Effect of Paris climate change deal on Nigeria’s political economy
The train of reduced hydrocarbon dependence by erstwhile major buyers of Nigerian crude oil has since left the station, says PROF. CHINEDUM NWAJIUBA. He argued that Nigeria cannot afford to pretend that things will remain the same, and advocated for urgent economic restructuring
THE United Nations Conference of Parties (COP21) should be an eye opener and trigger inner reflections and new actions by the Nigeria political class. Irrespective of what the agreements contain, and whether or not they are implemented, one simple thing stands out clear. The simple thing is that the serious countries of the world have resolved to end the era of energy dependence on especially petroleum, a resource which empowers countries which in the perspective of the G8 and the OECD are in parts of the world with heavy geopolitical risks. To this extent, the serious push for ending or in the least minimizing use of fossils is beyond the need to reduce Carbon emissions and mitigate Climate Change.
What gives my country, Nigeria, visibility at the global stage is neither her size nor huge and rapidly growing population, but that we are a major petroleum exporting country. Our huge and growing population of course presents an attractive market for those intending to export all manner of products, including China (that is also setting up new Coal plants). The attraction is enhanced by the purchasing power of the country which sources over 80% of its foreign exchange earnings from petroleum exports. Regardless of the commercial attraction, Nigeria remains one of the countries regarded as being of huge geopolitical risk. Perhaps even more of a risk than Nigeria as source of hydrocarbon supply is the Middle East.
How seriously the United States, for instance, views the risk emanating from the principal export commodity of countries like Nigeria is seen in President Obama’s open declaration early in his presidency that by the end of his tenure, the United States would scarcely be in a position to be held hostage ever again by the international Oil market. Today, that vision of Obama for the United States has considerably been realized. We are likely to see Europe following suit in minimizing their own dependence, just as Japan announced within the period of the COP21 that she is commencing the building of new coal plants with better efficiency and less carbon emissions. This trajectory has grave implications for Nigeria and it is critical that the political class in Nigeria follow, listen and plan with these developments in mind.
They mean it when they say it
In case there are Nigerians who may think it is a joke, I will cite a few examples of challenges faced by the G8 and OECD at least since the 1970s and how they were decisively addressed. These include:
What will Europe do with ageing vehicles? I believe this was a front page cover of Time or Newsweek Magazine sometime in the 1970s. With economic prosperity that followed the end of the Second World War, and the rapid expansion in personal vehicles, ageing cars became a problem. Then recycling was not much in the social and economic consciousness.
One solution that emerged was that following the Structural Adjustment Era of the mid-1980s, many young men from Africa found themselves in Europe, doing mostly jobs the Europeans would rather not do. Most of their earnings were used to buy ageing vehicles (Tokunbo) which were exported to Africa. In the same period cases of infertility, asthma, cancers, etc. increased rapidly in our part of the world. Medical records in hospitals, import records in Ports and borders across Nigeria tend to support this scenario. Europe dealt with her ageing vehicles, and today has developed substantial capacities for recycling.
We have seen the huge ICT transformation, especially the internet since President Clinton announced what he called the information super highway. This in addition to the GSM has created a new world unknown a few years ago.
After the financial crisis in 2008, one obvious shift was to fuel efficient vehicles. Germany for instance commenced a programme of trade-in of less efficient vehicles for more efficient vehicles. Today that programme has significantly succeeded. In the same period it has become very fashionable for Nigerians and also other Africans to acquire energy-guzzling SUVs of all types. From our politicians, businessmen/women, clergy, to even lecturers, people are having more than one second-hand SUV imported, sometimes preferably from the United States (American Spec!). How can a people advance without a thinking elite?
In the last half a decade, Germany, the economic power house of Europe has advanced rapidly on renewables. Today, Germany has re-engineered household energy consumption, reaching close to 50% on renewables, especially solar, while Norway has achieved similar levels on wind energy. In some cases some houses generate solar energy that is sold to other consumers. We can expect Southern European countries with more solar radiation in a few years to become very important in this. Note also the significant investments in solar capacities in Morocco (on the African continent but with European temperament).
The long-term consequence of these for Nigeria is decline in relevance. Changing relevance of different parts of the world and organizations is something we need to reflect on.
Three Key meetings happened simultaneously – Relevance?
As the COP 21 was going on in Paris two other important meetings were holding. One was the OPEC ministers meeting, December 4 in Vienna, and the other was the Chinese meeting with African Presidents in Johannesburg. Of these three, by all estimates the least important was the OPEC ministers meeting.
There are persons who ordinarily should know, but did not know that OPEC Ministers were meeting. Rewind to twenty years before now, or even ten years ago. An OPEC Ministers meeting was an important world event. This time it meant little. Just as the meeting ended Brent crude price fell to less than $40 per barrel, the lowest in seven years (the year Obama came to office). With that attitude to the OPEC meeting, is there little doubt that the Organization does not hold the relevance and clout of the past? In fact, some persons are saying that the G8/OECD may want oil prices to go down to $20 per Barrel.
If that happens, what is the implication for Nigeria? Nigeria’s political class should be aware that the drum beats have changed, and so must the dance steps change. The ‘culture‘ of monthly Federation Account meeting in Abuja to share whatever SHELL and the others bring, in order to pay Civil servants, teachers, pensioners, and do other things is gradually becoming a matter for the history books. Governors asking for bailout should know that it is not sustainable. Nigeria requires more decisive decisions and actions that acknowledge that the party is over. We shall come to required decisive actions.
The other meeting of African presidents in Johannesburg had nearly all African Presidents physically present. That perhaps was a better attendance record than an African Union (AU) meeting. What was at stake? Simply, Chinese money. China is the new big man in town. China has the cash. China is the number two in size, but a major creditor to the number one (the United States). Note that just before the COP21, the World Bank/IMF announced that the Chinese Yuan has become one of the currencies for international exchange.
The financial buoyancy of the Chinese is a key unsaid factor in the G8/OECD insisting in renegotiating the principle of common but differentiated responsibilities at the COP21. Their argument is that China and some of the BRICS may claim to be undeveloped, but they are also currently major polluters and most importantly have the cash to bring to the table.
At the Johannesburg meeting, the Chinese did it the way a Nigerian big man will do it. They announced the huge figures to support African counties and an elated President Mugabe could not hide his excitement when he said, that is what we have been expecting our former colonizers to do for Arica. Now, what did China do to move up the ladder? That is what we should learn from and not just expect Chinese cash. We should produce/manufacture, consume what we produce/manufacture, and export.
My People, the party is over
My greatest wish is that the political class in Nigeria be equipped to interpret and understand the new/emerging (emerged) world and ensure that Nigeria is positively relevant. But we first need to understand that the party is over.
The Owambe is over.
With about 170 million persons to feed, most of whom have no skills relevant to the contemporary world we are a major geopolitical risk. I like the way Our President Buhari put it to the US and Europe – bring the $14billion to reflate Lake Chad so we can revive livelihood in that area and stop them matching to Europe. I believe it is the kind of thing Europe will understand. Note also that if Europe stops the migrants from the Middle East and the migrants chose to march southwards into the savanna of West Africa, no person, government or organization has the capacity to stop them. We have been unable to stop an illegitimate Boko Haram. Please may God not let this thought get into the heads of the migrants heading to Europe.
Truth be told, Nigeria already has enough challenges for one country. The way things are, with significant amounts shared monthly, the extant insecurity and projected insecurity for Nigeria is serious. Yet there are more worries to come. A few of them include:
The high rate of population growth. It is projected that at current growth rates, by 2050 (35 years from now) we shall be more populated than the United States (over 400 million persons). Should we not start even using moral suasion and re-orientation/attitude change to discourage people having too many children?
Huge youth population where every young man wants to be a millionaire and every young girl wants to dress/look like a model/beauty queen. Where else on earth do we have this kind of national aspiration and goal? This is neither a worthy nor attainable goal. We have to embark on creative reorientation and attitudinal change.
A Nigerian asked me at the COP21 that if Morocco is hosting COP22 next year after haven hosted the COP in the past, and Durban hosted COP17, why not Nigeria. Another Nigerian asked if we saw security men at the airports saying to us on arrival “anything for the boys?” or “Oga your boys are here sir”. And, come to think of it, if the event had held in Nigeria, I can imagine how aggressively female undergraduates of our tertiary institutions would have invaded the meeting venue and adjoining facilities. For COP18 in Doha, we saw lots of young East Africans who were in Doha to do part-time job during the COP. Some of them were engaged as ushers, guides etc. Would they have tried asking for Nigerian students?
Please don’t lynch me in the name of patriotism, but we have to acknowledge the way things are. Where is even the venue to host the COP in Nigeria, and where are the airports, transport facilities, security and others. After years of oil boom, our infrastructure is too far behind. It is time for the Nigeria elites and political class to take our country serious and we also need to embark on massive cultural re-orientation of our people.
The skills gap is widening between us and even countries in Africa. We need new paradigms of how to return quality education and skills development in Nigeria. A huge population with the current and projected difficult public finance scenario (projections show that global oil demand will remain low at current parameters through 2016) may require what other countries who passed through similar situations did – export manpower.
Except for a small proportion of young persons who find their way out of the country for postgraduate studies, most other young persons are being prepared for life in the 2020s with life tools of the 1970s, minus acceptable values. This spells trouble for the future. We have many persons with degrees whose skills capabilities limit them to Okada riders and phone recharge card sellers.
They have no clue what else to do and of course have little opportunities. Many of them even as private school teachers at primary school level are a wonder to behold. We need to declare a national emergency in education in Nigeria, and perhaps fundamentally re-orientate and redesign the entire sector. We need to agree we do not have enough teachers as most of what we have now as teachers are not it. No school system can rise above the capacity of the teaching stock.
We need to consume what we produce. Even when due to membership of the World Trade Organization (WTO) we cannot ban Imports, we need to mobilize the NGOs/CSOs to help reorient Nigerians through massive campaigns, and leadership by example etc., to consume Nigerian products. This is one real way to address our financial challenges, and generate employment, reduce poverty, and insecurity. This is of urgent national importance. We need a massive campaign to convince our people to farm and produce and not idle away in the name of looking for jobs in cities. We need to replace an ageing farming population, and we need to have a massive youth farm programme supported financially and technically.
We need to re-order the structure and conduct of transportation in Nigeria. Reviving the railways should be a major priority. Johannesburg (South Africa), Rabat and Marrakesh (Morocco), and now Addis Ababa (Ethiopia) have trams in the cities. Why is Nigeria, the largest economy in Africa left behind? We need, as a matter of urgent National action, working trains linking the major routes with the heaviest volume of transport of people and goods in Nigeria. See the regular tanker menace in Apapa in Lagos. Must we move all that fuel from the Wharf through congested Lagos by tankers?
Why not Rails? Why are we even importing fuels?
Can we have a massive programme on renewables in Nigeria and at least develop solar efficient “bush lamps” for rural households? The technology exists and we can do with this what Coca-Cola or even MTN has done in a short period. Let each villager have a small lamp that is solar powered. With economy of scale, the unit price falls.
Some Decisive Actions for Public Sector Finance
With the financial challenges confronting the central and state governments in Nigeria, some persons suggest we focus on taxation. That is right if we can find creative ways of taxing the rich more and close the gap as is the case in the Nordic countries. However, in one state I know the Local Governments have been mandated to seize goats, fowls and palm oil from villagers as a way to raise IGR. Good luck. Now consider these:
Would it make sense for the central and state governments to agree that current financial structures are not sustainable and restructure the country entirely returning to manageable structures requiring less bureaucracy? The answer is no. No privileged group willingly gives up privileges. Pharaoh did not. Another prayer from me: may what happened to Pharaoh not happen to the privileged class/groups in Nigeria,
Can we declare a national emergency and convene a meeting of the public and private sectors and decide to make a national sacrifice to say, for instance, all wages, emoluments, earnings etc. for both the private and public sectors be reduced by half? The answer will be No. There will be losers, and better economists than me who will rather we reflate by putting more money into circulation, as a stimulus, or because of the traditional argument that capital will be advantaged over labour. Those ones may lynch me.
Can we agree with former CBN Governor Sanusi to devalue the Naira. Perhaps lets agree that oil prices have fallen by a third and so let us devalue by 100 per cent (for instance), getting the Dollar to N300? No. Nigerians are already saying No. We saw that in the 1980s and we have nothing else to export except the Oil which is internationally priced, and so devaluation has no real benefit, but will bring high cost of imported industrial goods and inflation.
But Nigeria is a clever country! One of my friends will say this. We have not said we are devaluing the Naira, but depreciating the Naira, and so since early this year we have officially moved from about N160 to the Dollar to N197. In the unofficial market, it is over N250 as I write. Is there still round-tripping going on, or is the Naira simply showing its true colour? I don’t know.
What about this option?
It seems to me the situation is getting to what it was before the oil boom commenced in the early 1970s. What therefore should the central and state governments do? I focus on the states. I suggest the state governments look at how the regions were financed. How did the Eastern, Midwestern, Western and Northern regions seek funds in that era? What commodities did they produce and export to earn foreign exchange – given the configuration of demand and supply in the world at the time? Oil palm, Rubber, Cocoa, Groundnuts etc., Marketing Boards, exports, etc.!
Many of our states are bigger than some African Countries that have no oil and are still functioning. Hence, states and clusters of states need to delve into modern Nigerian history and attempt the question, “what is the oil palm of the 2010s and 2020s? What will represent the cocoa, cotton, groundnuts, etc of the 1950s in the 2020s – and how do we go about increasing production and expropriation for public good?”
The best time to plant a tree, they say, is ten years ago; and the next best time to plant the same tree is today. The train of reduced hydrocarbon dependence by erstwhile major buyers of Nigerian crude oil has since left the station. We cannot afford to pretend that things will remain the same. It is already late in the day. There is an urgent need to begin planting those trees of economic restructuring that were not planted decades ago today. Fortunately, we have some history to learn from. It is time to dust up Okparanomics, Osadebenomics, Akintolanomics, and Bellonomics textbooks and manuals. Feeding bottle federalism is not sustainable. Welcome to a new Nigeria.
• Nwajiuba was one of Nigeria’s Negotiators at COP 21 and Professor of Agricultural Economics, Imo State University Owerri,
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