The oft repeated saying that crude oil is a curse is not accurate. Nigeria, with her militant insurgency, environmental degradation and corruption crises derived from crude oil often comes up as an example of the veracity of the statement.
But, a more accurate saying would be that crude oil can be a blessing if ones country wants it to be and acts accordingly. While to a great many nations the only lasting ‘benefits’ gotten from crude oil are greater amounts of corruption and an overdependence on one volatile product in their economy, to a few countries, it has transformed their economies and made all the difference.
Let me give you two shinning examples: Sometime in the tail end of the last century, Dubai a former fishing village, discovered that they had crude oil, and there was a lot of jubilation in the land. But that jubilation was tempered by the saddening or challenging discovery that the oil will only last for 10 years.
In some climes, that gloomy fact would have led to a mad scramble for the little awoof money the crude oil will spit out, and some big bosses would have pocketed all the monies derived, stashed them in some Swiss bank accounts, and that would have been the last their country would hear of the matter. But not the people of Dubai.
They immediately resolved to use the money derived from crude oil as a kind of capital to use to develop their city-state. They decided that if the crude oil in their city-state wouldn’t last, they would use it to build an economy focused on tourism and international trade- an economy where people from oil rich countries like Abu Dhabi, Saudi Arabia, and Nigeria would come to spend their money.
They built world class roads, airports, shopping malls, hotels, estates and other things they calculated would interest international shoppers and tourists. They built it, resisted the temptation to chop the money, and soon enough international tourists and shoppers began to flood Dubai, the former fishing village.
The long term result is that their economy became a world class multi-billion dollar economy. It became an economy not directly dependent on the volatility of the price of crude oil. All because they made sure they used the little crude oil they had to ensure lasting prosperity for themselves.
Okay, let’s look at another country that has turned crude oil into a blessing. Norway. The political class in Norway did not believe that crude oil will keep giving them money for public projects ad infinitum. They decided to follow wise King Solomon’s admonition to man to study the ant. And like the ant, they decided o set up a rainy day fund, preparing for the day crude oil either dries up or becomes worthless, Unlike some of our politicians who saw Nigeria’s Excess Crude Oil Account as an ATM machine, the
Norwegians hardly ever touched their rainy day fund. They rather invested it wisely. As a result, it grew and grew, and today, if the fund is shared among Norwegian citizens, they would each receive close to US $200,000 each. Compare that with Nigeria’s inability to even give unemployed people common N5000 per month despite being a major oil producer like Norway. Selah.
Today, Norway has US$871 Billion in their sovereign wealth fund, and the government withdrew money for the first time a paltry US$700 million only this year. Go to Norway. It is a rich country built on crude oil. The citizens have a lot of their personal expenses paid for by the state. For intending mothers a little tip: Norway has also been found by a study to be ‘the best place to become a mother’.
Also, Norway has the best prisons, some say they look like Nigerian 2 star hotels. And the credit protection in Norway is even stronger than that of the US. And they say crude oil is a curse. Crude Oil Recovering? When President Buhari came into office, the price of crude oil was in the 30s. But as of yesterday, it had climbed to US$58 per barrel.
This climb is partly as a result of the FIRM agreement between Russia, Saudi and Iran as well as other major oil producing nations to cut output. Not to be cynical, but the prospects of US President Elect Donald Trump tearing up the Iran nuclear deal and starting new negotiations with the oil rich country has also caused some price rumbles that may become a roar.
The steady rise of Nigeria’s oil output following a decrease in intensity of the conflict in the Niger Delta has made sure that Nigeria is going to be a beneficiary in any new price spikes; and in fact, credit rating agency Moody’s has predicted that Nigeria’s economy would grow moderately in 2017, rather than contract because of rising production.
So, it seems that a slight ray of hope has appeared in the dark clouds that have engulfed Nigeria’s economy since the last free fall of the crude oil price a couple of years ago. Nigeria has seen what happens when countries refuse to save and instead fritter hard earned oil money via a lifestyle of corruption and embezzlement.
If the current price rise continues, it will be a second chance to Nigeria to right its wrongs. Our leaders must embrace a culture of transparency and integrity and also welcome strategic thinking and proactive action. If not, we might still fall into the same abyss we are trying to emerge from today. Yet something still disturbs me. I have not seen much results from the modest recovery recorded in the oil price so far.
The price of foodstuff in the market continues to soar higher than ever, threatening Nigerians with hunger. The price of palm oil has skyrocketed. So has the price of groundnut oil. I begin to fear that at this rate, a good number of Nigerians may not be able to find oil to cook this Christmas. God help everyone. People in the food market blame the inflationary spike on a hike in diesel price of the transporters who transport their food from the market to their shops.
What this suggests is that the benefit of the $20 per barrel increase in the price of crude oil in recent times has not trickled down to Nigeria’s lower classes, and that is bad. What Happened To The Windfall? The Federal Government has to come out and tell us what is happening with our $20 per barrel ‘windfall’.
It also needs to tell us what has happened to all the moneys recovered from the so called corrupt former government officials arrested by the EFCC. The government needs to seriously establish a sovereign wealth fund, which should be managed transparently and its revenues announced to all Nigerians, so that there will be no long story, like the one we hear concerning the so called Cabotage Vessel Financing Fund (CVFF).
Our politicians who have brought us the trouble we are currently facing should also prepare to keep their fingers off the monies coming from this proposed sovereign wealth fund. They should find out ways of increasing internally generated revenue-and by that, I don’t mean they should tax the people to death.
The government should use a good fraction of the money to stimulate the economy, and should also ensure a zero tolerance for embezzlement. We have seen what corrupt spending bonanzas can cause. If crude oil should give us a second chance, we shouldn’t allow embezzlement fritter it away from us.