Beyond Now, Nigeria without oil
Doyin Salami, accomplished economist and member of the Monetary Policy Committee of the Central Bank of Nigeria recently delivered a lecture on ‘Beyond Now: Nigeria without Oil – Prospects for Technology and Innovation’ at the unveiling of Vatebra, a new brand identity of Fleet Technologies. Daniel Obi captured his speech thus:
Oil in Nigeria’s economy
Let me set a little background. If we are going to talk about Nigeria without oil, let us discuss the role oil plays in this economy. Though we say that Nigeria is an oil economy, but the truth is that it is just an oil exporting country. In terms of the economy of this country, oil in nominal terms is about 7 percent and when you adjust inflation, oil is about 12 percent.
In other words, in excess 80 percent of this economy is non-oil. When people say to me Nigeria is about oil. I argue that this is about $500 billion economy and at best, $50 billion of that output is oil. So why then is oil dominating the noise in the economy? This could be for two reasons primarily – the first one is that we tend to ‘kill’ for it. But more seriously, it is about government revenues. 72 percent of government revenues are derived from oil. So, you can already see the mismatch and the problems ahead.
When a sector of the economy that is about 12 percent is responsible for over 72 percent of government revenues, you already know that should anything happens to that revenue-generating machine, the government will suffer for it.
When people say ‘Nigeria beyond oil’, what they are saying is diversify the economy in such manner that government revenues do not depend on oil. If you know that government dependent on oil is bad, then this economy dependent on oil for foreign currency earning is even worse.
Approximately, 96 percent of our total earnings of forex is derived from crude oil, which is why, therefore, when oil prices drop, as it has done since 2014, from $114 per barrel to a position of below $30 per barrel and where for the first quarter of this year, it has averaged about $37 per barrel, you can see why we are in trouble.
Indeed, let us be very clear, when you look at the expenditures at the federal and state levels, for budgets to balance at 2m barrels of crude oil per day, Nigeria actually needs oil to be sold roughly at $60 a barrel. This is why we are not surprised that the 2016 budget has a deficit of about $10 to $15 billion depending on the exchange rate used.
Let nobody therefore be under any illusion that even though our output is non oil, our revenue stream and our ability to trade with the rest of the world is fundamentally dependent on oil. That is not to say that there cannot be a Nigeria beyond oil. Today, the Saudis are creating a $2 trillion sovereign wealth fund in anticipation of how their economy will move beyond oil. Strangely enough, our SWF has a total inflow slightly in excess of $1 billion and yet the Saudis are talking of $2tr. With this, you will begin to understand the issues ahead.
When we say ‘beyond now, Nigeria without oil, the prospects in technology’, even though I have set out for you that in certain dimensions oil is not important, in other dimensions oil is critical.
Beyond Oil
What is the role of technology as far as this economy is concerned? Strangely enough, technology has actually become arguably the fastest growing sector of the Nigerian economy. Think about this, ICT in 2016 accounts for about 10 percent of the Nigerian economy. When you bear in mind that in the year 2000, ICT was less than one quarter of one percent of this economy, this gives a clear sense of how rapid we have moved.
A CNN reporter was reporting from Beijing and set for himself a challenge of going out a whole day without cash and without a wallet. I was intrigued initially about this. However, this reporter went through his activities, bought things and paid for taxi simply by using an App on his mobile phone. That is where the world is headed as far as technology is concerned.
Late starters in technology game tend to have the benefits of newest technology. If you are going to be a late starter and a beneficiary, then you’ve got to be serious about it. If we are going to talk of Nigeria without oil, if we are going to talk about the world of technology, then we have to ask ourselves, is Nigeria ready for technology?
I was looking at global innovation index and it was quite damning. Out of 148 countries covered by the global innovation index, Nigeria ranked 121. If that is the case, what that tells us is that we are not only late starters; we don’t even seem to be interested in the game.
If we are going to be serious about this game, there are a number of things to be done. Today what is the quality of education that Nigeria offers? Have no doubt that technology is about the practical application of knowledge. Knowledge is about education. If we cannot educate our people, then how do we want to be part of technology?
What is innovation, which we talk about every time? It is either doing something new or improving on something that already exists. You may require technology for innovation but what is clear is that without knowledge, we are unlikely to innovate or do technology.
We must therefore look at the state of our education system. Today, regrettably, I come across university graduates who can neither read nor write nor speak and certainly, who cannot think. When we are graduating people, we are not asking the secondary question which has become a primary question: how fit for purpose are these graduates?
In 2015, Nigeria created roughly 1.9 million new jobs. In the same year, roughly 3.2m young Nigerians joined the labour market. What that tells us is that we have a big problem with employment. Out of this 1.9 million, many earned their living in informal sector with low pay and totally unsustainable.
Here is a country boasting as the largest economy in Africa, the largest population, but unable to deliver a workforce that is fit for purpose and yet we want to talk of technology and innovation.
I don’t want you to be depressed as if there is no hope, but it is on the verge of being bleak. Let’s be clear, this economy requires technology to drive innovation. How do we drive technology when the basic infrastructure that will support a technology and innovation ecosystem is weak? We have discussed about human capital but what of electricity and Internet access? All of these are inadequate.
Nigeria has an infrastructure master plan. But I don’t think the plan is obeyed and yet we want to be a nation of technology and innovation and we want to beat the world, how?
Opportunities
But there are opportunities. Let us start with Agriculture. Today, crop production is Nigeria’s largest sector, it accounts for 22 percent of national output. But our productivity in Agriculture leaves a lot to be desired.
I had a discussion with Murtala Nyako, former governor of Adamawa State, who took me through how the nation can improve household incomes through dairy farming. He told me that an average Nigerian cow produces only 10 percent of the milk an Israeli cow produces. We all laughed about the typical lazy Nigerian cow, but it is not about laziness but about technology.
We continue to talk about the inability and inadequacy to ensure and guarantee food security, but we need technology to raise output. Better deployment of technology will raise output and raise income.
Today, attending to bottom of the pyramid will be difficult. Not that it is not doable, after all, Kenya has done it with MPESA, but we can’t, because that requires technology. We have part of the technology but we don’t have the fundamental of technology. We have part of the tech that deals with banking and money transfers. The part we don’t have is how to identify the people who should be beneficiaries.
While I am confident that there can be a Nigeria without oil, I am absolutely convinced that Nigeria is potentially a great country. I am regrettably saying that we have a long way to go. But a journey of a thousand miles starts with a step in the right direction.
Daniel Obi