17 June 2015, Lagos – A former Deputy Governor of the Central Bank of Nigeria (CBN), Professor Kingsley Chiedu Moghalu, has described the about 50 per cent decline of global oil prices since June 2014 as a blessing in disguise, adding that it may be Nigeria’s last chance to restructure its economy for transformation and inclusive growth.
Moghalu quoted the wealthy American investor Warren Buffett’s as saying that “it is only when the tide goes out that we see who’s been swimming naked.”
Moghalu stated this in a keynote speech at the Quantum Global Symposium on “Oil Price Battles and Currency Wars. Global Events, African Perspectives,” held in Zug, Switzerland recently.
He told the symposium, which had 200 participants from various countries, that beyond the standard effects of currency and fiscal distress experienced by countries like Angola, Ghana and Nigeria, the current oil price volatility was a recurring cycle from which Africa’s commodity-dependent countries must device a permanent exit.
“Three situations make the present crisis unique,” a report quoted Moghalu to have said.
“First, OPEC’s decision (under Saudi Arabia’s influence) not to cut back production levels and cede market share in order to restore high prices. Second, the shale oil producers in the United States have a technological advantage because they can produce cheaply enough to adjust to low prices, therefore the OPEC strategy may not work in the short and medium term.
“Third, and perhaps most importantly, is the reality that many more African countries have become oil producers. These countries have built their revenue projections on crude oil production, which has not taken off because of the slump, and what’s more, in a more crowded supply market”, the former central banker said.
“With the price crash, many more African countries will not receive the benefit of lower oil prices, but the world’s industrialised economies, which have been built on the basis of economic complexity, will”.
Moghalu argued that the policy implication of the present crisis for the future was that Nigeria and other African countries must migrate to “radically different and new economic thinking” that shifts from seeing raw commodities and minerals as a source of wealth.
“The cold evidence before us”, Moghalu told the audience, “is that in the absence of strong and effective institutions and no value addition to these natural resources happening in our economies, we have been systematically impoverished by a combination of the global political economy of extraction, which has carried on for 500 years in one form or another, and rent-seeking in our domestic economies.”
Moghalu and other speakers at the symposium called for a massive, focused and sustained shift to forms of real wealth creation such as industrial manufacturing, investments in localised, off-grid renewable energy and electric power that can sustain such a strategy, human capital development and the protection and commercialization of innovation.
– This Day