THE strength of every nation may be identified by its natural and human resources and Nigeria as a nation is richly endowed with human, natural and material resources. However, the mismanagement of these resources has prevented us from reaching our full potential, hence precipitating economic struggles and decay.
Nigeria as a developing country depends mostly on primary product exports and upon her attainment of independence in 1960, has experienced ethnic, regional and religious crisis due to disparities in economic and educational development in the amalgamated regions (North and South) partly attributable to the major discovery of oil in the country which affects its economic and social components.
Prior to the civil war, Nigeria was an agrarian economy operating within regional system of government where regions contributed percentages of resources to the government at the centre. Under this arrangement, although the regional government relied on external donations for projects, they were sustainable; the regions maintained recurrent surpluses (based on internal revenue) to cover their recurrent expenditure.
Oil was discovered in 1656 at Oloibiri and in 1966, while the unitary system was still in effect, the Nigerian government declared a budget surplus totaling E18,000,000 with the federal government and the Northern region having spent nearly all that was in their coffers.
The Western region spent the majority of its revenue on recurrent expenditure, particularly certain items within its social policy that prioritised education and health. The fiscal dynamics of the period saw an even split along the economic and social projects, primarily building the dams, bridges and schools that we have served in the intervening years until today.
By 1970, the dynamics of the Nigerian economy changed as oil production rose to 1.08 million barrels per day, heralding a new era of crude oil driven government earnings. Despite the rise in oil production and crude oil prices at $3.407 in 1970, the oil revenue amounted to just 26.2per cent of total federal revenue. This figure soon rose to N1.46 billion in 1972 from the N4.48 million recorded in 1970.
By 1972, oil prices quadrupled. From $4.73 in 1973 to $12.21 per barrel in 1975; this was attributed to the Arab oil crises.
As the curtains closed on 1975, it became evident that Nigeria was willing to let crude oil take the lead, as the contribution of crude oil to the Nigerian economy had ballooned to 77.5%.
The influence of the hitherto insignificant hydrocarbon resource suddenly grew within a decade as global interest in the oil sector continued to climb (Budget2017).
Hence, it is beyond doubt that the Nigerian obsession with oil started with price glut of 1973; as the Arab nations stopped producing, Nigeria’s sweet crude blend fast became the toast of industrialised world.
The oil boom of the 1970s led Nigeria to neglect its strong agricultural and light manufacturing bases in favour of an unhealthy dependence on crude oil. In 2000, oil and gas exports accounted for more than 98% of export earnings and about 83% of federal government revenue.
New oil wealth, the concurrent decline of other economic sectors, and a lurch toward a statist economic model fueled massive migration to the cities and led to increasingly widespread poverty, especially in rural areas. A collapse of basic infrastructure and social services since the early 1980s accompanied this trend. By 2000, Nigeria’s per capita income had plunged to about one-quarter of its mid-1970s high, below the level at independence.
Along with the endemic malaise of Nigeria’s non-oil sectors, the economy continues to witness massive growth of “informal sector” economic activities, estimated by some to be as high as 75% of the total economy (Odularu, 2022).
Starting out in 1960 with approximately 45 million people and an agro-based economy, Nigeria has evolved over the last 56 years into a service-driven economy and has experienced economic recession, civil war, political unrest and other social issues.
The Nigerian economy has moved from the pre-1960 regime consisting of a more agriculturally inclined economy into an oil-reliant economy. Crude oil, thought to be a blessing to Nigeria and an instrument in enhancing the overall strength of the Nigerian economy only weakened other economic sectors and this is not unconnected to the gross mismanagement of the oil sector.
All who had hoped that oil would turn Nigeria into an industrial and prosperous nation were quickly disappointed when the nation became a debtor state by the 1980s.
Currently, 27 of the 36 states struggle to pay salaries following drastic reductions in the Federation Account Allocation Committee (FAAC) disbursements. The current Nigerian economic situation does not come as a surprise; it is the product of years of slavish dependence on oil prices, weak and corrupt institutions and the lack of diversified exports policy to boost foreign exchange earnings.
The recent decline in oil prices has had a ripple effect on the entire economy. The oil sector is not integrated with other sectors in the economy: oil sector workers account for less than 1% of total employment with a significant portion consisting of expatriates and much of the oil supply chain based abroad.
As a result of these dynamics, analysis suggests a decrease of 1% in in GVA in Nigeria oil sector would lead to just a 0.03 per cent decrease in her sectors, a negatively small proportion of oil revenue flows through to real economy.
The federal government spending in areas that would boost the economy – capital expenditure, welfare and public services is dwarfed by current expenditure (80% of which is paid as wages to public sector workers). Several studies indicate that there is little relationship between current expenditure by the government and economic growth.
Nigeria are largely unbanked as the proceeds from crude oil do not find their way into the real economy through the banking sector micro, small and medium sized enterprises officially contribute 14% of Nigeria GDP but account 2% of total bank lending is also minor private credit makes up 12% of GNP compared to 52% of GDP in comparable frontier economics (Nigeria Economy Watch, 2015).
Inadequate funding and investment and agriculture from the oil and gas wealth has left the agricultural sector in lurch and too uncompetitive to promote forward and backward linkage.
This has hindered the much-needed transformation of the economy in the last four decades. Individuals and scholars have advised that the panacea to the Nigerian economic debacle include emphasis on modernised farming and deliberate policy to demystify the oil sector.
There is also a need reduce reliance on foreign goods as the Central Bank should encourage loans for small scale and big businesses to encourage local manufacturers.
This present administration has added to these issues as it can be said that the economic travails of the Nigerian government has worsened in the last few years. Funds earmarked for empowerment has been diverted by different administrators and stored up in foreign banks to the detriment of local banks and the economy. Some international grants, including COVID-19 survival funds were used to promote the businesses of the rich as individuals in the rural areas are deprived of their entitlements.
Corruption has eaten deep into the system of Nigeria and is spreading like a cancer across other facets of country. The government must be deliberate in making practical financial policy that will demystify the oil sector, encourage local manufacturers, small scale businesses, and promote modern agriculture for big and small farm holders.
The Central Bank of Nigeria should support banks but promote financial inclusion campaigns, small loans to small scale businesses to encourage local manufacturers and government functionaries found waiting in their administering of these public funds must be punished by law for we have only one country to live in we cannot let it die.
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