FOR Nigeria’s fiscal authorities and the National Economic Council, NEC, the single most critical bane of the economy and public finance, oil price, is threatening to be back on the front-burner of issues around Nigeria’s economy.
As at end of November 2018, international oil price had crashed below the 2019 Federal Budget oil price benchmark of $60 per barrel, after about seven weeks of free fall. Oil price had peaked at $86 per barrel early October.
This development has already undermined the basic assumptions by the Federal Government which informed all the figures in the 2019 budget. Now we have massive backlogs in capital project finance and execution.
For the recent ones, we have been told by the Ministry of Budget and National Planning that the capital for 2017 recorded only about 40 per cent implementation as at end of June 2018, the statutory life time of the 2017 budget cycle. This means that about 60 per cent of the capital projects have either been abandoned or postponed. Inadequate revenue played a large part in this huge failure.
Similarly, the 2018 budget which is about five months in the implementation cycle, is said to be facing similar revenue constraints. Also, 2019 budget appears to have already failed before it is started going by the short-to-medium term oil price outlook.
All these are happening against the backdrop of massive campaign and sloganeering for economic change and diversification mounted by the current government at inception in 2015.
This government took office right on the throes of similar crises arising from the massive decline in oil prices between mid-2014 and 2015.
Every right thinking Nigerian has agreed that economic or revenue diversification is the single most important economic policy pursuit of the Buhari government. We now wonder why another deep decline in oil prices will put us in economic trepidation. To underscore the seriousness of the challenge, the Minister of Petroleum, Industry and Mineral Resources of the Kingdom of Saudi Arabia, Khalid Al-Falih, had to be on a diplomatic shuttle to Nigeria to ramp-up support for the Organisation of Petroleum Exporting Countries, OPEC, for checkmating the crisis.
But these diplomatic efforts can only bring temporary reliefs since oil prices will always fluctuate. Nothing short of a serious transformation and diversification of the economy away from oil dependency will do.
The time has come for the Muhammadu Buhari administration to tweak the Economic Reform and Growth Plan, ERPG, to fast-track its elements that pursue the early diversification of the economy. We can no longer afford these cyclical falls into recession due to oil price.
Having only recently crawled out of recession we cannot afford another return to it.