By Sunny Chuba Nwachukwu, PhD
The economic tools (comprising the factors of GDP) and national income are two critical aspects that the national oil company should focus on in bringing down the import coefficient that continually triggers low productivity, subjecting the system to ever increasing poverty imagery in the economy. This is because, any economy that is characterized as a net importer (a consumer nation), automatically acquires a deficit financial status in her annual trade balance in all the economic activities and financial transactions with her trade partners in global trade.
Low productivity manifests poor capability, under-performance which, of course, directly begets poverty and low per capita income for the nation because, you can’t eat your cake and have it, they say. For a country like Nigeria that is rich in oil and gas resources, her national income should expectedly be tied to optimal utilization of its revenue-generating natural resources, for wealth creation and financial accruals or earnings; which should come through high economic and commercial activities within the economy. Efforts, therefore, need to be doubled by the Nigerian National Petroleum Company (NNPC), in the area of utilizing the country’s hydrocarbon deposits optimally in the downstream oil sector, through value addition. This conservative economic principle for growth (based on imports substitution and backward integration) therefore, supports and engages every available factor that favours high productivity through (1) in-house investment strategy, (2) more emphasis on capital projects from government expenditure, and (3) high level of consumer spending from household disposable incomes (that represent a befitting standard of living in the society) in the economy. Such a scenario should significantly reduce the propensity for importation, once the economy is significantly recognized to be self-sufficient in products consumed internally and the services utilized within.
A country like Japan that is a known super economy commands high productivity in virtually all sectors within its economy, based on its hi-tech efficiency in the manufacturing sector. That makes the system most difficult to be run down economically, based on the result of surplus balance constantly posted from her economic activities with other nations; compared with imports from their trading partners. The auto industry alone generates huge amounts of foreign exchange earnings into the economy; which invariably is responsible for Japan’s constant postings of surplus balances annually, in her foreign account. This is exactly what is expected of Nigeria, if only for the huge daily spendings on imports of refined petroleum products being consumed daily (using petrol as an example) that chops off a significant proportion of the nation’s annual budget yet, the nation is very rich in crude oil reserves (as an oil producing nation). Japan’s per capita income (based on high productivity/GDP) is favourably captured as a very rich economy or super nation, globally. Why can’t it be so for Nigeria?
The high inflation, ever dropping local currency exchange value, vicious cyclical nature of the low GDP in Nigeria’s economy is traceable to the unrepentant high imports from our trading partners. This factor can only have a positive twist by lowering the pressure on foreign exchange demands whenever the national oil company shifts from a products importation policy (including the presently not-very clear subsidy spendings, and the recently pronounced arrangements for the CBN’s special importation loan to support the independent oil marketers’ refined products import operations into the country). This singular arrangement to support and encourage imports of refined products cannot, and will never leave any hope of lifting Nigeria’s GDP growth, unless such monetary arrangements are otherwise disallowed by the NNPC and discouraged completely in the economy; as another strategic alternative and sustainable solution within.
From all intents and purposes, the NNPC alone is able and can change this narrative, considering the significant negative and damaging impact imports of petrol has on this economy. If the amount of products imported don’t change, then of course, the nation’s GDP will never change for the better!
The proposed loan arrangement for independent oil marketers on product imports, negates the effect of monetary policy impact on GDP growth because such special arrangement comes handy with attractive incentives on lowering of interest rate for borrowers. This exercise in futility will dampen the morale of prospective investors on local refining, and will only end up promoting private monopoly and increase inflation continuously.
What the NNPC ought to do is to tailor such loan arrangements with the CBN to suit and encourage smaller units of inhouse refining operations that will fight inflation, and keep reducing importation by the same amounts they refined locally. This strategy will significantly shrink importation, beef up the GDP, and shore up economic growth and ultimately improve the national income profile in the economy.
Sunny Nwachukwu,PhD, a pure and applied chemist with an MBA in management, is an Onitsha based industrialist, a fellow of ICCON, and vice president, finance, Onitsha Chamber of Commerce; and can be reached on +234 803 318 2105 (text only) or firstname.lastname@example.org