By Uche Chris

Nigeria is today where it was in the 1970s shortly after the 1973 oil embargo imposed by the OPEC countries led by Saudi Arabia against western nations over the Middle East crisis between Israel and Palestine and other Arab countries in the Yom Kippur War. It was something unexpected as well as unprecedented in history and the shock waves were massively felt globally, forcing major economies into recession because of the astronomical hike in oil price.

For instance, oil price went up from about $2 per barrel to $12 and to about $20 in six months. By the time the embargo was lifted, the global economy was in recession while the OPEC countries such as Saudi Arabia, and also Nigeria, had become the new centres of petrodollars. For the western countries, it was an experienced never to be repeated in peace time, and everything was done to reverse the trend. Soon afterward, the price plunged and Nigeria, which had not planned for a reversal in fortunes found itself holding the shorter end of the stick.

The effect of such fortuitous wealth on the country was socially unimaginable, financially indescribable psychologically calamitous: A poor country just emerging from a 30-month civil war and saddled with the challenges of reconstruction and development suddenly swamped and flooded with overwhelming petrodollar. It was a fairy tale that has continued to mesmerize the nation till today; how suddenly it transformed from a poor country to easy wealth of stupendous proportion. It was the beginning of the economic, and some say, political ruin that has confronted the nation.

For instance, the Second National Development Plan (1970-74) was launched shortly after the end of the civil war as a means of reconstructing the facilities damaged by the war and promoting economic and social development throughout the nation. The plan was modest in its scope, and realistic in its objectives and ambition. The plan aimed at a capital expenditure of N3.192 billion during the four years and this was expected to be distributed between the public and the private sectors at the ratio of N2.1 billion and N1 billion respectively.

The implementation of this capital programme was expected to result in a rise in the gross output of the economy from a level of N3.028 billion in 1969-70 to N3.987 billion in 1973 in real term. The average growth rate expected throughout the plan period was about 4-6.6 percent per annum.

Most commentators believe it could have transformed the nation. Its five cardinal objectives or goals were:  A just and egalitarian society; a land of bright and opportunity for its citizens; a great and dynamic economy; a free and democratic society; and a just and self-reliant nation. Renowned economist, Prof. Oyetunji Aboyade was the chairman of the planning committee.

However, this modest ambition was changed dramatically with the arrival of petrodollar in October 1973. The Third NDP 1975-1980 reflected this change in the economic outlook of our leaders as they raised the Plan expenditure to N30 billion and growth rate of 9 percent, all to be financed by the government without room for private sector involvement. This amount was 10 times the budget for the Second Plan and its failure marked the entry of deficit and borrowings into our budget implementation. It failed because of oil price crash.

All the lofty and grandiose plan and objectives were never to be as oil price soon tumbled forcing the Obasanjo led military government after the assassination of Gen. Murtala Mohammed on February 13, 1976, to adopt low profile posture and made in Nigeria policy. The government then tried its best to reorient Nigerians on the need to diversify the economy, especially into agriculture to grow food as well as focus on industrial productivity.

So Operation Feed the Nation and subsequently Green Revolution programmes were born all in an attempt to exorcise the oil dependency culture that had enveloped our mentality. But it was short-lived, ostensibly too superficial, to withstand the huge appetite and greed already created. Soon we were back to our old ways at the earliest sniff of oil wealth.

Just as the civilian government of President Shagari was coming in 1979, the Iranian Islamic revolution took place with sanctions imposed on the Islamic new Republic by the western countries led by the U.S.; and oil price spike trading at about $24 per barrel. All the slogans on diversification were forgotten and the country went on the largest importation craze ever.

This was followed with the Iran-Iraq war in 1981-82, which saw oil price jump to $40 per barrel and the country became an import destination for all exporters. Then it was alleged Nigeria imported sand; and became a net importer of rice, champagne, and all sorts of drinks, and textiles. By 1984, the worst glut hit global economy as oil price dropped from the giddy $42 to about $8 per barrel. Gen. Buhari came to power then to salvage the situation. Unfortunately, he is twice lucky by being there again 36 years later to diversify the economy against oil price crash. This has been the tragic story of our nation.

In 1986, Dr. S.P. Okongwu, former finance and planning minister published a book, The Anatomy of a Traumatized Economy, and the content and conclusions would shock present day readers. Most of the issues he addressed then unfortunately are even more manifest and complicated today.

“The negative growth rate experienced in the agricultural sector is all the more disturbing when account is taken of the facts that: a) its decline would be greater if we consider per capita terms; b) it has adverse effects on the trade, industrial costs and on the social framework; and c) it takes more expenditure in food import which defeats the primary goal of food sufficiency…

“We have arrived at the situation where the national economic regime is characterized by an essential discontinuity of economic policy. The deleterious effects of such discontinuities seem rather obvious…. More serious however are the discontinuities induced by changes in the resource picture, which is dominated by our income dependence on oil proceeds….

“These changes have impacted virtually cyclically every year on the economy directly or indirectly through the annual federal budget and its complex direct and indirect controls. It is evident that between 1980 and 82, that in order to maintain its capital expenditure the government had to resort to increased borrowings to finance the deficits”….This has been the experience since these words were written.

Alhaji Aliko Dangote also made this point succinctly recently at the CBN consultative forum on the economy when he said that we have talked about diversification for so long that it may no longer be an option for the country. According to him, he has been hearing of the word since he got to Lagos in 1979.
“My heart actually bled when it was announced by the Customs that we had revenue of N1.35 trillion as import duties. It means that the economy is not working. If the economy is working, Customs should not collect that kind of money. In fact, it is the FIRS that should collect that much money because we should produce more,” he said.

“We need to adopt backward integration and economic substitution. The country spent almost $47 billion on imports last year. It is not sustainable for us to continue importing everything we consume. We need to find a solution as to how to make our country to be producing things that we consume. Even if we decide to produce goods worth $30 billion, imagine how many jobs would be created.

Where do we go from here? The answer is not as simple as those in power have made it to sound: Diversification. Time there was when it could suffice; not any more. Politics has mixed with economics and that is where the answer is. The solution lies in the principle of derivation. Because different parts of the country are variously endowed and therefore enjoy different comparative advantage in the production of different resources, and if challenged each state or part of the country will maximize their comparative potentials.

This is the only way to achieve diversification in the shortest possible time and end the deceit and pretension that has gone on for so long. The mistake we have made is to leave diversification for the federal government to drive; it is like the tail wagging the dog. Necessity, it is said, is the mother of invention; when states are challenged to survive, the problem will naturally end. Otherwise, we will only be waiting for another oil price crash.

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