Recession: Not so, Mr Vice President

The Vice President and the head of the Federal Government’s Economic Management Team (EMT), Prof Yemi Osinbajo, was recently quoted as saying: “If we did not have vandalism in the Niger Delta as we are currently suffering, we will not have this recession today.” Mr Vice President, we disagree. We need to keep reminding our leaders that Nigeria exists in a global village. Like all export-dependent nations, conditions in the world economy determine our fate; we are not total masters of our own destiny. Consequently, whenever the global economy shrinks, as it is doing right now, the countries suffering most are those that are export-dependent like Nigeria – which has long been recognised as the most vulnerable of all the oil-exporting nations.

When the global price of crude oil started dropping from $120 per barrel in 2013 to $45-50 today, it dragged down the economies of every oil-exporter. Today, only those nations which had saved when the price was high are able to draw from their Sovereign Wealth Fund (SWF) to reduce the impact of recession. Despite that, from Saudi Arabia,  the largest exporter to Venezuela, all oil producers are in recession. Surely, Professor Osinbajo cannot attribute Saudi recession to vandalisation. Furthermore, our predicament, which is shared by Venezuela among oil producers, stems from the fact that crude oil still accounts for over 80 per cent of our export revenue. All the others – non-oil exports, Diaspora funds, services and grants — contribute less than twenty. Thus, the sharp drop in oil prices was bound to create at least a mild recession eventually. Our failure to diversify the economy since oil became our primary revenue earner in the 1970s is also a major element contributing to the current recession. Incidentally, Buhari was the Head of State from 1984 to 1985, when the price of crude also plummeted to close to $12 per barrel from over $30 per barrel. There was no vandalisation of pipelines then, but the recession continued for more than eight years until oil prices picked up again in 1994. The fact is that if vandalisation stops and Nigeria attempts to export 2.2 million barrels per day, global crude prices will actually drop because a glut will result from it. Global demand for Nigeria’s crude is not as inelastic as Osinbajo thinks it is. Buhari needs to seriously consider the suggestion that he needs to bring in qualified economic technocrats to help the EMT to lead us out of this paralysing recession.

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