How Nigeria May Collapse in 2015 By Rudolf Ogoo Okonkwo

Forget the urban legend that there is a
United States CIA’s plot to fulfill their
purported prediction that Nigeria would
cease to exist in 2015. If Nigeria collapses in 2015,
the country to be held responsible, besides Nigeria
itself, is Saudi Arabia.

Before you raise your hands in protest, it won’t be
for the reason you think.
Nigeria has a very high ranking on all the lists of
the most-unstable countries in the world. Last
month, a UK-based risk analysis firm,
Maplecroft, grouped Nigeria with the worst ten in
Africa. Heading the team of most-unstable nations
are Somalia and Sudan. Others are South
Sudan, Democratic Republic of Congo, Central
African Republic, Libya and Egypt. The ranking
looked at conflict, terrorism and political pressure.
In another list compiled by Foreign Policy Group
and Fund for Peace in 2013, Nigeria was ranked
16th in the world with a 100.7 points on the failed
state index. The index indicators are factors like
demographic pressure, human rights, uneven
development, economic decline, delegitimization of
the state, public service, security apparatus,
factionalized elite and others.
The good news is that Nigeria is also on the list of
the highest growing economies in the world. Some
of the richest people in the world are Nigerians,
too. So, all things being equal, the economic factor
will balance out the instability factor and allow
Nigeria to soldier on beyond 2015. In fact, that is
how Nigeria has been soldiering on, defying all
predictions of doom. When Nigeria last visited the
precipice, which was during the civil war, it was
able to pull back and survive, thanks to the oil boom
that followed.
In his speech during the declaration of his interest
for a second term, President Goodluck Jonathan
touted Nigeria’s economic growth as one of his
accomplishments. At 7% growth per year, Nigeria
is one of the top performing economies in the world.
The president gloated, “Nigerian economy is on the
right path.”
Nigerian economy is not on the right path. In fact,
it is in distress. Even the eternal optimist, the
Minister of Finance, Mrs. Ngozi Okonjo-
Iweala, is beginning to sound the alarm bell.
Here is how we got to where we are:
You must have heard of the declining crude oil
price. Unlike past fluctuations in price of crude oil,
this one is so bad that everyone is going to feel the
effect. If the austerity measures announced by Mrs.
Ngozi Okonjo-Iweala have not affected you
directly, the recent devaluation of the Naira would.
All these are happening because Saudi Arabia is
locked in a mortal fight to destroy the US crude oil
production. Experts believe that the United States,
with its 11 million barrels production a day this
summer, became the world’s largest oil producer,
beating the former number one, Saudi Arabia.
Most of America’s new oil is produced through
fracking, an exploration system that extracts oil
from shale rock using the process known as
hydraulic fracturing or fracking. This process of
splitting rocks using high-pressure liquid is
expensive and is believed to be profitable as long as
crude oil price is high. The thinking in Saudi
Arabia is that allowing crude oil price to fall below
$60 a barrel will knock off the US shale
production.
At the last meeting of the Organisation of
Petroleum Exporting Countries, OPEC, in
Vienna, the cartel failed to do what is needed to
increase price – that is, cut the production quota of
each of the 12-member countries. While
Venezuela, Nigeria, Iran, Iraq, and Ecuador
pushed for cut in production, Saudi Arabia,
Qatar, Kuwait, and the UAE opted for retention
of the current production quota. That failure led to
a further drop in price of crude oil to a five-year
low. At $72 per barrel of Brent crude, Nigeria’s
oil is now selling below Nigeria’s 2014 budget
benchmark of $77.5 per barrel.
What this means is that Nigeria will find a way to
make up the short fall in revenue. Technically,
nothing will be going into the Excess Crude
Account until oil price recovers. And whatever
was there has been all but depleted. Initially,
Nigeria raided its External Reserve to support its
expenditures but that move was not sustainable.
That led to the decision to devalue the Naira and
reduce pressure on the Central Bank to keep
burning dollars in foreign reserve in support of the
Naira.
On the American side, the fall in oil price has been
a foreign policy political weapon. America’s lack of
dependence on foreign oil means that it doesn’t have
to worry about every little crisis that flares up in
the Middle East. In other ways, the fall in oil
price means that countries like Russia, Venezuela,
Iran and Syria are under economic pressure.
That helps America’s foreign policy entanglements
with these countries. Iran is being forced to stay on
the table to discuss its unclear ambition by a
combination of sanctions and falling oil price.
Russia has lost over $100 billion from falling crude
oil price and is under severe economic pressure that
it is moderating its ambitions in Ukraine and other
parts of Eastern Europe. In Syria, ISIS that
has been financing its campaign of terror from illicit
oil sell is now having difficulty selling oil in a world
market that is glutted. For Venezuela, America
doesn’t have to worry about the radical leftist
government in the country when declining revenue
is forcing the government to deal with a growing
number of disaffected citizens.
Given these economic and political conditions, there
is little interest in America or Saudi Arabia to see
an increase in oil price soon. What this means is
that Nigeria must brace itself for a crude oil price
that could fall below $60 a barrel. In trying to
calm the fear of Nigerians, Mrs. Okonjo-Iweala
assured Nigerians that the country would withstand
crude oil price of $60 a barrel.
But what about a $20 dollar a barrel price of
crude? Will Nigeria still stand or will it collapse?
If by next year the price of crude oil falls to $25.42
a barrel that it was in May 1999 when President
Olusegun Obasanjo’s started his first term as
president, Nigeria may collapse. Here is why.
Lets begin with Nigeria’s budget. Nigeria’s budget
can be divided into four parts: statutory transfers,
debts services, recurrent expenditure and capital
expenditure. In 2014, Nigeria budgeted N4.64
trillion. This is divided as follows: N399.7 bn or
8.61% for statutory transfer, N712 bn or 15.34& for
debt service, N2.43 trillion or 52.35% for recurrent
expenditure and N1.1 trillion or 23.7% for capital
expenditure. The United Nations Development
Programme recommends 70% of the budget to
Capital Expenditure and 30% to Recurrent
Expenditure.
In the last ten years, Nigeria’s budget allocation has
not come any close to the UNDP’s
recommendation. The best we have performed in
the last ten years was in 2010 when Recurrent
Expenditure got 56.77% while Capital
Expenditure got 40.23%. Actionaid Country
director, Hussaine Abdu, lamented about Nigeria’s
inability to produce a progressive budget in line
with UNDP recommendation. “No country
develops under such provisions,” he said, “because
what grows a country or builds the economy is the
amount of investments you are making on
infrastructure and other structural issues that you
require to strengthen your economy.”
Looking at what the government could do with the
current economic austerity, the budget would be a
good place to start. With debt service taking up
15.34% of the budget, recurrent expenditure at
52.35% and statutory transfer at 8.61%, the only
place that the government has room to maneuver
without having to fire workers or upset
bureaucrats, is in capital expenditure. So instead of
increasing it, the government may be forced to
decrease it further, never mind the recent non-
budgeted ordering of N9.6 bn cooking stoves.
In the last four years, crude oil price has hovered
around $100 a barrel. The Nigerian government
has been swimming in petrol dollars. Looking at
government figures, economists determined that
Nigeria's total crude oil sell came to about $470B
in all 5 years of President Jonathan's
administration and $489B for Yaradua, Obasanjo,
Abdusalami, Abacha administrations combined.
Adjusted for inflation, the numbers are $488.8B for
Jonathan and $594B Yaradua, Obasanjo,
Abdusalami, Abacha combined. The boom is
reflected in the budgets, too. In 2004, Nigeria’s
budget was N1.79 trillion. In the last year of
Obasanjo’s administration(2007), Nigeria budgeted
N2.26 trillion. But the lowest budget in the last 5
years of Jonathan’s administration was N4.2
trillion.
The additional money did not just come from the
revenue from crude oil. Nigeria’s gas production
within this same period has tripled. In his
declaration speech, President Jonathan reported
that, “in terms of gas supply, we have grown from
less than 500 million cubic feet per day, 4 years
ago, to about 1.5 billion cubic feet per day
currently. Our goal is to attain 4 billion cubic feet
per day, over the next 4 years.”
These increases in revenue had not translated into a
stable economy that could withstand a shock as
normal as a change in oil price. In fact, as more
money came, Nigeria became more unstable.
If there is a worst time for Nigeria’s economy to
be in distress, it is now. With the insurgency in the
Northern Nigeria, each day causing more havoc,
creating more victims, more destructions and more
distrust in the economy, Nigeria is potentially
coming face to face with that perfect storm it has
avoided for decades.
If Nigeria collapses in 2015, don’t look anywhere
else for the blame; put the blame where it belongs-
squarely at the feet of Nigeria. In the last 15 years
of democracy and relative peace, Nigeria had a
chance to build a strong economic and political base.
But like all the other opportunities the nation has
had, we squandered it. For so long, Nigeria has
been in denial about the unsustainability of the
corruption within its system. In time of boom, the
nation can endure the waste, but in time of
austerity, corruption will eat up what remains of
the nation.
In January of 2012, a presidential committee on
public service reform discovered that top
government officials in Nigeria take home N1.126
trillion a year in salaries and allowances – out of a
national budget of N4.6 trillion. These public
officers constitute just 0.013 per cent of Nigeria’s
population. They include 108 senators who each
make over $1.7m a year. That alone is $183.4
million (N28 billion). Then the 360 members of the
House of Representatives each takes home over
$1.2 million, which amounts to $432 million
(N65bn). Again, each state governor collects an
average of N200 million naira a month just as
security vote. In a year, they each get N2.4 billion
naira. So, our 36 governors take home N87 billion
naira on security votes alone every year. Add our
38 ministers and ministers of state, 100 plus heads of
federal and state agencies, over 432 state
commissioners, 774 local government area chairmen
or caretakers, almost 10,000 councilors and you will
understand where the N1.126 trillion goes.
Nigeria had a chance to trim down this N1.126
trillion waste but the leadership of the country, who
are the beneficiaries, did not have the will-power
to do so. Like the N260 billion naira spent from
2009 to 2013 on ex-Niger Delta militants, these
wastes are nothing but hush money paid to postpone
doing the right and difficult things needed to birth a
modern sociopolitical structure that is fair and
balanced, a structure that is sustainable in the long
run.
Sadly, the day of reckoning is here. The
consequence of Nigeria’s self-denial is staring us all
in the face.
A ministry of finance committee led by Mr. Aigboje
Aig-Imoukhuede looked at the subsidy claims of
2011 and discovered that the Federal Government
had overpaid importers and marketers of petrol by a
whopping N430 billion naira. In 2012, Ngozi
Okonjo-Iweala proudly announced that Jonathan’s
government had recovered N29 billion naira from
oil marketers out of N234 billion certified as stolen.
Whatever happened to the rest of the stolen money?
Have we stopped paying subsidies two years after?
Of course, not. Whatever happened to the promise
to retool and repair our refineries? How much did
we waste trying to repair our refineries? How
much are we paying in subsidies today? Shouldn’t
the subsidies we are still paying be coming down
now that oil price is falling?
You will think that those handling our economy will
be answering these questions publicly. But no, they
are not. We are beneath them.
The subsidy scam is part of the elaborate corruption
industry that feeds the mammoth Nigerian
unsustainable structure. It has become so entangled
in the fabric of the nation that a half-hearted
attempt at disentanglement will result in chaos.
What could not be done in a time of economic boom
cannot be done in a time of economic crisis. A lot
of people in Nigeria have been fed fat by
corruption. In crunch time, as the nation tightens
its belt, the corruption industry will morph and
move and when pushed hard will marinate the
nation and serve the country for the forces of
destruction to eat up.
Since 2009 crude oil thieves have been increasing
the amount of Nigeria’s oil that they steal.
According to the 2012 Ribadu Report, crude oil
thieves in 2011 stole over 100,000 barrels a day.
That is over $3.6 billion dollars a year. Some
foreign sources put the figure of oil theft at 250,000
barrels a day. Mrs. Okonjo-Iweala in 2012 told
the Vanguard newspaper that the loss to oil theft
could be up to $12 billion that year. If Nigeria had
closed avenues for oil theft, that oil could be shipped
abroad and refined for Nigerian use, allowing the
citizens to enjoy low fuel cost like other oil
producing countries when they pay for just the cost
of shipping and refining.
Meanwhile, as oil price falls, the oil thieves are not
going to go out of business. Instead, they need to
steal more to make up for the losses due to falling
price. With their children in the most expensive
schools abroad, dozens of girlfriends to show the
good things in life and with private jets to maintain,
the oil thieves and all the other looters of the
Nigerian economy, are going to do whatever is
necessary to maintain their lifestyles.
In the political arena, the 2015 election is shaping
up to pitch two candidates, like none that we have
ever seen, against each other. Oh, yeah, they
probably have met each other in a presidential
election before, but they have been transformed in
some unique ways. In past elections, we used to
have two distinct options that fitted into our overall
narrative, which was that “the best is impossible and
the worst never happens.” A foreign newspaper
once described the two candidates offered to
Nigerian electorates thus: “one is a fool surrounded
by idiots while the other is an idiot surrounded by
fools.” What is shaping up for 2015 is an
unpalatable option for a weary nation. The option
for 2015 is simple: If Nigeria votes for candidate
A, Nigeria is finished. If we vote for candidate B,
Nigeria is finished. That’s a no-win situation for a
country of 170 million people.
The scenarios are clear enough to those of us who
care to disturb our so-called beautiful dream.
The one thing that Jonathan administration can do
to reverse the impending collapse is to acknowledge
in words and in deeds that what is not sustainable is
really not sustainable. And that includes this
government itself.

By
RUDOLF OGOO OKONKWO