Naira Devaluation & Falling Oil Prices: A Marshall Plan For Nigeria
Feb 17, 2016 – Naira Devaluation & Falling Oil Prices: A Marshall Plan For Nigeria
A Marshall Plan for Nigeria, an article by Tony Ogunlowo
At the end of the Second World War, with much of Europe in ruins and struggling to cope with the aftermath of six years of conflict, under the Marshall Plan of 1948 America gave $13 billion dollars to Western European countries to help rebuild their countries. It wasn’t just a major financial package designed to help re-build major infrastructure, factories etc. destroyed during the war but also to make Europe prosperous again, dropping trade barriers using new business procedures, preventing the spread of communism and bringing in new improved working conditions.
Nigeria is in the same predicament right now. Economically in ruins, not by wars or conflict but of years and years of mismanagement which has seen politicians squandering billions and billions of dollars of public funds intended for capital projects.
The current planned National Integrated Infrastructure Master Plan (NIIMP) which was approved by the Federal Executive Council (FEC) in 2014 aims to raise the country’s stock of infrastructure to at least 70% of GDP by 2043.
All good in theory but where’s the money going to come from considering the implementation of phase one alone will cost at least 165 US billion dollars.
With the current falling oil prices the current government is in trouble; budget obligations may not be fulfilled, austerity measures will have to be introduced, inflation will rise and growth will fall seriously jeopardizing any future large scale projects.
Right now emphasis should not be on short term borrowing to plug the holes in the budget deficit. This will only be a temporary solution to an ongoing problem. Money is needed, not only to make up the shortfall but also for the overhaul of major capital infrastructure such as oil refineries, power stations and Federal roads which are currently crumbling to pieces or falling into neglect due to lack of maintenance and upgrading.
Bringing in cost-cutting measures in an attempt to diversify much needed funds will not work. There are too many needy sectors. The Structural Adjustment Programme, SAP, devised by the Babangida administration is a clear indication that such programmes will not work on a long time basis.
Nobody will give us a ‘Marshall-Plan-style’ grant because its believed we’re rich enough and don’t need handouts.What is needed is a very big loan from a foreign financial institution or country. It will have to be very long term, say 25 to 50 years, at a fixed rate. It will be solely for the capital projects that will benefit the country on the long run.
Such a loan, even though foreign lenders might demand it, might prevent the official devaluation of the Naira. With the value of the currency intact, capital flight (-pulling money out of the country) will be greatly minimized and will also encourage foreign investors to invest.
The advent of the Buhari administration has seen a renewed confidence, by foreign concerns, in Nigeria’s ability to pick itself up from problems created by previous administrations. The recent rise in offered help to fight growing problems such as Boko Haram and corruption is a clear indication of this.
Whilst foreign lenders are not actually queuing up to lend us money due to our past record of mismanagement and kleptomania, countries like Britain and America, would not hesitate to put a bailout package together if properly sought. Again reassurances will have to be made that the money lent will go directly to the intended projects and not end up in some kleptomaniac politician’s offshore account. We are all aware of the Obama arms embargo placed on Nigeria previously, under the Leahy Act, due to our dismal human rights record and pilfering. So if they do decide to bail us out they will be watching us like hawks ready to pull the plug if we default.
Oil is plentiful in the world now with more and more countries producing crude oil. Prices will continue to drop as the market stagnates and Nigeria needs to diversify into areas such as agriculture to provide a secondary income to oil. Currently agriculture only accounts for 20.24% of the GDP as of 2014.
It is another area where Nigeria can earn substantial income. India earns a fortune for being the IT outsourcing country in the world providing crucial IT back-up for firms in America and Europe. If the antics of the ‘Yahoo, Yahoo boys’ are anything to go by we have the raw talent but lack the infrastructure. Thousands of Nigerian students graduate each year in one IT field or another with no outlet or employment for their skills leaving them to turn to mischief e.g 419, scamming etc. A major investment in telecommunications and power stations is needed.
Secondary sources of income generation need to be sought to supplement the income from oil and the necessary infrastructure put in place. All this costs money, not the kind of money currently being earned from oil sales, but a huge capital injection of funds that can only come from a Marshall-Plan-style foreign bailout.
February 17, 2016 at 6:12 AM
I was not understanded wetin this persin was say at all.
February 17, 2016 at 6:39 AM
It seems more than it does not, that crude oil is the bane of Nigeria. And so if the fall in oil prices is the factor that will jolt this Giant of Africa from its slumber, then let the price nosedive until oil becomes as cheap as water.
Nigeria has everything it takes to be like Finland(ranked the best place to be born in the world). But being destracted by the quick gains in crude oil, and the corruption that seems to flow in our bloodstream, the nation now shares parity with countries like Somalia and Pakistan.
Several companies are now laying off their workers. SPDC alone announced 10,000 to be axed. With millions of people rendered redundant across the globe, who knows what they would mutate into?
Diversification is the only answer to this. Nigeria, as a part of the measures the government intends to tackle this problem with, should first make good access roads and steady power supply available to its citizenry: those are the two major things I know that encourages enterpreneurship.
February 17, 2016 at 7:25 AM
Pls Buhari should do something fast concerning this Naira drop
February 17, 2016 at 8:07 AM
The war that faced Nigeria as predicament e.g corruption, mismanagement, wrong leaders and bad adviser to the leaders so it will be OK if Nigeria get kind of opportunity Europe got from America
February 17, 2016 at 9:20 AM
Ok. I think this will help.
February 17, 2016 at 2:50 PM
From the article above, let me take it from the last paragraph that we really need secondary source of income generation in Nigeria. Prior to independence era, our chief sources of income were Cocoa, Groundnuts, Rubber,Cotton, and Palm kernel. As soon as we discovered oil that was the end to the production of our agricultural products. It is very absurd that the south east Asia countries who knew nothing about palm kernel are the one producing palm kernel and sell it back to us in form of prepackaged indomie food that we consume. After oil discovery in early 60’s Nigerians have become lazy and oil dependent. I don’t know what we going to do if we don’t have this oil again. Im not going to agree with some ignoramus who think Nigeria’s oil will be forever. Anything can happen at any time and that is why we need a secondary source of income. Any smart nation will never depend on one source of income. Even with our oil income, our leadership has failed to reserve some part of our surplus for future use. They began stealing our money and destroying our treasury. When the oil market was about $100 per barrel, Jonathan administration did nothing to keep anything in our escrow reserve instead he was busy squandering the money. Now the world price of oil has fallen significantly and make it so difficult for us to get back on our feet. To some uninformed individuals who do not know why president Buhari is going after these thieves, it is because our treasury is empty and we need some money to jumpstart our economy. What do you expect him to do? watching the thieves to walk away with our billion of dollars while other Nigerians are dying in poverty?. If you watch Buhari closely you can see the difference between him and jonathan i.e who want to run the Country and who only came to steal. The white people have predicted that even if they gave us independence we can not make good use of it, is the prediction coming to fruition or not? pardon my typo.
February 17, 2016 at 9:54 PM
President Buhari, Gov.of Nigeria Central Bank, and nobody can stop our dear naira from further depreciation b/c the international markets force is far greater than any wishful thinking.The supply of crude oil has exceeded it demand worldwide for the first time like never before seen in the history of crude oil. Russian, Iran, Venezuela, Saudi, Nigerian and other major oil exporter economies are crumbling before them. But Russian economy is a producing economy that export military equipments and other domestic products to the rest of the world, meaning it can survive this drastic oil drop. Saudi, Qutar, Emirates, and few smart nations were able to weather this difficult times b/c they kept trillions of dollars from oil surplus from 2010 to 2014 to manage and maintain their economies. But in Nigeria, over $900 billions realized from surplus for the same period were embezzled, mismanaged, and launderEd or looted to foreign bank accounts by our wicked, unpatriotic, and visionless politicians at all levels of government. I fully agree with great Rev.Father Mbaka that our criminal politicians removed every vital organs from Nigeria, and left PMB with Nigerian skeleton to work on. Massive investment in Agriculture by government, private investors, and millions of our jobless youths is the only way out of this sudden hardship. Is going to be wrong, but PMB admistration will beginning to progress by 2017, but he will be a very successful president before the 2018. He will be so successful as our president that we will beg him to contest for 2nd term. But we must pray for him and all our elected leaders at all levels of government for wisdom and great understandING from above to lead us through this difficult time. There is a lesson to learn from this crude oil drop. We must always safe when we have plenty.
February 18, 2016 at 10:26 AM
The Naira is so weak..chai
February 20, 2016 at 1:24 AM
MAKE UNA REMEMBER SAY NA SO SO TRAVEL MOHAMED BUHARI OUR NOW PRESIDENT TRAVEL DURING HIS REGIME AS MILITARY IN 1983-1985 WITHOUT ANY ACHIEVEMENT, IN FACT WHO WE KNEW AS A PRESIDENT THEN WAS IDIAGBON (MAY HIS SOUL REST IN PEACE) BUHARI DON START AGAIN TO DEY WAKA, MAKE UNA REMIND HIM OOO, ITS 1 YEAR AND NOW IN POWER NOTHING DEY HAPPEN.
AM SURE NO SABI WETIN EM DEY DU THERE, YES IS DOING GUD JOB BY COMBATING CORRUPTIONS, I THINK THE OFFICE OF EFFC WILL SUIT HIM THAN PRESIDENCY.
THIS NA MY OPINION
February 20, 2016 at 7:58 AM
Say Baba, now we know who the real president is between buhari and Goodluck, we are blaming oil fall prices when our president is hardly in Nigeria, you idiots you are seeking for a change and you get it so stop complaining, soon naira will be history and we will be using US Dollars in Nigeria.
February 20, 2016 at 8:01 AM
This is the best change Nigeria ever had, hahahahahahahahahahahaha 1$ IS N400
February 20, 2016 at 8:11 AM
Buhari is an id**t he said he will make Goodluck regime ungovernable? now is his own better? hahahahaha what goes around comes around, we don’t talk of boko harams anymore but we are talking about dollars and naira rate, we want change and this is the greatest one, it will be easier now for boko harams to pay their workers, at least their three thousand dollers will give them over a million. what a great man Buhari the traveler is.