By
Abubakar Atiku Nuhu-Koko
aanuhukoko@yahoo.com
The expected free fall of crude oil price
in the international crude oil market came so quick, sudden and took
those entrusted with managing the affairs of the Nigerian economy and by
extension, the overall wellbeing of the Nigerian citizenry by surprise and
ill-prepared (i.e. snoozing). For several months the writing was on the
wall for all to see of what could imminently happen regarding the
out-of-control spiralling crude oil price in the international market.
Nigeria went partying and sharing of the booty from the "Excess" or crude
oil windfall revenues.
Yet, the nation's economic technocrats keep on telling and reassuring the
highly sceptical Nigerian public that we are not in danger zone and in
fact, we are insulated and immune to what is going on in the rest of the
world as if we are not organically linked to the globalised economy; i.e.,
we are an idealised island economy. Moreover, Nigeria is presently facing
massive flight of capital and the exodus of dollars from the economy. At
last, the Naira has been officially devalued! And also, business mogul
Aliko Dangote can tell us the truth; with his planned ambitious expansion
of his cement manufacturing plants already as a result of the current
world financial meltdown.
We need, however, to constantly remind our policymakers and economic
management technocrats that the Nigerian economy has always been directly
linked to the global economy even for the obvious fact that the Nigerian
budget has perennially depended on the projected price of highly volatile
(initially agricultural produce up to the 1970s) oil. Industrial or real
sector economic activities have been largely dependent on the enclave and
volatile oil sector since 1960s to date. Probably the current
administration's seven-point agenda will change the sad situation.
Yet, before the November 2008 crash of crude oil price, Nigeria's economic
managers went ahead to prepare the 2009 budget with great optimism that
the crude oil price windfall is forever - repeating a silly mistake the
country made some 30 years ago. For example, the initial budget 2009 bench
mark for crude oil price was $62.50 per barrel. It was subsequently pruned
down until the current 'realistic' bench mark crude oil price of $45 per
barrel was adopted for the 2009 federal budget proposal and based on the
following additional key assumptions: Oil production of 2.292mbpd; GDP
growth rate of 8.9% and inflation rate of 8.2%.
It is from the previous experiences of oil price nosedives and their
impacts on national budgets that I wish to draw some parallels with what
is happening presently in the international crude oil market, the 2009
national budget adjustment in Nigeria and the likely impact on public and
private funding of the ongoing new and planned additional new power
projects for the country.
The aggregate expenditure for the 2009 federal budget is probably
N2.87trillion (or more); with N796.7 billion earmarked for Capital
Expenditure. About 91% of the capital vote has been earmarked to five key
priority sectors, of which power sector is one of them. For example, of
the N361.2billion capital allocations earmarked for the five critical
infrastructures, N88.5billion has been earmarked as capital allocations
for Power sector. Key projects to be funded in the Power sector by the
2009 Budget include: N3.5billion for the Mambilla Hydro-electric power
generation project, N21.5billion for other Generation projects (including
N6.5billion for the completion of the Niger Delta Power Holding Company's
NIPP projects), N32billion for Transmission projects, and N19.25billion
for Distribution projects.
An important question to ask is: How far will the 2009 budget lead the
country in the long and arduous journey of revamping the parlous power
sector? Furthermore, I cannot locate in the 2009 budget proposal how much
contribution is expected from the private sector under the professed and
proclaimed public partnership with the private sector in revamping of the
comatose power sector (i.e. Public Private Partnership - PPP mantra). This
aspect is not emphasized or clearly stated in the 2009 budget proposal so
far.
Other very important issues not captured in the 2009 budget proposal in
relation to the power sector rehabilitation and expansion include the
following: a) there is complete silence and zero capital allocation to
harnessing and development of renewable energy sources to complement the
existing traditional oil and gas based thermal power generation plants
(beside the proposed Mambila hydroelectric dam). b) Zero capital
allocation to demand-side management and consumption efficiency strategies
to augment and balance the supply-side of the equation and c) Complete
silence and zero capital allocation for rural electricity supply.
These three key issues are very crucial to any medium and long term
sustainable electricity supply for the country and the march to the
20-20-20 national aspiration. For example, enhancing energy consumption
efficiency is tantamount to: "Doing More with Less" according to industry
practice. Therefore, energy efficiency is an important energy policy which
satisfies all the key policy goals of:
a) Increasing the competitiveness of the electricity businesses (i.e.
generation and distribution, for example). b) Providing a highly cost
effective way of tackling the environmental impact of energy use including
the emission of carbon dioxide. c) Increasing the level of energy security
for the country. d) Providing affordable energy services for the most
disadvantaged in society and e) Help in bringing down the high cost of
supply expansion programme amidst paucity of available funds in a
recessionary period.
Therefore, if these missing items are incorporated into the 2009 budget
proposal, they may help also in reducing the substantial deficit of N1.09
trillion or 37 per cent of the budget that must be financed by borrowing,
spending cuts and other fiscal restraints or austerity measures. Probably
an early budget review and followed with Supplementary appropriation will
bridge these identified gaps in the 2009 federal budget as presented to
the National Assembly for appropriation by Mr. President.
Abubakar Atiku Nuhu-Koko
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