These are troubling times for the Nigerian economy. Our revenue base is caving in under the stress of falling price of oil in the international market. Due to the drastic and persistent nature of this fall from the highs of $115 in June of this year, it is my considered view that we can’t continue to give the impression that it is business as usual. The fact that the free fall in the international oil market price has seen it loosing over 25% of early June highs means that correspondingly our economy has lost over 25% of budget revenue estimates of the period as a result. More ominously, the fact that it continues to fall unabated means that it is not getting better yet and therefore we must now apply the breaks and act fast before they get out of hand.

Our economy cannot fully withstand the current trend of the current oil market. It is not our fault that the market is volatile but is will be our fault if we don’t learn from the mistakes of previous price falls especially 2008 to plan timeously on how to ease the pain for our people. This is not the time to paint over the rust, discussions and the choices we make now must be based on economics not politics.

The current position to put the benchmark for oil price at $78 is inconsistent with the economic trend and attitude of the managers of our economy, which has shown in the past to be very wary of over optimistic benchmark assumptions settling rather for the more prudent conservative base.

The above table clearly shows a clear departure from the trend over the years to a very acute tendency in 2015 proposed budget MTEF paper. This MOF/Executive position is hard to justify on any economic modeling or recent policy positions. One is left with the impression that this benchmark is not a product of any economic model but a political induced decision that does not paint the correct picture nor aligns itself to the 2015 forecast. So government should go back and come up with a realistic benchmark, which in my view cannot be above the lower 70’s. There is no better time to give full disclosure of the state of the economy and tell the Nigerian people the truth. We have a problem in our hands but not one that cannot be surmounted with the right political will. 

WHY THE URGENT NEED FOR ACTION

Aside the issue of the benchmark, the country needs a contingency plan in place now.

There is no country leadership that can continue to act like business as usual where it faces over 25% drop in its annual revenues.

Our foreign reserves have depleted considerably from the heights it had achieved of over $58b to the $39bn we have now. What this means is that we have small room to maneuver than we had in 2008.

Since most of this cost will be borne by the capital side of expenditure there is a likelihood that the implication will be in job losses, unemployment, social imbalance etc. none of the impact will be positive.

The implication of the state of our financial affairs and the reality if the truth is to be told by government is that there will be little or no capital project to be implemented in 2015 except things change drastically. But before Nigerians are called upon to make sacrifices government must show the will to tackle the monumental revenue leakages in our finances. These leakages have the capacity to significantly reduce the level of impact from this economic situation. It is unacceptable for these leakages to continue whilst Nigerians are called to make sacrifice.

These leakages, which are known to all but have persisted, now need to be tackled urgently.

1.   Crude oil theft.

The continuous loss of over 200,000- 300,000 barrels per day of crude must be stopped. Whether the perpetrators are powerful or highly connected is no longer an acceptable excuse why government with the full capacity of the law and instrument of state cohesion hasn’t been able to fully address this menace.

2.  The other issue is the vexed issue of the Kerosene Subsidy, which is costing the economy over N300b annually. This issue, which must be disconnected with the fuel subsidy, is one that government can easily deal with. There is incontrovertible evidence that the scheme feeds only the pocket of those who import Kerosene and does not get to the ordinary citizen. At this stage of our fiscal situation, this presents a good opportunity to exit the scheme to fund other critical sectors that can augment the revenue base.

3. Another area that the government could work to review would be the Crude SWAP program. Many reports including the NEITI report have indicted this NNPC program and called for a review of the program, as it is not adding value to the economy. There is no better time to stop the program. It’s wasteful and inefficient.

4. Government will have to revisit its recent decision to grant some oil companies Pioneer Status. This has become necessary as the nation can ill afford this due to the fiscal implications on the revenues of the country especially collectible tax in the face of these new realities.

What is required now is the right political will and leadership from government. Government should as a matter of national importance convene a meeting of the National Economic Council to proffer a collective and workable decision on the national contingency and viable benchmark oil price. There is no better time than now for government to do what is right and save Nigerians from the foreseeable hardship ahead.

Senator Bukola Saraki (Kwara Central, APC) is Chairman Senate Committee on Environment and member Senate Committee on Finance