One thing that has accompanied the global financial crisis has been a significant drop in the price of oil per barrel. It has fallen by 50% in the last 3 months. While some quietly argue that this was a ploy by the Bush administration to help Republicans win the upcoming election, it is more likely a sign that speculators and serious investors are putting their money elsewhere - gold, for instance, or letting it sit in a bank account.
These uncertain economic times have forced the Nigerian government to not only announce major budgetary cuts but to also announce that the government will need to look beyond oil for revenue and that
"There may be a need to intervene to balance the market, if the price slide seemingly predicted on demand and over-supply continues..."This follows the recent news from Soludo at the World Bank meetings that the Excess Crude Fund, a savings account that contained the windfall from oil earnings, is now depleted. And, this action may have been a reaction to the advise given by Ngozi Okonjo-Iweala of the World bank. She specifically stated on the 15th of October that Nigeria needed to be "prudent with [its] budget."
A few Nigerian banks have failed in recent weeks and according to a complaint from the Senate, the Central Bank was unable to promptly pay depositors of the failed banks. Additionaly, the federal government recently announced that due to insufficient funds, road projects will be financed with bonds.
These and other startling issues would suggest cause for alarm, however, Nigeria has approximately $64 billion stashed away in foreign reserves. That is money that can be used by the government if and when necessary. I am happy to see that Nigeria will be forced to not rely on oil wealth. If Okonjo-Iweala is correct that commodity prices will fall 20-25% in the coming year, then it is crucial for Nigeria to indeed 'tighten its belt' and seek alternative sources of income to fund the many projects Nigeria needs. We cannot continue to spend oil wealth without a careful strategy.
CUT YOUR COAT ACCORDING TO YOUR SIZE
It seems that the federal government is preparing the nation to 'cut its coat according to its size'. That is a good ethic to encourage, especially as the financial crisis has affected every single person from the richest to the poorest. But as the federal government encourages this mantra, it would be a wonderful example if top ranking officials like the President, the heads of the Nationa Assembly and others took a pay cut. Afterall, their peers in Cote D'Ivoire did that months ago. Nigerian legislators increased their pay by over 100% in August, and considering that their constituents never had that good fortune and are faced with extreme hardship in these trying imes, the least 'our representatives' can do is return to pre-increase pay.
'Our representatives' must lead the charge in tightening their own belts now that oil wealth is dwindling. Members of the National Assembly should unilaterally forego their various allowances like the newspaper, hardship and constituency allowances. Additionally, the budget to remodel the Senate Speaker's residence, the same issue that led to the downfall of Patricia Etteh, should not just be cut in half as is now the case, but should be scrapped all together. Speaker Dimeji Bankole can manage without remodeling that house which continues to be source of ire. It has been almost a year since he moved in to the house and there is no rush to fix it up, is there?
Given that our oil wells will be empty in approximately 43 years, this financial crisis gives Yardy the opportunity to transform Nigeria by revitaling the agriculture sector and expanding the nation's sources of income so that we no longer have to rely on oil for revenue. Imagine what that accomplishment would mean for Nigeria's future and Yardy's legacy. I only hope that good things will come out of all this.
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- Excess Crude Fund Depleted
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