By Babajide Komolafe

The economic team of President Goodluck Jonathan must develop a Plan B against oil price shocks and battle entrenched interest for Nigeria to transform into a modern nation, says Bismarck Rewane

“The Goodluck economic team must in the formulation of their Marshall plan for Nigeria, develop a fall back (plan B) just in case there is a precipitate or sudden drop in oil prices, production and revenues”, said Rewane, who is the Managing Director, Financial Derivatives Company (FDC).

In the May Economic Bulletin titled, Making sense of the Macroeconomic challenges facing post-election Nigeria, Rewane said there must be a new mindset in the management of the nation’s economy and urged President Jonathan to focus on key targets and pick a team that can deliver on the plan.

He also urged the President not to meddle with the autonomy and independence of organs of government e.g Central Bank of Nigeria, Securities & Exchange Commission and the National Communications Commission, saying, “Frustrating these champions of reform could easily lead to suboptimal economic performance and be counter-productive.”

He said, “The greatest challenge that the new economic team and Nigeria will confront is an economic mindset that must change.

“There is a wealth delusion in Nigeria especially in the public sector. This is based on a false premise that oil prices and revenues are an increasing function of time i.e oil revenue only increases and never declines. Following from this is the misconception that natural wealth is equivalent to produced wealth. In my interaction with public officials, there is an entrenched view that oil price shocks are temporary whilst oil prosperity and peaks are normal.

“The Goodluck economic team must in the formulation of their Marshall plan for Nigeria, develop a fall back (plan B) just in case there is a precipitate or sudden drop in oil prices, production and revenues. The economic managers have only planned around how to share windfalls. In other words, the pro-cyclicality of policy.

“On May 5, for example oil prices fell 15% in one day to $109pb. The revenue impact of this fall on Nigeria is approximately $11bn pb. This has serious consequences on exchange rate, inflation and public finance. The Nigerian economy has to brace up for future volatility and exogenous shocks.

“In 2008, when oil prices declined sharply, resulting in revenue gaps, internal and external balances, the Government had no anticipatory plan to fall back on. Thanks to the oil windfall excess crude account and prior external debt rescheduling.

The assertiveness and the battle against vested interests is another major challenge. The consensus that a combination of free markets and democracy will transform developing nations and sweep away ethnic hatred and religious zealotry is now flawed. Crony capitalism has blocked the deregulation of petrol prices, impeded gas and power sector development that are pivotal to the economic transformation of Nigeria.

“Finally, the management of an aggressive public expenditure policy that addresses the eco-nomically deprived (far North) and the restive Niger Delta at a time of fiscal consolidation will be a delicate balancing act.

“The way this administration protects the people from the negative effects of crony capitalism will determine if Nigeria will seize this opportunity for economic transformation into a modern nation state or muddle through and remain an economic underperformer.”