End Of National Cake

By Oyebanji Oluwagbenga

Crude oil was discovered during the pre-independence era in Nigeria.  Oil price first rose in 1973 from $3 to $12 because of  OPEC’s declaration of oil embargo in response to the  United States and western Europe’s support for Israel against the Arab nations during Yom Kippur war.  The era ushered in oil boom for Nigeria’s economy,  but the then Head of State, Gen Yakubu Gowon, did not understand the difference between investment and spending. Instead he opted for spending.

The post-Biafra war era brought in an unexpected revenue for the military Head of State General Gowon. Nigeria became a celebrity among African nations. Spending was not a problem because making money through petro-dollar was guaranteed.  This free cash brought in the popular phrase by politicians “National Cake”.  Gowon’s regime was overthrown on 29 July, 1975 and General Murtala Mohammed became the head of state while Olusegun Obasanjo was his deputy.   On 13 February,  1976 a coup d’état was led by Lt- Col Buka Suka Dimka  which led to the assassination of General Mohammed and   General  Obasanjo became the Head of State. During his regime  the crude-oil price was between $10-$25. He transferred power to the civilian in 1979 with the price at $15. During the civilian regime it peaked at $35 and slid to $20 between 1979-1983.

The civilian regime never learnt from 70s’ oil boom. Instead corruption became a status symbol. You must be corrupt to be socially embraced.  The civilian administration of Alhaji Shehu Shagari was overthrown by the military on the basis of allegation of corruption and electoral fraud on Dec 31, 1983. Before the coup many economic reforms were introduced but yielded little progress due to corruption. The military regime of General Muhammadu Buhari enjoyed oil windfall between $24-$26 per barrel  but  his stay was short as he was overthrown by General Babangida  on 27 August, 1985.

General Babangida plotted a bloodless coup that brought him to power in 1985. Crude oil price peaked at  $27 during the gulf war and slid to around  $15 in 1993. Due to pressure after he annulled  the 1993 presidential election won by MKO Abiola, Babangida stepped down on 26 August, 1993 and formed an interim government headed by Earnest Shonekan.  The price of crude oil hovered around $12, until General Sani Abacha  took over the government on 17 November, 1993 and remained in power till 8 June, 1998 when he died. During his tenure oil price was between $15-$20. Though he had some economic achievements, the regime was plagued by massive  corruption.

After the demise of General Abach, General Abdulsalami Abubakar  became the president in 1998. He later organized a democratic transition that brought the 4th republic into existence. The present dispensation has witnessed the greatest oil boom in the history of Nigeria’s economy. In 1999 the oil price hovered around $15, it peaked  $145 in 2008.  After 15 years of uninterrupted democracy, Nigeria’s economy has witnessed huge oil revenue but little to show for it. The  discovery of shale oil in the United States of America has brought about low demand  for  crude oil which has resulted in oil price decline to sub $60.  President Goodluck Jonathan’s administration has been accused of corruption like all other administrations since the oil boom of 1973. Is this a resource curse? Would Nigeria do better without crude oil? Why was post-independent Nigeria’s economy better than the crude oil economy of 1973-2014?

Over $2 trillion has been generated as revenue from crude oil in the last 41 years but with little to show for it.  What is responsible for this wastage?  Is it religion? Is it tribe? Is it zoning?   Surely, it is the national cake’s mantra where past leaders, politicians, civil servants, military generals believed the cake is big enough for them to take their share. Instead of focusing on building a national oven their focus was on how to share the cake.

Why should a natural resource that should be a blessing be  a curse?  Is the problem systemic? Why is corruption this huge? Why are politicians and ex-military leaders so corrupt?  What is causing this corruption?  The rate of political nepotism is high, never before had Nigeria witnessed profligate spending of this magnitude. Government officials and politicians spend money  like celebrities. Natural resources are non-renewable when extracted, they can’t be replaced. The value they bring is equal to the consequences they attract. Oil extraction zone has high environmental degradation and agricultural activities in such zone decline. A wise thinking leader should invest in long term projects from the natural resource revenue.  The benefits of diversification is not short term but long term. Now the decline in crude oil price has brought about the clamour for diversification of the economy.  Why didn’t we diversify our economy in the 70s’ when we  first had oil boom? The 2015 budget portrays the feelings of our politicians with 4.4 trillion naira, almost 80% on recurrent and the rest on capital expenditure. The budget’s  benchmark is uncertain because of falling crude oil price.  The naira value is tied to petro-dollar revenue, it is strengthened when there is increase in crude oil price.

The national cake conundrum is about coming to an end.   America and western Europe  have been  seeking a solution to supply shock  since 1973 which is caused by crude oil price increase, Crude oil price increase doesn’t help  the developed economies,  it only increases production cost which brings high unemployment. The federal government must quickly focus on massive investment in capital and human development. Let nobody be fooled, crude oil price  will never be over $50 in years to come.  Shale oil production has come to stay Our politicians have to adapt to the realities we face. The only way out is in infrastructure and human development. We don’t have enough skilled labourers to advance our economy in the 21st century. The agricultural sector that used to be the mainstay of our economy after independence was abandoned after the oil boom of 1973. Diversification can only be sustained through massive infrastructure development.  Agriculture will take its pride of place again when rural as well as urban infrastructure are upgraded.  Nigeria needs to focus more energy on fiscal discipline with sight on capital expenditure.

The  2015 budget tilts heavily toward recurrent expenditure instead of more resources being allocated to capital expenditure. Without that the economy will  create a wider gap between the poor and the rich. This is not the time for blame game because the problem  is short, mid and long term, the solution must be short, mid and long term also.  The economy can be transformed if our politicians crave for meat and quit taking  milk, they need to grow up and be disciplined fiscally.

There are roads to build, research centres to fuel new ideas, the transport sector to be reformed to the realities of our demands, road, water, rail and air. Our education system needs reform to produce more skilled workers. These are not  the times to play to the gallery. The power sector, telecommunication sector, health sector are all begging for attention. Many economies have been transformed through fiscal maturity and discipline. The Chinese economy and the  Asian tigers are testament to building an industrial base and agro-mechanized economy. Our greatest strength lies in our youths. Let’s invest in the  present and future.

•Oluwagbenga, a publisher writes from Lagos. E-mail: [email protected]