By, Bamidele Ademola-Olateju
Oil price is at $70 per barrel due to Houthi rebel’s strike on Saudi Aramco installations. If Saudi hits back at Yemen and or Iran, we should expect oil to go up to $75. Unfortunately, whatever profit we get with the right hand, we will pay out in subsidy with the left hand. Why? Our refineries are not working. We import petroleum. The futures contract were executed in the last 3days.
For every barrel of oil we sell, 60% of the profit goes to oil majors and 40% comes to us. If refineries were working, we would have enjoyed the boom while it lasts. Personally, I am enjoying the scenario that is playing out in Nigeria. If we do not suffer, we will never learn.
Here is the situation. Nigeria for years has been living above its means. We keep borrowing and borrowing especially from China. No one wants to lend to us again. Now that China faces its own yawa from Trump, and its economy is forecasted to go into recession in two quarters, how long can it extend itself? Nothing forces discipline unto a man like the one in debt and is forced to adjust when he is no longer credit worthy. Same for us.
I saw the composition of the economic team and I am cautiously optimistic. There are strong advocates of free markets among them. I hope the government listens to them because the saboteurs in this country are powerful. How powerful? Follow me.
This nonsense is a killer! We are buying petroleum and selling at N145. At $70 per barrel, we will still be paying N145 at the pump. Whatever gain we make selling crude is paid out in subsidy to importers. Do we consume all the fuel imported into Nigeria? No. How many fuel stations in the North sell fuel? The trucks are diverted and sold to our neighbors or not imported at all but receipts are submitted. The government pay subsidy and the citizens pay higher outside the Southwest. Must petrol price be equal across the country? The answer is deregulation.
Collapse the exchange rate and remove the arbitrage. There are many influential people who send their children to school abroad and fund extravagant lifestyle on our backs. How? These people burrow money in dollars. For example if one big guy borrows $1m. They are given $1m at N305 to a dollar. They sit in their homes and sell to Mallam at N355. That is a cool N50m! As long as there is arbitrage, they will continue to milk our cow.
The rates per kilowatt is ridiculous. It is unsustainable! We can’t buy back the DISCOS. Let Siemens, Marubeni and GE come in and do not peg price and see our power problem evaporate.
I have always said our debt and population are what will restore our brain as a country to factory setting. I am sure they are seeing the figures. Can the powerful subsidy and forex beneficiaries be weaned? I don’t know! What I know is that we can face it now, pick our poison or kick the can, down the road. Whatever it is, we are in trouble. The stock market is optimistic about Soludo and Doyin Salami on the team. The body language of these two people is what I am going to read going forward.
Let us pray for “President” Abba Kyari to succeed 😁
Please I am not an economist o. I have only read Stiglitz and Krugman for too long 🤣