In his own words, Kachikwu said Nigeria’s economy “lacks the essential engine of growth. We are in an energy trilemma: we export energy in a primary form, we import petroleum products, and we have a power crisis…” Direct though this was, we prefer to be more blunt: Nigeria’s peculiar practice of exporting crude and importing refined petroleum is nothing short of asininity, a monumental display of national self-immolation that has defied all admonitions for three decades. Successive governments since the mid-1990s have entrenched, rather than change the narrative; the current Muhammadu Buhari government is not doing anything differently. Though having the capacity to produce 2.5 million barrels of crude per day and having four moribund state-owned refineries with the capacity to process 445,000 barrels per day, the country depends on import of refined petroleum products by as much as 90 per cent. Yet, almost four years on, this government remains clueless about what to do with its four decrepit refineries. In terms of money wasted that could have been spent on infrastructure and social services, the cost is staggering.
Kachikwu, in 2017, said $28 billion of foreign exchange earnings was spent annually on the 92 per cent of petrol consumed locally. At an exchange rate of N305 to $1, it drained N8.54 trillion. Trillions were also spent on kerosene, diesel and aviation fuel and other lubricants. Between January 2010 and September 2015, N20.2 trillion was spent on petrol, diesel and kerosene, says the National Bureau of Statistics. According to data from the Petroleum Products Pricing and Regulatory Agency, 22.53 billion litres of products that included petrol, diesel, kerosene, aviation fuel and Low Pour Fuel Oil – an essential in industrial production – were imported in 2017.
Our national folly cost us even more as the government has for decades, subsidised the pump prices of petrol and, until recently, kerosene, not only to maintain a fixed price, but to also underwrite haulage costs to ensure that the price per litre on landing in Lagos is the same as in Maiduguri, 1,600 kilometres away! That subsidy rose to N1.4 trillion each year or N3.76 billion daily under a curious, even more opaque system the government calls “under-recovery.” Instead of the expected reforms, Buhari has handed the Nigerian National Petroleum Corporation carte blanche to import as it pleases and spend accordingly with scant oversight.
Nigeria must reverse the structure of its disarticulated economy to survive. Diversification, innovation and liberalisation are the key drivers identified by experts. The economy must be opened up for Foreign Direct Investment. While oil and gas accounts for 90 per cent of export earnings, it contributed only 8.55 per cent of GDP; targeting the non-oil sectors that provided 91.45 per cent therefore is the route to national survival. Agriculture and industries that contributed 22.86 per cent and 23.18 per cent respectively are sectors deserving of urgent liberalisation and FDI. The increasingly important services sector with a 53.97 per cent, illustrates the changing structure of the global economy and the importance of innovation and knowledge.
India’s mix of investment in infrastructure, diversification and liberalisation and an ICT sector that increased its contribution to GDP from 1.2 per cent in 1998 to 7.7 per cent in 2017, positions it to become the world’s fifth largest consumer economy by 2025, according to McKinsey, a global consultancy. Once an inconsequential backwater, its enlightened rulers transformed the United Arab Emirates by diversifying from dependence on oil and fishing to become a global investment and tourism magnet.
Turning the corner is not rocket science; just as India moved 30 million out of extreme poverty in the six years to 2017, and Brazil 20 million out of poverty in eight years, Nigeria can race to the path of progress by changing the structure from a rentier state to one of production: first, unload the refineries to private hands and provide incentives to other global players to join Dangote Group and modular refinery licensees, leaving the downstream field for the private sector. Railways should be thrown open to private investment: an ongoing programme to borrow £30 billion to fund state-run rail is foolhardy as state firms never turn a profit in Nigeria. The UNDP’s poverty survey of 108 countries that places Nigeria at 50th is a result of our wrong choices and corrupt governance.
The minister’s homily is a self-indictment, an admission that the change promised by this administration has not materialised, seven months to the end of its four-year term. The energy trilemma is typical and easy to reverse: transparently sell off the refineries immediately as they are to established global players; review the fraudulent power sector privatisation of 2013 and privatise the national power grid; give incentives – tax breaks, reduced tariffs and training – to investors and reform the gas sector where we have the world’s ninth largest proven reserves of 5.11 trillion cubic metres, but produce only 8.9 billion standard cubic feet while using only nine per cent of that locally, according to the Nigerian Association of Petroleum Explorationists.
But change can still begin with Buhari: he should fulfil his promises to reform the NNPC and the power sector: and follow through on the small-paced Seven Big Wins programme to restructure the oil and gas industry. This requires dropping his statist instincts for massive privatisation and adopting the reform policies that he has so far resisted.