The continuing decline in oil prices since August this year, deriving mainly from the financial meltdown that started in Wall Street has now virtually engulfed the whole world. Since 2004, oil prices witnessed a sustained rise which hit US$100 per barrel, reaching an unprecedented high of US$150 per barrel in August this year. Within the last three months, however, they have plummeted to as low as US$65 per barrel.

For Nigeria dwindling oil prices harbours dire implications. Having solved the debt issue and built healthy foreign reserves exceeding US$60 billion, we have embarked on the track to becoming a self-confident emerging economy. Until March this year, our capital markets were adjudged the most attractive in the world, judged against the measure of Return on Investment (ROI). Clearly, dwindling oil prices in combination with a falling stock market spell major trouble for the economy in the months ahead as falling demand will translate into slow growth for the world economy in general and for countries such as ours which depend on a single commodity for export earnings and budgetary spending.

This is not the first time Nigeria will be experiencing decline in oil prices. The Shagari administration had to grapple with massive collapse in oil prices and it had to implement austerity measures as a way of scaling down expenditure. Successive governments have however learnt how to deal with declining revenue. The oil fiscal rule, first put in place by the Obasanjo administration and sustained by the current administration remains a prudent approach to macroeconomic management. Furthermore, the 2009 budget was delayed so as to incorporate necessary adjustments in light of new global realities.

All of this is aimed at imposing a new culture of financial discipline among the different tiers of government including ministries, departments and agencies. This belt tightening would be most expedient for the federal system as we run it. Expenditure on it needs scaling down. Due to falling prices, pressures on government budgets are critical developments that the administration must confront. This might require re-visiting public sector reforms and the machinery of government should imbibe the paradigm of the New Public Management (NPM), which seeks to apply the best tenets of management science and private enterprise to the operation of government.

The NPM doctrine calls for smaller, faster-moving service delivery by public sector organizations. Such organizations would also have to be increasingly professionalized and kept lean through competition and the requirements of managing for results. The recent announcement that the Budget Office would institute a new framework for performance-based budgeting is a step in the right direction. Still the overall success rests with public sector reforms. Instituting financial prudence therefore is the way to make the economy come out the stronger. A recent report by Merrill Lynch, the global investment bankers, rated the economy as among the top 10 safest economies in the world. Using criteria such as external reserves, ratio of private credit to GDP, ratio of public debt to GDP, external indebtedness and outlay borrowing against assets by commercial banks, Nigeria was rated as the safest economy in the world, ahead of Indonesia, Malaysia and several others. This position derives in large part from the fact of our relative insulation from the global economy.

While we bask in this renewed confidence on the Nigerian economy, it should not give room for complacency whatsoever. Our economy may be safe and our overall fundamentals may look good, but we still face severe structural and institutional bottlenecks. The infrastructure situation remains parlous; crime and social disorder are yet to be wrestled down and corruption remains endemic.

Sadly, the current administration has not come out with a convincing economic blueprint characterized by boldness, determination and panache. The Economic Team that should fashion out a well thought out plan has not been able to do so.