We certainly are living in interesting times depending on whether you are living in a country that is benefitting from the fall in global commodities prices such as oil, like the United States, or you are living in a country whose economy is reeling from the fall in commodities prices like oil, such as Nigeria.
But the fall in oil prices, which has precipitated what experts are now calling a ‘Decade of Low Oil Prices’, could not have come at a better time for Nigeria whose over-reliance on oil for 80 percent of government revenues and 95 percent of foreign exchange revenues has always come as a source of concern.
For decades, there have been repeated calls for diversification of the Nigerian economy to find new sources of revenue for government but without the corresponding activities on the part of government to wean itself off depending extensively on oil for its revenues. In 1983 when oil prices fell, the military wasted no time in overthrowing the elected democratic government of Shehu Shagari, but in the intervening period up to 1999 when the military ruled Nigeria, nothing was done to effectively create other sources of revenue especially through taxation like in developed countries.
When oil prices fell again in 2007-2009, the Yar’Adua government did not promote additional sources of revenue through taxation but resorted to plundering the £40 billion savings in the Excess Crude Account to sustain 80 percent funding of 594 ministries, departments and agencies in addition to the 36 states and 774 local government areas.
From September 2014 to date, oil prices have again fallen to record lows, the difference this time around being that we have entered what is generally agreed to be a Decade of Low Oil Prices; and worse, Nigeria has only about £2 billion in its Excess Crude Account savings whilst still maintaining its full load of recurrent expenditure.
The fundamental flaw of the military-inherited 1999 Constitution was that it recognized the federal, state and local governments as the only legal entities entitled to the sharing of oil revenues, which has seen them embark on creating legal sub-entities of their own all feeding fat on the oil revenues. The net result is that the Federal Government with its 594 ministries, departments and agencies, the 36 states and774 LGAs with their collective employees numbering about 3,000,000 are consuming 80 percent of total revenues as recurrent expenditure to the detriment of 167,000,000 Nigerians.
The implication of 80 percent of total revenues being consumed by the public sector has been the toxic nature of Nigerian politics as all means foul and deplorable are deployed by those with supposedly altruistic reasons for seeking elected offices but motivated simply by a desire to enrich themselves. This has also spurred corruption in the public service across the three tiers of government as civil and public servants have turned the period of their service as opportunities to amass wealth, even with a Federal Character law in place to give a national spread to the stealing and plundering of public funds.
For the average Nigerian, the periodic rises and falls in oil prices made no difference because when oil prices were high, the three tiers of government and their employees were there to plunder the spoils, and when oil prices fell, government resorted to accumulating debts to keep its expenses going at the expense of Nigerians.
This is why the Decade of Low Oil Prices makes all the difference as the implication is that governments at all three levels cannot resort to borrowing over the next 10 or more years to sustain the current 80 percent recurrent expenditure profile, and with about $2 billion in the Excess Crude Account, there are no savings to fall back on either.
Indeed, tough decisions await federal, state and local governments that go beyond simply reducing government expenditure, reforming government structures and processes, seeking bailouts and grants, plugging revenue loopholes while generating additional revenue to fund infrastructure, health and education to meet the expectations of 167,000,000 Nigerians.
Kingsley Omose
Omose writes from Lagos.
