The Chief Executive Officer of Mascot Consult Limited, Mr. Marcel Okeke, has described the novel COVID-19 pandemic as a blessing in disguise as Nigeria can no longer afford to postpone the desired transition from an oil dominated economy to one without oil.
Okeke, a former Chief Economist at Zenith Bank Plc, made this statement during a recent Webinar series lecture organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos entitled: “Nigeria Without Oil”.
He said one of the economic lessons of the COVID-19 pandemic was that dependent on oil as Nigeria’s major revenue earner had come to an end stressing that other revenue sources must be urgently explored.
“This shows an urgent need to restructure Nigerian economy such that substantial revenue must come from either new or neglected sources”, he said.
According to Okeke, Nigeria must begin to develop an alternative economy and end the debate on whether crude oil is a ‘curse or blessing’ to Nigeria, which has been raging on since the 1980s.
“The utilisation of our oil revenue has been our challenge for the economic development of the country. It can, therefore, be said that the Dutch disease and the paradox of resource curse has been with Nigeria for a long time. Now that we are where we are, there is need for a paradigm shift towards having a country that does not depend on oil,” he said.
Okeke argued that reliance on oil is no longer sustainable for the Nigerian economy as the current slump in price of oil in the international market had negated all the projections in the 2020 budget to the extent that economic development would be a mirage and anything contrary would be a magic.
“Since March 2020 there has been a glut of crude oil in the global market. Demand has been remarkably outstripped by supply. Indeed, it has been reported that several oil-laden cargoes belonging to Nigeria and other oil-producing countries have been hovering on the sea for months without buyers.
“This situation is likely to linger because economies that consume oil are in no situation to utilise the product due to the gravity of the impact of COVID-19 that has practically shut down all productive and production activities”, he explained.
Elaborating further on the subject-matter, Okeke said, “Let me give you a little idea about Nigeria: Oil production in Nigeria is now seriously endangered. Production cost of a barrel of crude oil in Nigeria is around $22 per barrel.
“Now the price of the product is around $10 to $15 per barrel, it means it will sell below the production cost. If this continues, oil producing companies would fold up and you know the implications for this country.
“For Nigeria that hugely depends on oil for its revenues, the reality is that oil revenues are no longer forthcoming. Therefore the country has been sent back to the drawing board.”
Prescribing the way out, Okeke said it was time for Nigeria to resort to its previously neglected sources of revenue like agriculture, taxation and non-oil mineral exploration that the country is richly endowed with.
He also recommended the pursuit of aggressive import substitution and industrialisation strategy for the country.
“So many of those things we have been importing all these years, we have to find a way to produce them locally so we can substitute them. It would take some time, but that is the direction to go for a Nigeria without oil.
“There has to be reorientation for the consumption of locally made goods; this is in line with import substitution.
“Also, emphasis should be laid on human capital development with emphasis on digital economy, meaning that our education system should be restructured so that we can produce people for the needed direction of the economy.
“Increased emphasis should be on infrastructure development. That has been the challenge of the economy and it would be more so when we don’t have oil. Power infrastructure is needed for the entire economy to grow.”
He said there should be greater focus on security and good governance, pointing out that the high level of insecurity impacts negatively on good governance.
Okeke also stressed the need for radical restructuring of the polity to ensure appropriate legislation to disentangle the unwieldy three-tier structure of government that is excessively resource-consuming.
“There is an urgent need for fresh legislation to disentangle the three tiers of government from oil money sharing culture. In a situation where there is no oil, this culture of monthly sharing of oil proceeds has to disappear.
“The sharing of oil money is a constitutional provision, there has to be a serious amendment of the Nigerian constitution to reflect a new economy that no longer depends on oil.
“Greater emphasis has to move towards internally generated revenue by sub-national governments. When there is no monthly revenue to share, they would have to think outside the box on how the states can exist and discharge their responsibilities”, he said.