THOUGHT-PROVOKING: We’d Soon Start Drinking Our Oil

Simon Kolawole

Here is a reproduction of yesterday's thought-provoking editorial by Simon Kolawole of ThisDay.

Did you watch the thugs in the Rivers State House of Assembly last Tuesday? I later learnt that they were, in fact, legislators. A group of five, led by Babakaya Bipialaka, had ridiculously tried to remove the Speaker, Otelemaba Amachree, with a fake mace. Bipialaka is an opponent of the state governor, Chibuike Amaechi, while Amachree is pro-Amaechi. Shortly after Bipialaka was “elected” Speaker, a group of 27 pro-Amaechi lawmakers entered the chamber. In the videoed fracas, Amaechi’s loyalist, Chidi Lloyd, grabbed the fake mace and began to use it as a weapon of mass destruction. He later narrated how he was eventually given the beating of his life. In the “movie”, Amaechi’s security aides also contributed some useful punches and whiplashes to the show of shame. And so on and so forth.

Well, fellow Nigerians, you don’t have to panic. Our salvation is nearer than we thought! If everything goes according to plan, crude oil could soon be selling for $10 per barrel and there would be little or nothing for the politicians to kill themselves over. These clowns have eaten too much and are belching recklessly into our faces. While the Rivers State branch of the thugs misruling Nigeria were busy with boxing, wrestling and judo, the Organisation of Petroleum Exporting Countries (OPEC) was raising the alarm over the looming oil doom. The discovery and production of shale oil by the United States - and the United Kingdom - will begin to considerably hurt oil-exporting countries from next year.

Oil revenue accounts for roughly 80 per cent of what the three tiers of government spend in Nigeria. Of course, most of it ends up in the pockets of the politicians, their fronts, top civil servants and other high-profile bandits. All those private jets, all those mansions in Banana Island and Abuja, all the militancy and assassinations and political thuggery fuelled by oil boom… just wait and see what will happen when the price of crude oil mightily tumbles. I am hoping, against hope, that this looming scenario will bring these pot-bellied gangsters in power to their senses so that we can begin to tackle the real development issues facing Nigeria. The Nigerian condition is so critical that you would expect these trigger-happy politicians to spend their energies on something more productive.

Oil boom has pulled the wool over our eyes since 1973. But the threat to crude oil has always been there. More countries are discovering oil, which means our exports will begin to drop at some stage. In addition, all the talk about fossil fuels and climate change is leading to the development of alternative fuels - and that has always been bad news for crude oil producers. The Nigerian case is even worsening because of frequent production outages and unprecedented oil theft despite the billion-naira contracts awarded to militants to safeguard the pipelines. We are already in trouble. That is why we are taking loans every day. The debts are piling up again. And the Minister of Finance, Ngozi Okonjo-Iweala, keeps educating us that we have a robust debt-to-GDP ratio!

As if all these are not enough trouble, the world’s biggest consumer of crude, the US, has now found a formidable alternative in shale oil. I wouldn’t mind if the alternative would take 30 years to develop. We could brace up for it. But it is developed already! So, the demand for our oil has fallen and will only continue to fall. In two to four years, the picture will be very clear to us. The new reality is that crude oil is no longer a monopoly! We are losing our swagger. Demand is falling and will continue to fall. As demand falls, the price will fall. As the price falls, production will fall. Many oil fields will become unprofitable to operate. They are likely to close down. You see, we may soon start drinking our oil for breakfast, lunch and dinner. Yes, you heard me right.

In the event of an oil doom, expect these: One, the naira would crash. Oil brings in most of our forex. A fall in forex inflow will hurt us since we are rapaciously import-dependent. Two, we would deplete our external reserves trying in vain to protect the naira. Three, a falling naira would impact negatively on the general prices of goods and services. Four, there would be less money to build infrastructure. Five, there would be less money for government overheads, leading to retrenchment and salary cuts. Six, there would no more money to fund fuel subsidy and petrol price will be increased. If petrol price goes up, there would be mass unrest as cost of living rises. I can go on and on.

Indeed, if crude oil revenue were to dry up today (July 14, 2013), only Lagos State would be able to pay workers’ salaries from its internally generated revenue. The other 35 states do not generate enough non-oil revenue to pay wages, much less meet other basic obligations. Most states are in debt, in any case, as they have taken loans or bonds. They will begin to default on the repayment and penalties will set in. The immediate option for the government would be to take more foreign loans to meet mounting obligations. Our children would inherit such a debt burden that they will curse us for enslaving them. And Okonjo-Iweala would not be around to explain to them our fantastic debt-to-GDP ratio.

It is not all bad news, though. We have shale oil too, somewhere in Ebonyi State, and we should concentrate efforts on finding more wherever it is buried. We can also choose to develop alternative energy sources as a matter of urgency. The best bet, however, is to invest heavily in infrastructure to grow industry, spur real economic growth and get off the fake petrodollar life support. We urgently need roads, power and railways. States need to fast-track the development of solid minerals and agriculture. We have to industrialise. These are what we should be spending our energy and time on. That is what will promote us out of underdevelopment, create jobs and sustainable wealth.

I repeat: I am not interested in who is the chairman of governors’ forum or Speaker of Rivers House of Assembly. That will not reduce the price of garri. In my list of priorities, I am more worried about the looting and incompetence going on at all levels of government. I am worried about the future of my children and grandchildren and great grandchildren. Is this the country they are going to live in? None of these political thugs seems worried about that. They are just playing politics at our expense, manipulating the highly vulnerable media for their selfish agenda.

Nevertheless, let the thugs continue to break one another’s head. I’m sure they have stolen enough petrodollars to treat their wounds in Germany or Dubai. That, fortunately, is not my headache.