Time is fast running out - Editorial

Those in charge of affairs are still carrying on as if everything is alright. The headlines of the newspapers indicate this. A quick sample reveals the thought process of Nigeria’s ruling elite. They include-‘FCT budget: senators query N4bn allocation to first ladies Secretariat  and how about ‘Audit report indict NNPC for unremitted N2.66 trn’. A compilation of absurd headlines from this year’s newspapers alone will fill an entire tome. And we are still only in February.

In spite of the pretence to the contrary, however the good times are slowly coming to an end. Unfortunately those at the helm of affairs do not appear to be very keen to accept the changing realities. They have to be given a wake-up call. For even though they can’t change time, time will change them. Slowly but surely the terms of trade are already changing against us. If we continue in the present way, two or three more generations will subsist in terrible circumstances.

There are already warning signals. We ignore them at great peril. For example, recently Ecobank, a financial services giant predicted that the Nigerian oil and gas industry could face a difficult 2013 as Shale Oil in the United States of America (US) takes an increasing share of the North American market. Ecobank’s estimate is that Nigerian crude oil export to the US could fall by over a quarter this year, from 800,000 barrels per day (bpd) in 2012 to as low as 580,000 bpd in 2013.

In a sane polity, this would have triggered off alarm bells. That we are still talking about the renovation of the Vice-President’s guest house and sending ‘high powered’ delegations to the football fiesta in the Republic of South Africa, portrays an utter lack of a sense of reality. The reality is in the opposite direction. For according to the Ecobank report, crude oil shipments from Nigeria have declined from 75 cargoes in January to a scheduled 59 in March and there is an overhang of 21 – out of 65 February cargoes.

Unite honestly; you do not, as the American bard Bob Dylan famously observed, “need a weatherman to tell you in which way the wind is blowing”. The terms of trade, we must repeat for emphasis is perhaps irreversibly turning against us. It is an unusual as well as a perturbing situation in view of the fact that the aforementioned overhang cargoes contain Nigerian’s premium grades of sweet and light crude which are usually very much in demand.

To unravel the puzzle, let us look at the analyses of the Head Of Research at Ecobank, Rolake Akinkugbe. Akinkugbe explains that refiners in Asia are increasingly becoming capable of handling larger volumes of sour crude oil grades, while Europeans refiners are facing pressure on their margins and seeking lower-priced margins. The two factors involved oil grades, priced as they are at a substantial premium to the sour grades from the Middle East.

According to Akinkugbe, ‘’Nigeria and other oil produces in West Africa had a window of opportunity during the Libya crisis when the country’s (Libya’s) supply was taken off the market.”

The US is still Nigeria’s biggest oil export destination, but the relationship can no longer be taken for granted.

In recent years, she said, producers in West Africa and the Gulf of Guinea have exported around 2mbpd of oil to North America, but this has fallen to around 1mbpd, with the slump in Nigerian export to the US being particularly severe due to the steeper price of its crude.  Having accounted for 12 per cent of US crude import in 2011, Nigerian’s share fell to 6 per cent in 2012.

Nigeria’s oil export to the US,  Ecobank  said, have already slumped to 700,000bpd from the 2012 average of 800,000 bpd, and that could fall as far as 580,000bpd in 2013 as US domestic oil producers add an expected 8000,000bpd of new capacity.

It is incomprehensible why our ruling political elite across the divide are carrying on as if they are impervious to which way the wind is blowing. The bell as it is, is tolling vigorously against our age of indulgence and self-destructiveness. The political elite must take a turn in the right direction.

What has to be done now is obvious. There must be draconian cuts in the crass wastage involved in the machinery of government.  We cannot wait forever for the implementation of the Steve Oronsaye report. In the first place, there was no need to wait for Oronsaye to act in accordance with fiscal rectitude and common sense. This must go hand-in-glove with an overall re-direction of capital.

If we are to survive, the overall thrust of government spending must be redirected from consumption to production. An institution such as the Bank of Industry for example should be properly recapitalised and repositioned to an infrastructure financing bank. Furthermore, there must be a return to combatively competitive fiscal federalism in order to make the Nigerian economy competitive. And of course the monopoly of the central bank over the forex market has to be broken.