Nigeria’s missed opportunities and way future prospect

Strike while the iron is hot” is a popular dictum. But after constant dithering over ideological postulations of not wanting to submit to the dictates of the International Monetary Fund and the World Bank, not wanting to ‘kill the Naira’, and providing a direction for the economy, the Buhari administration has come full circle to now accepting the obvious – that it just does not have enough forex to meet Nigeria’s humongous import needs and technically devaluing the Naira to enable fuel marketers import petroleum products after severe scarcity has almost crippled the economy. But alas, the iron has gone cold and the country is forced to take the bitter pill of devaluation without its concomitant benefits.

Coincidentally, the Nigerian Bureau of Statistics (NBS) released its quarterly report and the cost of the government’s utter lack of direction, dithering and keeping the entire economy waiting in suspended animation is visible. According to the NBS, in the first quarter of 2016, the nation’s GDP grew by -0.36% (year-on-year) in real terms. Quarter on quarter, real GDP slowed by 13.71%.

It is clear the Nigerian economy is in deep crisis. However, this crisis comes with huge opportunities to reset the economy and take off again on a strong footing. Nigeria cannot afford to waste this precious opportunity. However, this opportunity comes with necessary painful policy changes that are long overdue but if still implemented now can help to reset the economy.

To begin with, the government must quickly pass the Petroleum Industry Bill (PIB) and totally deregulate the downstream sector of the oil industry. The lackadaisical attitude the government is showing towards passage of the bill and the decision to stubbornly and irrationally maintain a price band and thus frustrate the full deregulation of the sector is causing more harm to the country and its prospect to attract critical and much-needed investment into the sector. Already, Wood Mackenzie, the energy consultancy, last week, cut its output forecast for Nigeria by more than a fifth to 1.5million barrels a day on average over the next decade. Its previous forecast for the period was 2.1 million barrels a day. According to one of its analyst, “The government is not doing a good job of signalling and this could hurt [Nigeria’s oil production] in the medium term even if oil prices recover.” The details of the government’s promise to overhaul and reform the Nigerian National Petroleum Corporation remains hazy and unclear, putting investment on hold and stoking frustration in the sector.

This was even before the renewed militant attacks on strategic oil installations in the Niger Delta escalated. In a situation where the Nigerian government does not have the wherewithal to effectively secure all oil installations, its continuous threat to militarily crush disgruntled militant gangs in the region was misplaced. Now that the militants have dared the government and heavily crippled Nigerian oil production by over 36 percent, the government has not got any meaningful response. Thus, Nigeria has been unable to benefit in any real terms from rallying oil prices.

The government also needs to urgently implement the Nigerian Gas Master plan to provide for the commercial exploitation and management of the enormous gas reserves in the country to revolutionalise the economy, position it to be competitive in the export market for gas and guarantee Nigerian’s long term energy security. The current situation where the country cannot utilise its abundant gas reserves to power the few power stations in the country is highly deplorable and shameful.  In the same vein, the government must work assiduously to fix the power sector. This is a sine qua non for the economic take off of the country.

Finally and very importantly, the government must accept the reality that its archaic monetary policy cannot work and must accept the inevitable and deregulate the foreign exchange market. It’s refusal to do that continues to badly hurt the economy and keep investments and investors away thus compounding our foreign exchange problems.