DISCOURSE: Nigerian State Without Oil And The Future Of Subnational Entities — Implications And Prospects For The Midland State Of Kwara By 2050

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Bolaji Abdullahi.

“The best way to predict the future is to create it.”

A popular aphorism about Egypt is that without the Nile, there would be no Egypt. It is possible to assert in a similar vein that without oil, there would be no Nigeria. At least, there would be no Nigeria as we know it today. Anyone familiar with the tempestuous politics of post-independence Nigeria would understand the layers of usually unspoken truths embedded in that statement. Oil has not only been the life blood of our country, it has, in fact, been the great unifier that has kept Nigeria together despite the various centrifugal forces that have threatened to tear it apart over the years. Nigeria may have been named after the River Niger, the great body of water that runs through it, but it is the oil in the river’s delta that has kept us together. As they say, blood is thicker than water. And oil, is the blood of Nigeria.

Therefore, to envision a Nigeria without oil is to demand a total re-invention of the country itself. Rethinking Nigeria’s economy that is not built on oil revenue is a task that has great historical consequences. Indeed, it is very unlikely that we would be able to carry out the kind of structural transformation that is required and still have Nigeria as we know it today. In other words, it is not possible to think of a post-oil Nigeria without thinking of a post-Nigeria as it is currently configured.

Although crude oil constitutes only 20 per cent of the country’s GDP, it accounts for more than 80 per cent of its revenue and 90 per cent of its foreign exchange earnings. This has tied our economy precariously to the cycle of boom and burst of oil prices. Perhaps, nothing could have demonstrated more starkly the grave danger of our mono-economy like the Covid-19 pandemic. As the pandemic shuttered the global economic machines, the Atlantic Ocean became crowded with vessels bearing Nigerian crude oil that no one wanted to buy even on credit. Within days, analysts have started to see the possibility of a Venezuela or Zimbabwe kind of collapse. If the shut-down had gone on for a while longer than it did, it was clear where we were headed.

Mercifully, the world recovered more quickly than was feared and the price oil in the international market has rebounded once again. From the near zero at the time of the lock down, it now hovers around $70 per barrel this week. But the yellow card had been served.  Within days, the pandemic had made nonsense of all our fiscal assumptions as government at all levels scampered to cut budgets.

However, despite the resurgence, we are yet to recover from the after-shock of the pandemic that has sent so many more of our people into poverty and left governments bewildered. We have heard allegations that the Federal Government is printing money to block its financial crisis. The Federal Government has denied that it is printing money. Meanwhile, NNPC announced some days ago that it may not be able to make any remittance to the Federations Account in April because its profits have been wiped out by subsidy payments. This means that for the month of May, there would be far less money to share by the Federal and State Governments. Federal Government has started to consider salary cuts for workers, even as labour continue to insist on minimum wage. The hard times are indeed here.

Beyond the pandemic however, this century has witnessed an advancement in technology and science into whole new frontiers that were hitherto unimaginable. And as mankind continue to find more efficient and more sustainable means of production, the need for fossil fuel will continue to decline and will ultimately disappear. Even as we speak, perhaps the biggest threat to Nigeria’s crude oil economy is the development of shale oil technology in the United States, which is one of Nigeria’s largest oil market. Hailed as the “most important innovation of the 21st Century” by the Financial Times in 2015, the world’s reserve of shale oil is estimated at 425 billion barrels, held by only 11 countries, and currently constitutes 36% of US oil reserve. Many have argued that shale oil will not replace crude as a new form of fossil fuel. However, US oil imports from Nigeria has steadily declined in the last few years.

Going by the reports of the US Energy Information Administration, US imported about 132, 000 barrels of oil from Nigeria in 2017. In 2019, the import dropped to about 70,000 barrels. And by 2020, it has come down to a little over 26, 000. The world’s largest economy is clearly losing its appetite for Nigerian oil, overtaken by India, China and Spain. This has even greater significance beyond petro-dollars. Over the years, the United States’ most important strategic interest in Nigeria has been its oil. The less America needs Nigerian oil; the less important Nigeria is global politics.

What is clear from the foregoing is that our vision of development can no longer be built on our oil export, even if it were not so precariously tied to the vagaries of the international commodity market.  Saudi Arabia is another country that is overwhelmingly dependent on oil. However, the Arab nation last year launched vision 2030, described as a “landmark strategy that, among other goals, aims to reduce the country’s dependence on oil by facilitating the emergence of a robust private sector.” In a bid to build more resilient economies, so many other countries, including African countries are embarking on ambitious plans to change the fundamentals of their economies. Kenya and several island countries are scaling back on their over-reliance on tourism, having been taught harsh lessons by the pandemic.

It is interesting to note that in terms of vision, Nigeria is probably way ahead of many other countries. Long before the pandemic or even the 2015 economic downturn, Nigeria had conceived the vision 20:2020, which planned to make Nigeria one of the top 20 economies of the world by 2020. NV2020 was conceived as an economic development plan to build “a large, strong, diversified, sustainable and competitive economy that effectively harnesses the talents and energies of its people and responsibly exploits its natural endowments to guarantee a high standard of living and quality of life to its citizens.” The vision document expressly stated that Nigeria would “pursue a structural transformation of the economy from a mono-product to a diversified and industrialised economy” and move from low productivity activities like primary agriculture to higher productivity activities like manufacturing and services.

The transformation agenda that followed was not less remarkable in its vision to build a more resilient and sustainable economy. Therefore, Nigeria is not short on vision. What we appear to lack is the willingness to take the radical measures that are required to change the fundamentals of our economy. While we are capable of developing radical visions and dreaming big dreams, we have continued to prefer the business-as-usual approach, which at best could yield some marginal gains, but would never deliver the quantum leaps that we desire.

After Nigeria first rebased its economy in 2013, the GDP rose from $270 billion to $510 billion to become the largest economy in Africa, and push its share of the sub-Saharan Africa’s GDP from 21.3 per cent to 31.7 per cent. Efforts to bring the informal sector into greater focus would reveal even a much bigger economy. However, like Joseph Stiglitz and some other top economists have argued, GDP is not enough in capturing the totality of human experience within a nation’s economy.

A Nigerian knows this better than most people. Even at a time that we are reporting one of the world’s fastest economic growth rate at 7.4%, Nigeria is also being declared as the poverty capital of the world, and home to the largest number of people living in absolute poverty. 83 million people, or half of our population are living below the nation’s poverty line of N137, 430 or N11, 450 per month. It is also reported that out of about 70 million people that make up Nigeria’s labour force, more than 24 million are without employment, representing about 33%. If we disaggregate this numbers, we will find that the youth unemployment situation is even much worse. What this goes to show is that it is perfectly possible for Nigerian economy to continue to grow, while leaving majority of Nigerians behind and in poverty. The implications of this for social cohesion and long-term stability is better left to imagination.

However, as long as oil remains the basis of the Nigerian economy, the prosperity of this nation will be enjoyed only by a few people who are connected to the oil economy. An economy that excludes the majority of its people from its source of wealth can never lead to real development. It is no surprising that Nigeria is not only home to the largest number of poor people, it is also the country with one of the highest income inequality in the world. The direct implication of unchecked inequality is that government loses its moral authority as the majority of the people grow cynical and resentful of those in power, or anyone who simply looks better than them.  The danger in this is that once the political elite loses its credibility, it also loses its capacity to mobilise the people for any form of economic or social transformation. This trust deficit is perhaps the major reason government has found it difficult to rally the people for any meaningful change.

Successive Nigerian government has continued to celebrate economic growth. But this is not enough. An economy that is not able to create jobs for the people, especially the youths, will not improve livelihood for the majority. A 2018 PwC report estimated Nigeria’s average job growth between 2010-2017 at 1.6% while the labour force grew at 3.9% over the same period. New businesses have emerged in-between, but these are not leading to new jobs. As the report noted, the bulk of the jobs created between 2013 and 2016, up to 63%, are in the informal sector, with most of them being low productivity work that do not eliminate the need for formal-sector work.

Quite importantly, attempt to disaggregate the data on youth unemployment has revealed that majority of the youths who are out of jobs, 80% by one estimate, do not have more than secondary education. This is a peculiar problem that Nigeria must address. How do you bring over 25million young people who are in all practical purposes without any education into jobs? The traditional informal skills sectors are already in crisis with many at risk of losing their livelihood forever, unless we make deliberate efforts to upgrade their skills and bring them in line with developments in modern technology. This makes a strong case for formalization of artisanal training and skills standardization and the development of a National Vocational Qualification Standards.

The NVQS will not only accelerate the ability of our skilled workers to access international markets, but it would also set explicit standards for certification based on competence and skill levels. What Nigeria has more than most countries of the world is her huge population, estimated to exceed 400 million people by 2050.  It is quite unlikely that we will be able to slow this down any time soon. However, with the right investments, we can turn this potential liability into a great asset and make our people our biggest export.

In 2018, Nigeria earned approximately $32 billion from oil and gas. Going by available reports and estimates, in the same period, Nigeria was reported to have earned up to $25 billion from remittances alone, with a projection that the figures could rise to $34 billion by 2023. Given the lack of transparency around remittances, it is quite possible that Nigerians working abroad actually sent more money home that year than was officially recorded. In 2019, India topped the table of remittance recipient countries with $83 billion, more than two and half times what Nigeria earned from oil in the same year. India is followed by China (68.4 billion), Mexico (38.5 billion), the Philippines (35.2 billion), and the Egypt (26.8 billion).  Therefore, a nationally backed policy of skills exportation by Nigeria will ultimately serve the country better in the long run, both in terms of fiscal diversification and in developing global level competence for the local economy.

Conversations about economic diversification, especially fiscal diversification have not been limited to the national economy alone. Desire for a more sustainable revenue forms in the States has gained greater currency in recent years. This has prompted such evaluation tools like the Annual State Viability Index (ASVI), which ranks all the 36 states of the federation based on the percentage of their budget revenue that comes from other sources, especially the Internally Generated Revenue (IGR) other than the FAAC allocations. Based on recent assessment, it was reported that only six states in Nigeria are actually viable, while five others were declared outright unviable. Viability is determined by the extent to which a state can survive without allocations from the Federal Government.

An important part of this lecture is to assess the prospects and implications of a post-oil Nigeria for Kwara State. It is to this, that I now turn. I will start with the good news. The 2019 ASVI report released July last year classified Kwara State as one of the six states in the country that are viable. The 2020 revised State of the States report by BudgIT also ranked Kwara state 12th in economic sustainability with FAAC to IGR ratio of 58.06% – 41.94% in 2019. Apart from consistent growth in IGR between 2016 and 2019, the state’s total revenue also exceeds its recurrent expenditure by N8.25billion in the same period. What more, Kwara State is one of the least indebted states in the country, ranking 30th, although its debt has continued to rise, increasing by 155.04% in the 2014-2016 period. Based on these statistics alone, one would be tempted to reckon that Kwara state is doing well. Indeed, when compared with many other states, especially in the far north, Kwara is doing well. But that is where the good news ends. In reality, Kwara State is as vulnerable as any other state in the country and going by its current economic structure and financial outlay, it would be near impossible for this state to survive without federal allocations for more than two months.

Kwara state has an estimated population of 3, 192, 000 in 2016, occupying 36, 000 square kilometers of landmass. The state’s population is believed to increase at the rate of 3.49% each year, which is above the national average of 2.6%. If the current pattern is sustained, Kwara’s population would be close to 9million by 2067. Current demographic patterns also indicate that 54% or more than half of the state’s population is between 0-19. By the NBS assessment of the total labour force represented by those between the age of 15-64, 13.8% or about 278, 000 people who are willing to work and who are able to work cannot find jobs. This number could be much higher if we add those who claim to be self-employed, but are in fact under-employed, or are really not doing anything meaningful.

As the 2018 research by S.B. Morgen Intelligence would show, only 6.5% of those who claim to be employed in Kwara state actually earn more than N50, 000 per month. About 48% earn between N18-30, 000, while about 40% earn less than N18, 000 per month. By NBS calculation, Kwara state poverty head count rate is 20.4%, which means that about 640, 000 Kwarans live on less than N11, 450 per month or about N382 per day.

We can stand on this mountain of statistics and attempt to glimpse the kind of future that awaits us and our children. And the more we look, the clearer it gets that unless we start now to get our priority right and make the right investments in economic and human development, the future is bleak indeed. Fifty years may be a long time in the life of a man, but it is such a short time in the life of a nation. The future that we would arrive at in 50 years will be determined by the choices that we make today. If anyone is in doubt, they only need to look at the last 50 years.

If more than half of your population is below the age of 19, you don’t need a Bill Gates to tell you that your spending priority should be in health and education. Kwara state’s per capita health spending as at 2019 stands at N8, 043. This is does not reflect an awareness of the challenge that the state faces in this sector. If our people is our greatest asset, then we have to make our best efforts to keep them alive and healthy. If they do fall sick, we must be able to help them. But if we wait for them to fall sick before we intervene, then it would have been too late. We have to ensure that our children are leaving school with the right level of educational competence that prepares them for a productive life of work and service. In other words, human development should be the most important responsibility of the government, if we are indeed desirous of achieving real, inclusive, economic growth that offers a chance of improved livelihood for everyone.

The health of our people is closely tied to the health of our environment. The exponential growth of our population means that we have to start to plan today for the infrastructure and physical planning systems that would guarantee the welfare of the next generation. By one estimate, close to 37% of the state’s population live in the capital city of Ilorin, a space that is just a little over 2% of the state’s entire landmass. At the current rate of migration and population growth, half of the state’s population could be living in Ilorin in the near future. Apart from the obvious escalation in urban poverty, high population density brings a huge pressure on physical infrastructure, water supply and sanitation. As access to water becomes more difficult, and sanitation situation gets worse, a perfect condition is created for diseases to thrive, thereby generating bigger threats to U-5 Mortality, maternal mortality and general well-being, and constituting even bigger burden on the state’s limited resources. Already, as we can see, the management of solid waste is becoming a major challenge in our city.

In the 70s, Kwara State witnessed a remarkable growth in industries. Niger Match, International Tobacco, Coca-Cola, Prospects Textile Mills, Steelfab, United Enamel-wares, Bisi Foams, Bio-chemical services, Abiola Bottling company, De-Johnson Ltd, to mention a few. These companies attracted workers to the capital city. Outside the state capital, on the Offa-Ijagbo corridor, we had the Noble Breweries, and Okin Biscuits; the Kwara Paper Converters in Erinle; Polar drinks in Isanlu Isin. In the northern axis, you had the Kwara paper Mill in Jebba and the Sugar company in Bacita. Those who work in these companies and their families didn’t need to come to Ilorin to find meaningful existence.

However, with the economic downturn of the late 80s and 90s, most of the industries collapsed. Those who worked in these companies did not leave and the those who used to work outside Ilorin had to relocate to the capital city when they could not find meaningful existence in these sub-urban areas. And as the security situation in the far north deteriorates, more people fleeing the conflicts relocated southward, and Ilorin appears to have been everyone’s preferred destination. Uptill this day, more people are coming in and setting up homes here. This has its own benefits. But we need to recognize the multi-dimensional challenge that this ceaseless influx presents to our state and begin now to tackle them head-long. Urbanisation is good for the economy. But unplanned urbanization, as we are currently experiencing is a disaster waiting to happen. Flooding, that used to be a rare occurrence has now become commonplace even with the slightest drops of the rain.

Some researchers have identified 27 new industries that had sprang up in Ilorin between 1998 and 2012. These have created jobs and contributed to the State’s IGR, but they are not going to be able to make significant dent on the growing army of unemployed youth in our state, majority of whom have neither meaningful education nor meaningful skills. Government is able to employ only about 10% of the labour force on which it spends the bulk of its recurrent revenue in salaries and benefits. With dwindling revenue and demand for wage increase, government would find it increasingly difficult to meet its fiscal commitments, including servicing its steadily growing debt burden.

Therefore, this is time for a radical step-change in the way the business of government is conducted and in our understanding of politics and the purpose it should serve. Regardless of what the media report about Kwara State’s viability or its celebrated growing IGR, the state’s economy is tied to the national economy like the umbilical cord. If the oil revenue dries up today, Nigeria will suffer and Kwara State will suffer with it. We are simply not ready and neither are we preparing for a future without the oil rent. But we can, at least, start to talk more seriously, think more seriously, act more seriously and behave more responsibly about the coming winter. Sooner or later, it would come.

Some have presented agriculture, tourism and solid minerals as Kwara State’s alternative to oil. Even though these can provide some pathways to the challenge of youth unemployment and our quest for fiscal diversification, they merely point at potentials rather than actualities.  As they are currently operated, they cannot save us if the oil money stops coming in today. So much needs to be done before we are able to unlock the huge potentials that abound in these sectors and connect them to the heart of both the national and the international economy. Like the country itself, our quest for structural transformation must be built on high productivity, greater efficiency and broad development. Isolated economic activities will not deliver the kind of change that we want, whether they are private sector-led or government driven. Only a Total Development Approach (TDA) that views human development as the basis for economic development generally can set us on the path to real economic growth that guarantee a shared prosperity for everyone into the future.

Like the rest of the country, Kwara’s greatest asset remains its people, not kaolin or tantalite. But we have to start to make the right scale of investment. With careful planning and preparation, we can be a net exporter of skilled workers in niche service industries to other states of the federation, to the West Africa sub-region and to the larger world. This is the development model that has been successfully employed by India (ICT/Medical services), China (Construction/mining), Kenya (Tourism), Philippines (hospitality), etc. With the right level of investment, we can also be the place where people go to get trained and educated. But we must start to make the necessary investments today. We must re-invent our educational system to reflect our new vision and our development priorities.

A nation’s education system must reflect the people’s vision of society and the kind of economy they want to build. This, currently, is the greatest failing of our education and this is why our children are leaving school and cannot find a job because they are not being prepared for the available jobs. A Nigerian is officially regarded as ready and able to work at the age of 15. Yet, our education system does not prepare anybody to work at that age. This is one of the ridiculous things we do as a country that makes other people look at us and just laugh.

Another example: vision 20:2020’s goals on healthcare says: “NV20: 2020 will enhance access to quality and affordable healthcare through the establishment of at least one general hospital in each of the 774 local government areas in the country with each hospital having specialists in surgery, pediatrics, medicine, obstetrics and gynecology. Teaching hospitals, federal medical centres, specialist and general hospitals will also be well equipped.” With due respect, this looks more like a procurement plan than a healthcare plan to me. But my major concern is that there was nothing in the education section that hinted at a plan to develop deliberately produce any of the high quality medical expertise that were itemized in the healthcare plan. The point here is that education must be the pivot upon which all other development plan is built. This is what every country that has achieved progress has done.

One often touted advantage for Kwara state is its geographical location as the gateway between the north and the south of the country. We have an international airport that makes us just about an hour or less away from any part of the country. Geography, as they say, is destiny. Politically, we are a northern state. And if Nigeria decides to regionalize, using the current geo-political arrangement, we will be in the North Central region. However, it is important for us to adopt strategies that will enable us to take full advantage of the opportunities that abound in the South West, even as we remain a north central state. Why is this important?

If you analyse the six states in north central, based on Poverty Head Count, Poverty Index Gap and GDP, you will find that for North Central, the average PHC is 43.37, PIG is 12.57 and total GDP is $29.53 billion. On the other hand, if you examine the South West, you will find that the PHC is 12.07, that is about 3.5 times less than North Central; average PIG is 2.33 and the total GDP is $78.79 billion. If the South West of Nigeria were to be a country, it would rank above Ghana as the 9th largest economy on the continent. I reckon that this was the strategic decision that a country like Turkey has to make in deciding to join the European Union, while remaining a Mediterranean State with strong Islamic social and cultural orientation. Kwara State has to decide whether it wants to be a king in hell or a servant in heaven.

Personal Income Tax (PIT) remains the most sustainable source of income for a government. Most developed countries of the world rely on this form of direct tax and social security payments as the source of government revenue than anything else. However, how many poor and jobless people can the government tax? Investment in people, especially in health and education, as well creating opportunity for them to work, is the wisest investment any government can make.

Apart from the obvious economic benefits, it is now a trite principle in governance that the more the government rely on the people for its revenue the more accountable that government is likely to be. Therefore, developing the people’s ability to pay tax and relying more on tax revenue has multiple gains in fiscal sustainability and improved governance.

How far can the monkey jump? A monkey can only jump as far at the nearest tree. We cannot jump from where we are today to become next exporter of computers and micro-chips. We must however demonstrate a keen awareness of our standing place and start now to construct a theory of change that is built on those factors that are within our control rather than those things in which we have no say. Or, like beggars, in which we have no choice.

Being a paper delivered by Bolaji Abdullahi, former minister of youth and sports, in Ilorin on Saturday, 15th May, 2021. 

One Reply to “DISCOURSE: Nigerian State Without Oil And The Future Of Subnational Entities — Implications And Prospects For The Midland State Of Kwara By 2050”

  1. This is one of the objective and well researched paper I have read by someone within the government. I hope the government will explore the concept to take Kwara to greater heights. For me, investment in human resources is the key. We should review our curriculum to address societal Challenges not focusing on grades and certificate.

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