern sociopolitical structure that is fair and balanced, a structure that is sustainable in the long run.

Sadly, the day of reckoning is here. The consequence of Nigeria’s self-denial is staring us all in the face.

A ministry of finance committee led by Mr. Aigboje Aig-Imoukhuede looked at the subsidy claims of 2011 and discovered that the Federal Government had overpaid importers and marketers of petrol by a whopping N430 billion naira. In 2012, Ngozi Okonjo-Iweala proudly announced that Jonathan’s government had recovered N29 billion naira from oil marketers out of N234 billion certified as stolen. Whatever happened to the rest of the stolen money? Have we stopped paying subsidies two years after? Of course, not. Whatever happened to the promise to retool and repair our refineries? How much did we waste trying to repair our refineries? How much are we paying in subsidies today? Shouldn’t the subsidies we are still paying be coming down now that oil price is falling?

You will think that those handling our economy will be answering these questions publicly. But no, they are not. We are beneath them.

The subsidy scam is part of the elaborate corruption industry that feeds the mammoth Nigerian unsustainable structure. It has become so entangled in the fabric of the nation that a half-hearted attempt at disentanglement will result in chaos. What could not be done in a time of economic boom cannot be done in a time of economic crisis. A lot of people in Nigeria have been fed fat by corruption. In crunch time, as the nation tightens its belt, the corruption industry will morph and move and when pushed hard will marinate the nation and serve the country for the forces of destruction to eat up.

Since 2009 crude oil thieves have been increasing the amount of Nigeria’s oil that they steal. According to the 2012 Ribadu Report, crude oil thieves in 2011 stole over 100,000 barrels a day. That is over $3.6 billion dollars a year. Some foreign sources put the figure of oil theft at 250,000 barrels a day. Mrs. Okonjo-Iweala in 2012 told the Vanguard newspaper that the loss to oil theft could be up to $12 billion that year. If Nigeria had closed avenues for oil theft, that oil could be shipped abroad and refined for Nigerian use, allowing the citizens to enjoy low fuel cost like other oil producing countries when they pay for just the cost of shipping and refining.

Meanwhile, as oil price falls, the oil thieves are not going to go out of business. Instead, they need to steal more to make up for the losses due to falling price. With their children in the most expensive schools abroad, dozens of girlfriends to show the good things in life and with private jets to maintain, the oil thieves and all the other looters of the Nigerian economy, are going to do whatever is necessary to maintain their lifestyles.

In the political arena, the 2015 election is shaping up to pitch two candidates, like none that we have ever seen, against each other. Oh, yeah, they probably have met each other in a presidential election before, but they have been transformed in some unique ways. In past elections, we used to have two distinct options that fitted into our overall narrative, which was that “the best is impossible and the worst never happens.” A foreign newspaper once described the two candidates offered to Nigerian electorates thus: “one is a fool surrounded by idiots while the other is an idiot surrounded by fools.” What is shaping up for 2015 is an unpalatable option for a weary nation. The option for 2015 is simple: If Nigeria votes for candidate A, Nigeria is finished. If we vote for candidate B, Nigeria is finished. That’s a no-win situation for a country of 170 million people.

The scenarios are clear enough to those of us who care to disturb our so-called beautiful dream.

The one thing that Jonathan administration can do to reverse the impending collapse is to acknowledge in words and in deeds that what is not sustainable is really not sustainable. And that includes this government itself.

Source: http://saharareporters.com/2014/12/01/how-nigeria-may-collapse-2015-rudolf-ogoo-okonkwo

Onota:
Too busy to read the long epistle. I will be back

cocoduck:
I read this long epistle with keen interest but stopped when you typed must be blamed on GEJ. That is really wrong by all ramifications. He merely happened to be there at the wrong time. many people think that oil prices fell like magic, no, go back to obama's 2008 US election campaign and listen very well to him, he made it clear that the Russians were having too much petro dollars to make trouble anywhere in the world and oneof the best ways to stop them is by bringing down oil prices. so that was the time for yar adua to start work but he was sick till 2009 when he died, then came GEJ and according to your essay 2010 is the year that recurent expenditures was lowest, well, with boko haram it is bound to rise, so the question is what where obasanjo abacha ibb and Gmb do back in those days that the civil service for example was smaller? and why did Gowon chase the biafran scientists away because Nigeria would have been a weapons manufacturing country by now if he were far sighted. Why does the legislature take 25% of national budget? and why is there no true federalism in Nigeria today? These are things when done right we wouldn't even care about oil prices.

pazienza:
Crude oil should sell for just 10dollars, that would help my desire come true.

If you are wondering what my desire is, look no further than my signature.

ledafaze2:
Mind you... no more signature on Nairaland... Seun removed it cos of adverts like urs.

ledafaze2:
I am sorry for saying that but what I believe is that if the head is faulty in making better implementations and making sure that corruption is sustained at the barest minimum, believe me everything ends at his desk. Do you believe in being somewhere at the wrong time?

In Yoruba, there are things we call ORI or AYANMO. Destiny is best suited for it. If its not working please its better to leave it. If he had announced that second term for him is a no no, maybe PDP would have produced a far more better candidate Nigeria ever had. Abdulsalim Abubakar also made the move for democracy as we have it today... Some dont just want to give way.

About Biafran scientists, they are there but the economy is not enabling. No matter how we put it, it still have to boil down to the economy.

Help us o Lord.

cocoduck:
well, we are not enemies even if I am igbo, the only thing is that we missed several opportunities to make Nigeria great. Ie Gowon said the money is not the problem but what to do with it, he then embarked onreckless spending on frivolities,if he at least laid a foundation of development all we need is to build on it, it is unfortunate that we have to start from scratch which you and I know is not easy to desern what is bein done until we actually start building on that foundation, then the progress will be easily seen.

AJINATU:
NIGERIA MUST DIVIDE IN JESUS NAME

ledafaze2:
As a Yoruba guy, I still put the blame of what I am facing today on Chief Obafemi Awolowo. If he had accepted the deal that Chief Ojukwu offered him then, this part of the nation wont be in this mess that we are in. They saw money was not the problem and then corrupt minds like that of Chief Okotiebor started embezzling. Well... down the drain we see what we now have in Nigeria.

May the Almighty scale us through these trying times.

T8ksy:
Can you expatiate on the bolded, above?

ledafaze2:
Correct me if I am wrong... Either at the brink or during the Biafran war/civil war, Awolowo was invited by Ojukwu to en-mass the whole of Yoruba with them to fight the hausas and let them be on their own... Hausa vs Yoruba+Igbo

Chief Obafemi Awolowo’s assessment of the Biafran leader was not very dissimilar to Akinjide’s view of him as a man who sought to control everything around him. Reviewing his own efforts, undertaken at considerable personal risk to find an accommodation with Ojukwu before he declared the secession in May 1967, Awolowo told US Ambassador Elbert Matthews on 24 August 1967 in Lagos that he was convinced it was impossible to negotiate with Ojukwu, who was seeking to bring the whole of southern Nigeria under his control. He described Ojukwu as being committed to conquest, not secession. According to the Periodic Intelligence Note complied on the Nigerian situation by Thomas L. Hughes, Director of Intelligence and Research, submitted to US Secretary of State, Dean Rusk, the “chief target” of Ojukwu’s “seizure of Midwest” was the Yoruba. “Should this large tribe, numbering eight million or more, choose to join Ojukwu in a move to oust northerners from southern Nigeria, the rump Nigerian federation would come apart…The Yorubas, riven by past divisions and in no mood to pull Ojukwu’s chestnuts out of the fire (rescue Ojukwu), are undecided. They have tended to side with the Gowon government ever since their principal spokesman, Chief Obafemi Awolowo, agreed to join it last June. At the same time, the fear of northern domination remains strong…Awolowo rallied towards the Federation when Gowon, himself a northerner, showed he meant to break up the once monolithic North by decreeing several newstates there,” the US intelligence estimate stated.