Taye Obateru Jos
11 January 2009
Mr. Ezekiel Gomos, who recently bagged a national honour of Officer of the Federal Republic (OFR), in this interview, speaks on what must be done to cushion the effects of falling oil prices.
THE global economic meltdown would seem to have finally caught up with us with the falling oil prices...?
Ezekiel Gomos, OFR,...no longer business as usual
Yes, 2008 ended on a very tough note for Nigeria's economy because, finally, the global economic crisis began to impact on our economy in many ways that Nigerians will now feel its impact. First, the global economic crisis led to a drop in the demand for oil worldwide and that affected the price. Crude oil, which was selling for $130 p/b for most part of the third quarter, suddenly dropped to less than $40 p/b in the last three months of the year and that is continuing into 2009. So, obviously, what we'll be seeing is that our revenue as a nation could drop significantly and that would affect government's capacity to execute its mandate in terms of projects and programmes.
What is the implication of this vis-a-viz the falling exchange rate of the naira against the dollar and other foreign currencies?
The drop in foreign exchange earning has also affected available funds on the foreign market, leading to a drop in the foreign exchange available in the economy. A dollar now exchanges for about N140 from the N116 it used to exchange for and, obviously, making it more expensive to buy the dollar. This will translate to higher prices, higher cost of doing business, especially businesses that have foreign content, and in Nigeria, most businesses have foreign content. So we are going to see increase in the price of goods and services and that will translate into high inflation, by and large. Therefore, Nigerians may discover that 2009 is going to be a very tough year for the country unless, of course, the price of oil goes up or our production volume increases.
What do you foresee as the backlash of the falling prices on the 2009 budget?
Already, the price of crude oil has dropped below what was in the budget. The budget was $45 p/b but now we are selling at $37 p/b (at the time of interview). So, this is already close to about $10 below what was projected. Unless we dip into our reserves, which is dangerous, we have to cut our coat according to our cloth. So, as I said, 2009 is going to be a tough year for business and the economy generally.
Does the scenario not say something about the country's over-dependence on oil revenue?
It has continuously emphasized the need for alternative sources of revenue other than oil. Of course, it's not today that this is being said. Government has constantly paid lip service to the need to diversify revenue sources but that has not been achieved for many obvious reasons. Even liquefied natural gas, of which we have a huge deposit and which cost of extraction is not as high as oil and which demand is continuing to expand in the world because it's cleaner than oil. Yet, we've not focused on that as a major source, but only exploit it along with oil. So, unless and until we pay serious attention to those strategies that would reduce our dependence on oil, we'll continue to see our economy as being a victim of oil price changes.
What steps do you think should be taken by government?
First and foremost, there is need for serious education for people to know that it cannot be business as usual. I think I like the fact that the Federal Government has already issued circulars to federal ministries, curtailing certain expenses and this should also be done in the states. It's no longer business as usual; we have to tighten our belts and if people know that it's no longer business as usual, they'll begin to take precautions. If, for instance, a family head knows that his income has decreased in value, he prepares his family members for the hard times ahead. It is easier for them to go through the hardship when they are already prepared for it.
There must be some preparation. Alongside this is that there must be serious belt tightening in terms of its expenditure profile especially non essential expenditure. Non essential expenditure like purchasing of vehicles, travels, ceremonial issues, etc. Thirdly, a lot of loopholes have to be plugged in terms of revenue. Collectable revenue must be properly tightened so that correct revenues are collected as expected.
Efforts to diversity the economy should not be stopped. They should rather be re-energized. If you re-energise the efforts to diversify the economy, it will help us to find alternative sources of income. I am saying this because the temptation is for government to halt efforts to diversify the economy and say, well, there is no money to pursue alternative sources of revenue now until when things get better. That will be dangerous and short sighted.
Don't you think the dwindling revenue will also affect plans to improve the power sector and, therefore, make the situation bleaker for businesses and other Nigerians?
By and large, it's going to affect that, but the good thing is that a lot of the budget for that is already being made from the excess crude earnings which are already available.
So, if there is discipline in the execution of that aspect, there won't be much problem because that money is already being earned and is kept somewhere waiting to be expended. So the energy project can still be pursued and executed if there is the will.
How does it feel to be a recipient of a national award of Officer of the Federal Republic (OFR)?
I feel excited and fulfilled that government has recognized and appreciated our little contributions to the development of our country in our small corner. I always tell people they don't have to climb to the national platform before they are noticed. You can be noticed by your nation even in your small world, whether in your village setting or in your local government or state.
If you excel and impact the lives of people, it can be appreciated. So, for me, it is an endorsement that one should keep impacting on the lives of people positively, especially in terms of entrepreneurship, economic enhancement and empowerment and of knowledge and learning. The award is a tonic for us to do more in the Jos Business School in terms of empowering people with knowledge and ideas that can make a difference in their lives and add value to their future.
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