Nigeria’s recession status was formally confirmed yesterday when the National Bureau of Statistics released its economic quarterly report for the second quarter of the year. Like most of its oil-producing counterparts around the world, Nigeria’s economy was hit hard by the global fall in oil price. The country’s second quarter GDP fell by more than 2 percent after it had fallen by 0.4 percent in the first quarter.
Norway, another oil-producing country announced its second quarterly report indicating an economic contraction in GDP like Nigeria, but that is where the comparison ends. Norway has a sovereign wealth fund, a special reserve set up decades ago to counter situations like the global fall in oil price. Norway’s sovereign wealth fund stands at $888 billion as at when its 2016 second quarterly report was released. It intends to borrow $9 billion from it to counter this global fall in oil price. A huge percent of the money in Norway’s wealth fund is gotten from oil, just as is with Nigeria’s sovereign wealth fund.
In contrast to Norway’s long established wealth fund, the history of Nigeria’s wealth is relatively short. Established in 2011 after it was upgraded from the Excess Crude Account by the past administration, the wealth fund has just $1.07 billion left in it as at May 2016. To put things in perspective, Nigeria produces more oil in a day than Norway but has only $1.07 billion saved from oil revenue since 1960, owing to the mismanagement of successive governments. Even at its highest, $67 billion in 2007, Nigeria’s overall gross reserves is not up to 10 percent of Norway’s sovereign wealth fund. One might say Norway is wealthy, and not a part of OPEC, hence is not restricted by OPEC’s strict guidelines. But Abacha and Babangida’s “foreign reserves” indicates that Nigeria has just as much oil wealth.
The question now is why has the same system that encouraged a lack of vision, a saving culture, continued even after the military regime? The answer to that question will most likely be corruption. True. But corruption is not the only answer; the dearth of good leaders is another answer. This is quite obvious when attention is paid to Nigeria’s saving culture, or rather, the lack of it. At times of record oil price when past governments should have saved for a rainy day, they didn’t. This indicates that the system which encourages reckless spending has long been in place.
Since its discovery, Nigeria has been drunk on the ‘black gold.’ The present leadership promised diversification, but it actually seem to be waiting for oil prices to rise again. It’s a strange addiction, one that should be the subject of independent research studies. If, and when Nigeria eventually achieves diversification, would there be a better saving culture? Will our foreign reserves undergo any significant change when they are funded by other export goods and services? Probably not.
Nigeria’s problem is not just a corrupt system; a visionless leadership has also always been a problem. And unfortunately, like others before it, this administration’s lack of vision is becoming evident daily.
Source: Ventures Africa