Our underperforming economy should leverage its oil industry capital stock

By Sunny Chuba  Nwachukwu, PhD

The nation’s actual national output has remained a far cry from its potential, when we consider the unutilized capital stock and unemployed labour force. Over the years, since independence, the mismanaged capital stock in the macroeconomic space based on inappropriate policies deployed by the government and its agencies has simply been the problem. The natural resources (both the rich arable land for agriculture, abundant mineral deposits and the acclaimed oil wealth), have always remained underutilized and poorly managed through unreasonable actions and practices without minding their unsustainable negative impact on the economy. This has been the synopsis of the present economic climate and the challenges resulting from it, including abject poverty.

The expected goals of economic growth and development keep manifesting failures in contrast. There are no signs of bringing the inflation rate down. There are no signs of reducing the unemployment rate. The national budget planning is still far from attaining a balanced budget; one expected this to happen with more capital projects, and a completely forsaken petroleum subsidy. Rather, the proposed appropriation for 2022 is already loaded with N900 billion for the subsidy. Calculate and imagine the percentage proportion of this acknowledged ‘wasteful financial outlay’ relative to the total budget estimate for 2022. How then can the economy grow or survive with such prodigal financial leakages? As an imports dependent economy, our expenditure profile on international trade continually records a trade deficit balance at the end of the period whenever reviewed. It has always made foreign exchange demands exert pressure on the economy. All these translate to poor productivity captured and recorded in Nigeria’s economic activities’ profile, from virtually all the known economic sectors; hence, our totally bastardized local currency exchange value!

The most painful of it all is the activities going on in the nation’s oil sector, where the sub-sectors are operating under a style of ‘robbing Peter to pay Paul’. This is still ongoing in the financial sector, and also operational between the upstream (exploration and production for exports) and the downstream (storage and marketing of the refined petroleum products). Here again, the total underutilization of crude oil resources manifests in full public glare, by poor investment decisions and the neglect of capital goods. This underperformance could be modestly ascribed to laziness and procrastination on the part of the top managers of regulatory authorities in the industry, due to the ‘deception’ observed in the oil boom era of the 1970s. But, the nation has to move on!

The present management should be proactive enough to sustainably turn the tide around in favour of the economy. The socioeconomic profile of the macroeconomic space, that is linked to citizens’ standard of living, could be improved upon in national output performance, through the right and effective deployment of capital stock, along with the labour force within the economy, for a better realizable per capita income and GDP growth.

There is still hope rising for economic emancipation, even though the numerous investors within the class bracket of small scale enterprises, positioned along the sectoral value chain operating with insufficient funds for entry into refining operations, could be encouraged in clusters. Recognizing SMEs as the engine block of the economy in the real sector, the cheap entrance into local refining economic activities could be promoted, by wooing them into an improved method of home grown refining technology. These aggregates shall be empowered and exposed for entrepreneurial capacity building workshops, academic training, through research works; for better processing techniques of the existing local technology for products acceptance. A refining module that meets international operational standards, being developed locally, and fabricated by our indigenous foundry engineering facilities; promoted as Nigerian made capital goods under the local content policy. This is a feasible and very bankable strategic concept for greater economic growth.

The national economy could still fill up the gap of lost potential output in our productivity profile once the Directorate for Petroleum Resources (DPR), for instance, gives approval to encourage and promote a cluster of SMEs to venture into local refining of crude oil in the sector. This, if achieved through a legal framework for entry, would of course wipe off the numerous illicit refining processes going on in the creeks of the Niger Delta region.

The official entry through a scientifically certified and ‘cheap equipment cost’ indigenous refining technology, operating with the globally acceptable best practices, will, in addition, tackle two critically disturbing challenges in the economy. It shall reduce in no small measure, the issue of oil theft. It shall also reduce the propensity for environmental pollution resulting from their presently crude methods of processing petroleum products. The greatest benefit shall be an enhanced and improved economic growth rate through increased productive activities in the economy.

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Nwachukwu, a graduate of pure and applied chemistry with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce.

Sunny Chuba Nwachukwu (FICCON, LS)

Onitsha, +2348033182105