Is this how economies and nations collapse?

March 26, 2022by Tope Fasua0

I am afraid. Very afraid. I knew there was always a possibility that I will be left holding the can with my bet that Nigeria was the country to be and that we should stay here and make the most of our country. I always had a fear that we may one day totally screw up this nation. It looks like that time has come.

The Buhari government, through a very deadly combination of incompetence, deception, self-deception, wickedness, arrogance, insularity and ill-luck, has finally pushed us to the very brink. We used to think Nigeria was at the brink. One over-sabi American Ambassador, John Campbell, wrote a book to that effect some years ago. But both he and we knew nothing about being on the brink.

Economic collapse

I sought to get an idea off the internet about what it means for an economy to collapse. The results threw up pointed to when economies go into depression. Apparently, it is a slow process as a country loses grip. It could span over several governments. Nigeria had always been in the throes of collapse, to be honest. The symptoms of economic depression have been with us for a long time, and I have humbly pointed to that fact – that we should stop deceiving ourselves that we went into recession when others did and came out when others did. We were permanently in a depression.

The dictionary says if an economy was to collapse “you would likely lose access to credit. Banks would close. Demand would outstrip the supply of food, gas, and other necessities. If the collapse affected local governments and utilities, then water and electricity might no longer be available”. Another definition of a failed and depressed economy says “a worsening unemployment rate is usually a common sign of an impending economic depression, rising inflation, declining property sales, increasing credit card debt defaults…”

Let us scan our environment. Government supporters will say that our inflation fell from almost 19% back to 15%, but that inflation is climbing again. The Bureau for Statistics has announced that this is partly due to the fuel scarcity that still subsists in many parts of the country. The fuel importation business is killing Nigeria and subsidy, according to the national oil company, could now be as high as N300.

We will do a back-of-the-envelope calculation to see just how much trouble we are in, but suffice to say that for the first time, ever, since we have become an oil-producing nation, we are not only unable to gain from a major disruption in the oil and gas markets, but every price increase seems to be hurting us to the bone. What happened? When did we turn the corner? Have we finally ruined this country, looted her to the bones, used impunity, myopia and utter greed to ruin our children’s future?

Inflation and devaluation

When I looked at inflation since 2015 on some staple items, I found out prices had increased by an average of 300%. This included most food items, which takes the first charge from people’s earnings. Very few Nigerians could have earned 300% more than they did in 2015. Devaluation of currency was a major driver of inflation. I must tell devaluation enthusiasts – most of whom are protected folks who have enough dollars stashed everywhere (bankers, oil workers etc, including our amiable vice president), that at the end of the day what they are proposing is that life will become more hellish for the citizens to the extent that they give up on some imported goods that they used to enjoy.

That is how devaluation has always worked. It results in street protests and unlucky governments being removed therefrom. What I am proposing is not to keep defending the naira, but to be wise about it and to have some mercy for the poor folks in this country. A government may have to take a risk and invest in the productivity of its citizens before devaluing. For a country like Nigeria, almost everything we touch and need – from our food to our clothing, to our housing, to our children’s local education – has huge elements of importation and once we devalue, the prices of these daily staples simple soar, leaving millions of our people in the hole.

Incredibly, the same devaluation/currency floating enthusiasts are also the ones who quarrel when the central bank says it shall not support the importation of items like rice, spaghetti, chicken, eggs, Indian incense, candles, toothpicks, water, bagged cement, paracetamol, malaria drugs, cocoa butter, mosquito coils, tomato paste, soaps, toilet paper, multivitamins, aspirins, beef, fruit juice among others. I think there is a mental block somewhere. I have listed quite a few of the 43 ‘banned’ items. These are things that people with some shame should be able to produce themselves.

In fact, I will support and suggest that more items be placed on that list to save ourselves from the calamity which is bearing upon us. There must be a direct impetus for local industries. We have not done enough. I don’t care that some overfed and lucky guys are so selfish they cannot see further than their noses. They want to be the only ones enjoying those imported luxuries so cheaply if the government throws the borders open. I know that restricting imports encourage smuggling but a bit of sincerity and intelligence in our borders will frustrate smugglers and make the policy work. We must start to produce ourselves. We are simply too lazy and uninspired. We just want to enjoy things with immediacy – things produced by other people. No nation is built that way. Simple. We must get very serious and immediately too. For we are drowning.

Of course, the other indicators of a collapsing nation and economy have been very much with us for decades but have only got worse under Buhari’s sleepwalking leadership. He doesn’t talk to the people. He doesn’t write. When he speaks, he gets angry that people put him under pressure. And so, the people decided to take things into their own hands. We know what has happened to unemployment, and how Nigeria became perhaps the most unsafe country in the world, with the worst reputation of any country on earth. We are aware that illiteracy has notched up, in a time where almost every nation on earth could never contemplate leaving children out of school. Buhari did nothing for the 15 million children who roam Nigeria without education. With that problem, Nigeria mortgaged two national lifetimes, or more.

Poverty capital

The world poverty clock recently recalibrated, incorporating the effects of COVID-19. Nigeria became second to India, with 70 million poor people as against India’s 83 million. But the graph also shows that whereas India is getting people out of poverty on a per-second basis, Nigeria is leading the group of mainly headless African countries where more people are entering extreme poverty on a per-second basis. Most of the red zones are in Africa, with Nigeria leading the pack followed by DR Congo with 67 million people in abject poverty. The 80 million in India is minute compared to their 1.3 billion population, meaning that proportionally, Nigeria and DR Congo lead the poverty pack. What a shame!

China, with more than 1.4 billion people is almost clear of poverty and at the same level as all western nations, with less than 3% of their population in poverty and clear and effective government policies that are working to lift people out daily. In China, even the private sector is playing a significant role in eradicating poverty; a system that Nigeria should have copied if we weren’t possessed by some evil spirit which is egging our leaders to destroy this country.


Chinese loans

And speaking about China, one key indication of our economic failure is the stoppage of Chinese loans. The minister of transport raised the alarm that most of his programmes will stall as a result. We may end up with white elephant, uncompleted or suboptimal projects all over the place. At the Dubai World Expo recently, I saw the buzz that is going on with Angola and Gabon, largely as a result of Chinese investments. Those countries have shown that even as black people they aren’t as reckless and shady as the utterly arrogant Nigerians, who have negative patriotism for their country and would rather loot every farthing in sight.

China, as liberal as it is, is tired of Nigeria’s stupidity and has now clammed up. One of their companies even sued our minister for something or the other. The western nations who have been jealous of China’s incursion, have us back in their grips. And in that grip, nothing productive has come out in the last 40 years. It was only with the brief dalliance with China that we repositioned our airports and built some rail network. The western countries are totally cynical and have become toxic to our socioeconomic development. They will soon appear with conditionalities, including sexual ones. Already, with very little to show for it, Nigeria spends close to 90% of all her earnings to service debts! We are totally cooked!

How crude oil became a liability

A back of the envelop calculation will reveal to us how much trouble we are in with the crude oil sector. If Nigeria produces 1.5 million barrels per day and our own share of production for local consumption is about 400,000 barrels, we could hope that with current spikes in crude prices as a result of the Ukrainian war, our margins could stabilise around at least $80. This is because cost of production is higher in Nigeria than most other oil producing countries in the world. What costs about $5 to produce elsewhere could cost as much as $20 to $30 here. With $80 margin, on 1.1 million barrels, this is $88 million per day, all things being equal.

However, we understand, through the work of the Nigeria Extractive Industry Transparency Initiative (NEITI), that only about 30% of this is due to Nigeria, the remainder (70%) being for the international oil companies. So, at best, we get $26.4 million as extra, per day, or $9.6 billion if we gross out for a year. However, we are said to be enjoying a subsidy of at least N250 per litre of imported petrol. So, the subsidy expense is something like N250 multiplied by at least 60 million litres (daily consumption), which sums up to N15 billion daily, or $36 million (using N415 as official exchange rate). In a year, our subsidy expense is roughly N5.4 trillion or $13 billion. On a net basis, at the current run rate, we gain a windfall of $9.6 billion but pay subsidies of $13 billion. We are in the hole for $3.4 billion on petroleum alone.

But we could unpack the above. No one is sure of our daily petroleum consumption. Even the minister of state for petroleum, Timipre Silva, recently questioned same. In May 2021, we were said to be consuming all of 93 million litres of petrol daily. Doing what exactly? What used to be standardised around 42 million litres daily has however stabilised at 60 million if we are to believe NNPC, the custodians. But the figure could be much lower. There are no saints in that industry. At every step, some people are taking huge advantage of the rest of us. The cost of producing a barrel of crude could also be worked on to be much lower. Insecurity in the oil producing areas add significant to the cost as we are told. Communities have become antsy and always demand more. International oil companies have moved deep sea where they find some peace. But we should also try and block the loopholes they enjoy. I hope the laws around deep-water production – which as per a 1993 degree gave Nigeria almost nothing in terms of royalty etc – has been repealed. Because of Nigeria’s serial breach of joint venture agreements, many of our production partners have now opted for product sharing contracts, which on paper is meant to be sweet for Nigeria as it requires the producer to invest all the money required for production, back out his costs and share the profit with Nigeria. In short, Nigeria thinks she can just sit around and make money. In reality, PSCs have never worked for Nigeria, not in 1975 when we had the first one with Addax, not in 1993 under Abacha, and certainly not today. The IOCs have decided that we don’t deserve much and so they manage to do the calculations and give Nigeria a huge, fat nothing! Of course, sitting in plush offices and basking in airs of opulence, those controlling that industry cannot see clearly what is going on. We are finished.

To add to this, Tony Elumelu, one of Nigeria’s billionaires, had cause to take on the Nigerian government on twitter over the mess in the oil sector recently. He took the government to the cleaners over incompetence and corruption and mentioned that 90% of Nigeria’s crude oil is stolen. A whole 90%? But we should really listen when someone like Tony speaks. He said the minister of state, Silva, is not being honest about investments not coming into the industry too. Word on the street says that the oil license Tony recently bought turned out to be 419 as the cabal in that sector ensures he only gets 1% of what is on the paper. A smart guy has been outsmarted and that could be painful.

Electiciy sector collapse

We have the same serious issue with our electricity sector. As I type, almost the whole country suffers from rolling power failure. The national grid has collapsed for the umpteenth time in a week. The power generating companies (GENCOs) have complained that they are being owed trillions of naira. The distribution companies too. The minister of finance assures the world that the government has removed subsidies in this area and indeed it has. I pay about N120,000 for electricity each month, despite reliance on an estate power generator. The deregulation regime is killing us. Deregulation is seen as opportunity to slit people’s throats by the Nigerian capitalist and his friends in and out of government.

In the oil sector, diesel now sells for N800 because of deregulation which prices in the inefficiency and corruption and dumps everything (including fraud by the seller), on the consumers. Aviation companies are about to shut down due to the prohibitive cost of jet fuel. In every sector, and especially the petroleum and electricity sectors, we suffer the results of our laziness, lack of initiative and archaic ways of reasoning. We suffer for not having ramped up our capability to do things ourselves, rather living soft lives and expecting other people to do the work and hand over the money to us.

Petrol scarcity and diesel price hikes

For three weeks now, there has been fuel scarcity as a result of the surge in global crude prices. Importing is no longer tenable. The refineries are no longer workable even if those working there still get full salaries and promotions. It is looking like the days of permanent scarcity is back again. Abuja is one of the worst hit. Alongside petrol scarcity is diesel price hike. That segment of the market has since been deregulated. But prices has now risen from N150, in 2015 when Buhari came in, to N800 during the week, shutting down many companies. Proponents of deregulation should also consider this case study. What should we do when prices simply run away? With the deregulation of everything, are we setting ourselves up for grief? Or can deregulation also come with curbs to rein it in when it loses its way? Does deregulation have to mean that a few smart folks take advantage of poor folks?

No unity, no progress

And we also suffer from a refusal to cooperate. We are not only disunited along ethnic and religious lines – almost unbridgeably – but the people are opposed to the government. Businesses don’t only refuse to pay taxes, but the organized private sector through bodies like NACCIMA, LCCI, NECA and the rest have become strong opponents to any taxes or attempt by a struggling (though truly dishonest) government to reposition and get some more money to run our affairs. They have decided to oppose as a matter of policy, any attempt for the government to tinker with sources of revenue.

When they recently opposed the sugar tax and went to town with strong words, I had cause to take note of this anomaly. The OPS opposes any increases in VAT, or excise duty, or indeed any taxes at all. Property owners vehemently oppose the payment of property taxes. People who enjoy luxuries – yacht owners, Rolls Royce owners, and those young boys who spend N10,000,000 on single nights at clubs – vehemently refuse to pay luxury tax. But if the government of the day was more honest and engaging perhaps it will wring some concessions out of these guys. Otherwise we will never get out of this canyon that we dug for ourselves.

A doomed currency?

The naira is also wasted. All the attempts to protect its value has been met with frustration. Nigerians are just a people with very externalized views of the world. Many or most Nigerians believe their country is rubbish even those who are really doing well and have cause for cheer. They believe every other country is better than theirs and governments in recent years have done nothing to change this rhetoric. We would need an orator for a leader, helped by many in his team, to try and turn this situation around. The thin black market is fueled daily by the hypocrisy and sabotage from everywhere including people in government and bankers. Simple policies around travel allowances are frustrated and corruption continues to provide ready fuel for the black market.

Today a margin of close to N200 exists between official and black market rates and the black market is more accessible to the common man. There is every indication, especially as Nigeria misses a critical opportunity to cash in on current crude price spike, that the naira may tumble again. It must be said that in 1973, 1990, 2006, and 2011 when crude prices spiked as a result of wars and global economic crises, Nigeria greatly benefited even if we wasted the monies. With hindsight we did better in the Gowon years when we built some infrastructures and in the Yar’Adua years when our reserved peaked at $62 billion. Today, something has broken, and higher crude prices equates more suffering for the people. Our unwillingness to do hard things and help ourselves has caught up with us.

A David’s ark to the rescue

In all this, we have a church pastor trying to build an ark (yes, you heard right), for $200 million or a paltry N116 billion only. While the going was good, the limit of our intelligence is to spend on self-glorification and also set aside something substantial and worthy for God – as a bribe, so that God in his infinite mercies will not consider our roles in ruining our nation and making the world a more miserable place for our fellow citizens. Perhaps the most expensive buildings here are churches and a few mosques.

A lot of our cashflows went in that direction, and ironically, into things on the very direct opposite of godliness, like gambling, alcohol, philandering, and other pleasures of life. We are still what some colonialists said we are back then; given to pleasure, with no apprehension for the future. Perhaps the pastor has seen a vision, and a great flood is coming to sweep us all away. But how many Nigerians can fit into that ark? And will it accommodate all animal species to start Nigeria afresh after the floods?

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