Chijioke K. Mama
24 February 2015, Sweetcrude, Lagos – Elections and government transitions are dicey issues in every economy. If there is a change in power, it is characteristically followed by ripples of shock across the macroeconomic horizon of a country. Nigeria goes to the polls in about four weeks from now, to elect a president. From the political tempo in the country, this seems to be a critical election. The ruling People’s Democratic Party (PDP) has continuously reiterated its commitment to a free and fair election. The main opposition party the All Progressive Congress (APC) has employed all levels of political engineering to solicit for the support of the electorate, perhaps, in a manner never seen in the nation’s previous elections. One thing is clear; that the election promises to be a real contest, with both parties wielding a significant degree of the electorate’s support. It will surely be difficult to predict a winner.
Beneath the secondary impact of who wins the election are the more important issues of what happens to the economy, post-election. Already on a scary profile, the Nigerian economy has suffered numerous blows and shocks in the past months. There are numerous issues of high importance to which maximum attention must be given. Enter the oil and gas industry in Nigeria.
Whether there is continuity or change in government, matters of critical importance to the growth and survival of this nation continue to swing on a dangerous pendulum. The oil and gas industry which is the main source of revenue for the government (80%) and the principal means of foreign exchange earnings deserves more attention and a more prominent mention in the manifestoes of the feuding parties, than it is currently getting. This, in essence, should be the crux and the thrust of electioneering activities; a detailed plan on how to salvage and reposition a seriously stalling industry. Nigerians are yet to be presented with that robust economic plans and policies crafted to ensure the optimal use of Nigeria’s resources viz-a viz revenues, towards the much needed infrastructural development in the country.
A plummeting oil price seen since July 2014 has placed Nigeria’s economy on the very scary edge of a cliff. Most Nigerians are oblivious of the enormity of fiscal challenge facing the nation. The campaign activities have been turned into a drama, passing as an entertainment to many people. In the morning after election and certainly in the absence of this euphoria, the nation will wake to a better understanding of the misfortune that crude oil has suffered in the past few months. The near permanent change in the supply – demand dynamics of crude oil, orchestrated by Shale production in the US will then come to full view. Those who reviewed Nigeria’s 2015 budget are already aware of the extent to which it has been re-worked away from the patterns of 4 to 5 years ago when oil prices peaked.
If shale production in the US alone has jolted the global market to this extent, more shocks may therefore be witnessed when deposits in other regions of the world, (actively being explored) become commercially viable and comes on stream – Israel, China, Russian and Mongolia.
For a hydrocarbon-based economy such as Nigeria and one in which institutional transparency and public sector accountability is poor, unless a diversification of the economy (which is not a day’s job) is followed by multiple smart policy changes (such that will guarantee a meaningful shift away from government’s dependency on crude resources) more austerity conditions will be seen. Personal income and corporate earnings will be impacted. The 2015 budget already put a lot of measures into place to reflect the unpleasant realities.
If there is a change in government in the forth-coming elections, it will be hard to predict what fiscal and policy path the nation might take. Whether uphill or downhill, what is known is that when opposition parties inherit a new government, they are quick to overturn the decisions of the outgone government and find a new path. The result is usually a series of shocks on many sectors of the economy with counterproductive results – at least in the near term.
Political analyst has pointed that the manifestoes of the major contenders in the presidential elections has series of holes (to an academic eye). Nigeria’s pedestrians (most affected by a mismanaged economy) are currently more fascinated by the personal attacks and counter attacks going on between the major contenders. An attraction to the ephemeral! which blinds realism – especially unpleasant realism. When the elections come and go, a new chapter will be opened filled with questions and hardly any answer.
*Chijoke K. Mama is a Senior Oil and Gas Analyst based in Lagos.
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