By Dele Sobowale
“Nigeria complied with OPEC cut deal in February – Kachikwu” – Report
The report went on to disclose that Nigeria, which produced 1.792 million barrels per day in January, went down to 1.685 million in February in compliance with the agreement by members of the Organisation of Petroleum Exporting Countries, OPEC to reduce supply and raise crude prices. Unfortunately, OPEC and Nigeria are caught in a no-win situation. Each time they reduce production to push crude prices up, they make it more profitable for American shale oil producers to increase their own supply and grab more of the global market share. Already, the Us has overtaken Nigeria as a supplier of crude to the United Kingdom. Our cutback will certainly open more of that market to the Yankees.
As most of our readers are aware, the 2019 budget was based on 2.3mbpd export of crude oil at $60 per barrel. That was unrealistic to begin with. Nigeria had never shipped out 2.3mbpd of crude even when there was vigorous global economic expansion. It was mere wishful thinking for the nation’s Economic Management Team, EMT, to imagine that Nigeria will sell 2.3mbpd when all the forecasts point to economic contraction worldwide. January’s export represent 22 per cent shortfall from the budget volume estimates; February’s performance amounts to 27 per cent plunge. Meanwhile, price had increased by only 15 per cent from budget. Nobody needs to be a mathematical wizard to realise that actual revenue will fall below target for the first two months of the year. Nothing suggests the situation will improve for the rest of the year.
Just to prove that the OPEC strategy is a no-win approach, another report informed oil watchers that US producers are rushing to fill the supply gap the Saudi-led cartel is trying to create. OPEC and Nigeria might end up selling less crude at the same low prices. That means trouble.
The signs of big trouble were visible in the January revenue allocations for the Federal, States and Local Governments. It came down from N740bn in the fourth quarter of last year to N641bn in January 2019. That is bad news for the states and even the FG. But, the real problem is the 2019 appropriation bill now languishing in the National Assembly, NASS. To say that the budget is in trouble is to understate the problem. With the elections concluded and several top members of the NASS not returning in June, the budget might become hostage to hostile politics.
Traditionally, members not re-elected have turned their backs on the work of the NASS; they mark time; warm seats and wait for the Assembly to pass into history. Some embittered members actually become stumbling blocks towards the work of the legislative branch – especially if they head key committees. The last three months of the present Assembly will be one of the most, if not the most, difficult Nigeria has ever experienced since 1999 for one obvious reason.
This is the first time a seating President of the Senate has been declared defeated while he still presides over the affairs of the Senate. Like it or not, he will still be in charge until May – unless an ill-advised attempt is made to remove him and install another Senate President. Irrespective of whether he remains Senate leader until May or not, his reaction to his announced loss of election will have a major impact on the fate of the 2019 budget.
Bad politics always drives out good economics any time any day. The entire world is witnessing an extreme case of that in Venezuela where hundreds of thousands of citizens who, hitherto, had not considered leaving their country are now refugees in other nations around them. On the face of it Nigeria has managed to escape the fate of the South American country. No major violent reaction has occurred as a result of the disputed results. Opponents have opted to seek redress in the courts. Ideally, most Nigerians, including this writer, would have preferred that the candidate of the Peoples Democratic Party, PDP, Alhaji Abubakar Atiku, GCON, should congratulate President Buhari and allow the nation to put the election behind us. But, he has chosen to exercise his constitutional rights by going to court. That is Plan B and perfectly acceptable. However, that approach only shelves the possibility of violent reactions; it has not totally eliminated it. Meanwhile, the NASS will be venue for a lot of bad politics and both the winners and losers might commit blunders that will further delay the passage of the bill.
If a week is a long time in politics, a year’s budget still not passed by May is already a failed budget. We saw it in 2016, 2017, and 2018 when the All Progressives Congress, APC, had a clear majority in both chambers of the National Assembly. Nobody is sure what the numerical strength of the two parties are today. But, the leadership of the NASS is still in the hands of the aggrieved parties. That will probably not change until June.
A constitutional crisis looms with regard to the 2019 budget if the current Assembly fails to pass it by May 29. Nobody has considered that possibility and what it will portend for the nation in 2019. Legal luminaries are advised to start thinking of that eventuality now. That leads to three suggestions.
“Foolhardy man! Why provoke one whose temper is foul already?
First, President Buhari should urgently ask the Chairman of the APC, Adams Oshiomole, to belt up and allow the party to demonstrate magnanimity in victory. The easiest way to ignite outbreak of violence is to continue doing what the APC Chairman is doing now. While more sensible leaders like General Abdulsalami and Bishop Kukah are trying to prevent eruption, Oshiomole is stoking the embers. All right thinking Nigerians must wish that cooler head prevail. But they will take control only if Buhari cautions his party Chairman.
“Don’t oppose forces; use them.” Buckminster Fuller, US industrialist, 1970.
Second, no attempt should be made to change the NASS leadership now. It will only lead to more waste of time by putting budget passage on hold. The APC should wait until June to select a new Senate President. Nigeria simply cannot afford any more delays on budgets.
Finally, we need stability somewhere. The announcement, true or not, that Buhari will dissolve the cabinet before May only creates more uncertainties in the economy. If the Ministers who prepared the budgets and who are in the best position to defend them are removed, who will answer questions raised by the NASS? At any rate, we need stability somewhere in our economy. For almost four years Nigeria had no discernible fiscal policy. Osinbajo and his team don’t know how to develop one. We have survived by the grace of a focussed monetary policy provided by the Central Bank. More than ever we need that stability during the tempests ahead. Godwin Emefiele had kept the economy afloat. He now has five years of experience and global network to help guide us through the uncertainties of the near term.
ONE TOUGH DECISION BUHARI MUST MAKE
The three tiers of government shared N1.2trn in Value Added Tax, VAT revenue in 2018. If Buhari wants to boost internally generated revenue, he should move quickly to increase VAT from 5% to 7.5% on basic items and 15% on luxury goods. With the difference, he will have enough to fund education better. Now that he no longer needs our votes; he should take that tough decision despite the noise from “know-nothings”. There was noise hen it was first proposed. Today everybody benefits from it.