Perhaps, the most interesting word I looked up last week is the word, repurpose. It is a transitive verb defined by the Collins Dictionary as “to find a new purpose for” something.It is a rarely used word, according to that dictionary. Yet that is the word that should pop up when we discuss the Nigerian economy. It is an economy due for repurposing.
But how can one discuss repurposing without broaching the root word, purpose? Similarly, we cannot discuss repurposing the Nigerian economy when we have not identified its current purpose. The same dictionary gives three interesting definitions with examples that speak to our topic but let’s stick to the third, which says, Purpose is the feeling of having a definite aim and of being determined to achieve it.”
In line with that definition, Nigeria’s economic purpose is to produce enough crude oil to grow the economy and achieve development and prosperity for all. Conceived in the 1970s, this purpose helped the economy achieve great heights including the building of roads, bridges, government owned enterprises and generous welfare packages including the famous Udoji awards among others.
Oil brought tremendous liquidity for the economy so much so that leaders boasted that they had a problem on how to spend the money. But it wasn’t long before there was a shock. There have been several others since but the most recent plunged the economy into a five-quarter recession. The economy though has turned the bend, recovery remains fragile.
Oil price volatility should have given enough signs to managers of the economy that a boon bust cycle was not good for the economy and so should have pointed to a repurposing of the economy, what loosely is referred to as diversification. Oil prices surged to near $80 this week, sending signals that oil dependent economies like Nigeria should brace up for windfalls but that same oil plunged the economy into recession in 2016 when prices dropped below $24.
Perhaps a more compelling reason to move away from oil is the so called resource curse or the Dutch Disease. According to Wikipedia, the resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources (like fossil fuels and certain minerals), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources”. Along with Nigeria, Sudan and Angola have suffered the resource curse.
This curse is evident when Nigeria, the world’s 13th largest oil producer is lagging Singapore for example with little or no natural resource. Nigeria has a per capita GDP of $1,648.26 billion and HDI ranking of 152 out of 188 countries while Singapore has per capita GDP of US$61,766 and HDI of 5 out of 188 countries and territories. There are several other resource poor countries that are doing far better than Nigeria, including Japan and Italy.
There is yet another clear reason to repurpose the economy, a contemporary one; the world is moving away from fossil fuel. India has announced a deadline to get rid of petrol powered cars just as Japan says it’s moving towards water for fuelling automobiles and machines. That’s where the world is going but Nigeria is still committing billions of dollars to exploration even in the most unlikely of places.
So for reasons of oil price volatility, the resource curse and the global shift away from fossil fuel, all oil purposed economies need to repurpose like the UAE, specifically, Dubai. Speaking of Dubai, they are the inspiration for this article. I had read an online magazine, Arabian Business where I saw the following quote, “Now the region is getting repurposed by its aspiration to grow beyond fossil fuel”. According to the publication, by repurposing, “Oil production, which once accounted for 50 percent of Dubai’s gross domestic product, contributes less than 1 percent to GDP today”.
Their determination is such that “Energy officials in 2016 said renewable energy will account for 25 percent of the emirate’s needs in 12 years”. The renewable percentage will rise to 44 percent by 2050, according to Sheikh Mohammad Bin Rashid Al Maktoum, vice president and prime minister of the UAE and ruler of Dubai.
In line with the move towards renewable energy and making Dubai a green economy, there was massive expansion of infrastructure. This strategy was stubbornly pursued even when oil prices declined. The result as we noted last week, is that Dubai has transformed into the Mideast hub for finance, information technology, real estate, shipping and even flowers”, according to Arabian Business.
In contrast to Dubai, Venezuela stayed content with oil revenues accounting for more than 50 percent of the country’s GDP and roughly 95 percent of total exports. So when oil prices started faltering in 2014, so did the Venezuelan economy. One source says that in 2015, close to 45 percent of Venezuelans are unable to afford food at times. In 2018, this figure rose to 79 percent, one of the highest rates in the world.
But the question remains, if Nigeria were to repurpose, where should the focus be in other not to attract the Venezuela situation or worse? We will discuss these in future sessions here on the Economic Corridor.