Stories by Dirisu Yakubu with agency reports
Nigeria’s Finance Minister, Kemi Adeosun has faulted the description of Nigeria as an oil economy as erroneous, saying the facts on ground contradict such claims.
The minister stated this in an article she circulated among media houses, with the title: “All change! Nigeria is not an oil economy,” saying it was an error to categorize Nigeria as an oil economy along with such nations as Saudi Arabia, Kuwait and Qatar with very high daily oil productions and low populations.
She said, “Descriptions of Nigeria’s economy often include such phrases as ‘Africa’s largest oil producer’ and ‘the oil-rich African nation’ but oil economies are typically characterized by low population densities and abundant oil resources.
“Saudi Arabia with 10 million barrels of oil per day and 30 million people, Kuwait with 2.7 million barrels of oil per day and 4 million people and Qatar with 1.5 million barrels of oil per day and 2.5 million people are typical of such.
“These economies pursued an economic model that was built around a large government dependent almost entirely on oil revenue for funding. Such economies could afford to have low or in some cases no domestic revenue mobilization, in the form of taxes.
“Tax to Gross Domestic Product (GDP) ratios of less than 10% against the OECD average of 34.6% could be justified especially in the era of high oil prices.”
Adeosun further disclosed that, “For over three decades, Nigeria pursued this model. But things are changing, with the election of President Muhammadu Buhari in 2015, who was propelled into office under the mantra of ‘change’.
“That clamour for change, in the areas of governance, security and economy, coincided with the collapse of global oil prices and a consequent huge deficit in government revenues. These circumstances provided the ingredients for an overhaul of the entire economic model.
“The first and rather numbing conclusion of that exercise was that Nigeria is not actually an ‘oil economy’. With just 2 million barrels of oil per day and over 180 million people, simple mathematics tells us that 90 Nigerians share a barrel of oil compared to 3 Saudis, 1.44 Kuwaitis and 1.69 Qataris. With oil at just 10% of GDP, Nigeria simply does not fit into the mould of the traditional oil economies.”
In her words, “Even nations who did legitimately fit into this narrow mould of high oil revenues and low populations, are abandoning what is now considered to be a flawed model.
“The imperative for Nigeria was even more urgent. Nigeria recalibrated its target peer group from the oil economies to the ‘oil plus’ economies such as Mexico and Egypt. This new peer group has diversified economies and tax to GDP ratios of 20% and 16%, respectively, compared to Nigeria’s 6%. Consequently, the change mantra had to be urgently applied to revenue mobilization.
“Analysis of the data suggests that revenue mobilisation is potentially the master key to unlocking Nigeria’s huge growth potential by funding its ailing infrastructure including roads, power and rail,” Adeosun added.