Nigeria and Economic Recession: Way out (3)

Before the discovery of oil, Nigeria which is blessed with mineral deposits of all types including tin, gold, coal and many other minerals earned appreciable income from the aforementioned minerals. The tin, gold, coal fields were abandoned following the discovery of oil. During the first Republic Agriculture was the mainstay of the economy. The north had cotton, groundnuts and other products. The East and the Southwest had Palm Oil and Cocoa respectively. With revenue generated from these products, the regional governments were able to cater to the needs of their regions. They embarked upon programs which impacted positively on the populace. In the Southwest, buildings such as the Cocoa House in Ibadan and the magnificent structures of the University of Ife (now Obafemi Awolowo University) are eternal reminders of the prosperity of that era. However, with the increased production of Oil and the huge revenue which it attracted, successive Nigerian governments and the military ones in particular soon began to pay less attention to the need for sustainable agricultural policies. Such was the country’s newly found comfort that an entire civil war was prosecuted without any external borrowing of funds. To further compound matters, the military with so many funds at their disposal created numerous parastatals and governmental agencies to carry out often overlapping functions. The belief that we would always be assured of a never ending source of income from Oil revenue also led to the adoption of a system of government that is clearly capital intensive and which continues to stifle economic growth as a large percentage of government revenue is geared towards the maintenance of political structures. Oil dependence of the 70s and the creation of states In the earlier 70s it was stated by the then Military Government that the problem of Nigeria was not money but how to spend it. To a large extent, this statement remains true for despite dwindling revenue from oil, Nigeria has found itself in a situation which much of the revenue which accrues to it is spent to maintain political structures rather than provision of social amenities to the populace. In this respect the greatest indication of just how bad the situation is now, is the fact that virtually all the States of the federation depend on federal allocation to keep afloat. Most if not all the States are not economically viable because of outright neglect or unrepentant abandonment of agriculture and non-exploitation of other available sources of revenue including mineral resources. The expansion in creation of states began in 1967 with the creation of twelve states from the previous region of the country. Overtime, successive military government created more states mostly out of political exigencies rather than economic realities. At the end of it all, Nigeria has at the moment 36 States and the Federal Capital Territory, Abuja. As I stated last week, the present slump in oil prices was predictable and with proper planning Nigeria could have been better prepared. What I also find alarming is the fact that in 1980 – 1981 there was a similar slump in oil prices and in the course of which the price of oil slumped from a peak of $35 per barrel ($100 per barrel today) to below $10 per barrel in 1986 ($22 per barrel today). At that time as it is today, there was world-wide outcry about the effect of the slump on certain countries. In one of its editions, Time Magazine wrote as follows: “A glut of crude causes tighter development budgets” in some oil-exporting nations. In a handful of heavily populated impoverished countries whose economies were largely dependent on oil production – including Mexico, Nigeria, Algeria, and Libya – government and business leaders failed to prepare for a market reversal.” It is clear from the above that Nigeria was affected by the slump of 1981 – 1986 as it is affected by the last slump. By this time Nigeria which used to derive a huge chunk of its revenue from agricultural products had become dependent on oil export. Therefore as the Federal Government and the states which existed at that time experienced a drop in revenue it was reasonable to expect that the creation of more state would not be a matter of priority. However, most surprisingly in 1987, the State creation exercise kicked off again with the creation of Akwa Ibom State followed in 1991 with the creation of Abia, Adamawa, Anambra, Delta, Edo, Enugu, Jigawa, Kebbi, Kogo, Osun, Taraba and Yobe States. In 1996 more states were created bringing the total to its current number. Matter of time However, as I stated earlier it was only a matter of time before we realized that we could not depend entirely on oil based revenue. In September 2015 N 502.09 billion was received as revenue an amount lower than the N 601.05 billion received in August 2014. This decline of N 99.55 billion in one month alone was due to the drastic fall of the price of oil as well as the inability of the country to meet its production quota due to production losses arising from shut down of trunk lines and pipeline vandalism at the various export terminals. To further compound matters, it has already been predicted that current Oil depositories may become exhausted in less than 50 years’ time. So even before the advent of the current recession, it was evident that we must either begin serious exploratory activities to discover fresh Oil deposits or we must put in place urgent plans to diversify the revenue base of the economy. Agriculture – The first casualty One serious damage done to the economy of the country was the abandonment of agriculture. It is common knowledge that the first profession ordained by God was agriculture. The great countries of the world including Canada, USA, Brazil, Argentina, European countries, Russia, China, Australia, New Zealand etc give pride of place to Agriculture. Most of the wealthy citizens of these countries are farmers. The first wealthy Nigerians I grew up to know were farmers. They acquired their wealth from proceeds from cocoa, palm oil, palm kernel, rubber, cotton, groundnut etc. Gone are the days when the road between Ibadan was laced on both sides with cocoa plantation. The roads from Ado-Ekiti to Ilesa, Ilesa to Ibadan, Ibadan to Ijebu-Ode through Gambari were not left out. The cocoa farms on the right and left sides of the roads from Ibadan to Abeokuta, Abeokuta to Ayetoro, Odeda to Ijebuland, or Akure to Ondo or Ondo to Ore were beautiful to behold. Today, over 99% of the cocoa trees are dead. Indeed all the farms are overgrown with green vegetation. The foreigners from US and Europe visiting Nigeria wonder why Nigeria has vast underdeveloped land. Yet Nigeria orders maize from far away Argentina to feed poultry farms. Nigeria imports rice worth over several billions of naira annually.At the moment it is estimated that only 12% of arable land in Nigeria is cultivated while the remainder are not utilized. Next week, I shall consider “the revival of agriculture” as one of the ways out of recession.