PEOPLE & POLITICS

Oil Price Hike – The Worst is Yet to Come

By

Mohammed Haruna

Over 17 years ago, The Economist(May 3,1986) published a 42-page survey on Nigeria which it titled “After the ball”. Nigerians, the paper said in the survey, were thrown a petro-dollar windfall in the early eighties, but they had no idea how to catch it. Instead, Nigerians, said the paper, went on a binge and blew their windfall. Worse still, it said, Nigerians contracted a huge (debt) hangover in the process.

The wine merchants, said the paper, apparently tongue-in-cheek, foolishly forgot to collect their money in advance and by the time the debt collectors came, they found “the bottles and glasses mostly broken or stolen by the guests, and the soldiers who came in to keep order shooting each other”.

Seventeen years after the survey, history has clearly been repeating itself. Four years ago after General Abdulsalami Abubakar handed over power to an elected President Olusegun Obasanjo and thus brought an end to over 16 years of military rule, Nigerians were once again offered another petro-dollar windfall. Oil price which had plunged to below $10 per barrel quickly rose to double that amount even before President Obasanjo had fully settled on his chair. For the next four years it averaged $30 per barrel. The broad picture clearly was that Obasanjo collected more petro-dollar in four years than President Shehu Shagari before him collected also in four years.

Just as was the case 17 years ago, it seems Nigerians once again have blown their good oil fortune – the difference(s) this time being that (1) far fewer Nigerians got invited to the ball than in the eighties and (2) it does not seem as if there are any soldiers in sight to keep order. But even if there are, coup-making has fallen into so much disfavour, the soldiers are more likely to shoot at each other – and at the rest of us – than keep order.

When Obasanjo launched his presidential campaign on February 13, he told a World Press Conference how messy the country was when he took over from the soldiers. ”The entire gamut of public infrastructure”, he lamented, “had fallen into a state of pitiable decadence. Electricity supply was epileptic and water supply erratic, if not non-existent. Roads were in a state of total disrepair while the rail system, hitherto the bedrock of our transportation system especially in the 1960s and 1970s, had become utterly dysfunctional… Equally astounding was the persistent scarcity of petroleum products, even with Nigeria’s status as the sixth largest producer of oil”.

This, said the president, was the point at which he came in. And, faced with this rather daunting scenario, he said, “we quickly confronted head-on, the hydra-headed problems in order to arrest the situation which had characterised our national life over the years. And we speak today of marked improvements in many sectors”. (emphasis mine).

With due respect to the president, the vast majority of Nigerians would disagree with his assessment of “marked improvements” in many sectors. Indeed, for most Nigerians if there has been anything “marked” about the last four years, it has been the deterioration of things from the point at which the president came in. Considering the hundreds of millions of dollars government says it has spent in the last four years in reviving our infrastructure, it is obvious, except for someone who chooses to live in the world of make-belief, that our electricity supply is now worse than epileptic, our water supply has remained erratic and our roads, even by the president’s own admission the other day, in worse than total disrepair.

Obviously, few Nigerians ever got invited to the big ball of the last four years. One impeccable witness to this fact is retired Justice Adewale Thompson, the elderly Secretary-General of the Yoruba Council of Elders, and arguably the staunchest supporter of Obasanjo today. Recently, Thompson had cause to lament the profligacy going on in Abuja in an interview with The Comet (March 24, 2003). “There are so many people who are hungry”, he said, “and yet at Abuja, they are squandering money as if it is gari”.

However, even though most Nigerians never even heard about the ball, never mind partake in it, it is they who are now being asked to foot the bills for the pills that will cure the nation of its hangover.

Nigerians have now been presented with the first bill by the president even before he has fully settled down for his second and last (?) term. This bill has come in the shape of 65% jump in the price of petroleum products, petrol in particular. The president has said the jump is necessary to remove a 250 million Naira subsidy on the price of petrol, which he says has gone mostly into the pockets, not of ordinary consumers, but those of the rich, mostly big time, smugglers.

Inevitably this bill has led to an economically and socially debilitating strike by labour which says it is fighting for the poor and disadvantaged Nigerian. Many Nigerians doubt the sincerity of the labour chief, Adams Oshiomhole, in calling out workers to go on strike, especially given his ringing endorsement of the last presidential election on behalf of labour. Whether he is sincere or not, a compromise figure between government’s N40 per litre and labour’s N32 per litre seems inevitable. In other words, the dice is loaded in favour of government’s insistence on an increase in the price of petroleum products.

Objectionable as most Nigerians think the oil price increase is, they ought to know, if they already don’t, that the worst is yet to come. This is for at least three reasons. First, as any drunkard would tell you, there is no getting over a hangover without a headache – and the heavier the drinking bout, the mightier the hangover and, in turn, the more painful the headache. Needless to say the binge the nation went on in the last four years was a pretty big one, even though few Nigerians got invited to it.

Second, it is obvious from the president’s economic team comprising ministers-in-waiting like Nasiru El-Rufai of the privatisation fame and Dr. Ngozi Okonjo-Iweala, the lady from the world bank, that we should expect increasing withdrawal of subsidies from other areas besides petroleum products.

Third, and most importantly, there is the international context of the oil industry itself. The most critical element in this context is obviously the United States, as the world’s only remaining superpower for now. Seventeen yeas ago, the U.S. was not the only world superpower and so could not hope to get away with blue murder as has become the case since the collapse of the Soviet Union. With the advent of the car in the United States one hundred years ago and with oil having the monopoly of energy for transportation, the country became increasingly addicted to cheap oil. This dictated that it must control, if not own, the regions and countries that had the fortune (or is it misfortune?) of sitting on vast supplies of oil, more specifically the Middle-East.

This region, according to experts, sits on the largest reserve of oil in the world, led by Saudi Arabia and Iraq. Not only does the region sit on the world’s largest reserve, its oil wells are also the most productive. According to Time (May 19, 2003), quoting some oil experts, whereas it costs $10 to bring out one barrel of oil from the ground in United States, it costs only $2.5 to do so in Saudi Arabia and even less – below $1.00 – to do so in Iraq. According to the same magazine, it takes about 800 United States wells to produce as much oil as one typical Iraqi well.

As the world’s biggest economy, the U.S., according to The Economist’s Pocket World in Figures (2002), consumes 18.5 million barrels of oil daily which is over three times that of Japan (5.6 million), the next biggest consumer. Of the 18.5 million the U.S. consumes daily, it produces only 7.76 million, next to Saudi’s which is 8.59 million, as the world’s current No. 1 producer.

With such a huge economy and an incredible military machine that in itself needs enormous amounts of oil to move around, coupled with the facts (1) that it sits on a fast dwindling domestic oil reserve, and (2) that after September 11, the Saudis were (and are) increasingly looking more unreliable and increasingly “irrational”, it is not surprising that the U.S. has apparently decided to rely more on crude force than on the good old mixture of carrots and sticks to procure the stuff.

Of course, it has not been able to completely jettison the good old mixture of sticks and carrots. Herein lies the significance of President George Bushe’s forthcoming flying visit to Nigeria. The country may not be in the same league with Saudi and Iraq in terms of its oil reserve and the productivity and cheapness of its oil. However, it is the 13^th (not the sixth as President Obasanjo says) oil producer, according to the Pocket World in Figures. Besides, it is one of the leading exporters to the U.S., and, has the largest and most avowedly radical Muslim population in Africa and in much of the world.

With the U.S. and its poodle, the United Kingdom, unable to provide any evidence of the existence of weapons of mass destruction (WMD) in Iraq which it used to justify its war on that hapless country, several weeks after they declared the war over, it has become increasingly obvious that their main objective for the war was Iraq ‘s huge and cheap oil. Unfortunately for both countries, recent attacks on their forces resulting in more casualties than they suffered during the actual war – and counting – is threatening to turn Iraq into a grave yard of their imperialist ambitions. This will invariably make oil producing countries outside the Middle-East like Nigeria and Angola, even more important to the U.S as sources of cheap oil.

It is not surprising therefore that Bush says, strike or no strike against Obasanjo’s oil price like, he will still be visiting Nigeria. As the 13^th biggest oil producer, Nigeria is perhaps the weakest link in the OPEC and is therefore probably the prime candidate for busting or weakening OPEC as a great hindrance to cheap oil which America needs to sustain its rather profligate political economy and its huge military machine.

With a president who, in the last four years, has shown more interest in being a world statesman than in the less glamourous job of fixing the country’s poor economy and infrastructure, it should not surprise anyone if Nigeria chooses to please America first, and itself a poor second, as Bush, whose family is into the oil business, big time, comes visiting.

At any rate, with the U.S. and U.K. sitting pretty on Iraqi oil, even if somewhat uneasily, the chances that oil may be selling at well below $10 per barrel in the not too distant future are pretty high. Cheap oil obviously means increasing budget deficit for Nigeria which depends on oil for most of its public spending. This, in turn, means even greater suffering for Nigerians in the long run.

With the kind of incompetence, corruption and mismanagement we saw and experienced in our leadership’s handling of the country’s oil windfall of the last four years, nothing short of a miracle can save Nigerians from suffering even greater hardship in the next four years. The current increase in the price of oil, in other words, is the beginning of tougher times ahead for most Nigerians. And so help us God.