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Nigeria and low oil prices

Vice President Yemi Osinbajo said during an interview at Davos, Switzerland that Nigeria should be able to cope with the drop in oil prices. His comments indicate he was talking about “Nigeria” as in the Nigerian government and not the country. This is because his comments centred on increasing tax coverage to raise additional revenue for the government beyond oil.

Osinbajo speaking during the Davos interview
Osinbajo speaking during the Davos interview

Watch the interview here.

The oil price has dropped from highs of over $100 per barrel in 2014 to below $30 last week and Nigeria’s budget had been based on proceeds of oil sales at $38 a barrel.

Unless you buy into the myths of “trickle down” economics, the billions of dollars Nigeria has made from crude have passed by the majority of its people. Only 1% is estimated to have benefited from the oil wealth. So most Nigerians would really not be affected by the current slump in oil prices, at least not directly.

An estimated 80% of oil revenues go to the government, which is shared between the presidency, the federal government, state governments and a multitude of hangers-on. Much of this money is stolen or frittered away on stuff that doesn’t matter to ordinary people.

The drop in the price of oil should also have meant that looting and frivolous government expenditure should be reduced. But there is no chance of that. Nigerian governments – federal and state – plan to address the oil shortfalls with further borrowing. And this money will be looted, lumbering future governments and generations with debt – that wasn’t spent on things that were sustainable and would have generated the revenue to repay the debt.

With so much of oil revenues going to the government and oil accounting for about 90% of Nigeria’s foreign exchange earnings, you would think that some belt-tightening would be in order at senior levels of government. But the Muhammadu Buhari government has reportedly allocated 4bn naira ($20m) for the presidential clinic at Aso Rock. This is while the budget for the entire federal ministry of health is around $179m. This demonstrates the “Animal Farm” (some more equal than others) tendencies of the people Fela Kuti called “Beasts of No Nation, Animals in Human Skin”.

Osinbajo talked about widening the tax base, but going by the evidence of how government spends oil money, there is little evidence that increasing the tax burden on Nigerians would benefit ordinary people.

Some have argued that when more people pay taxes, they would start demanding accountability for how the money is spent. This sounds good in theory, but in Nigeria the slogan “no taxation without representation” by the American colonists against British rule rings very true. Nigerian governments do not represent the people. Nigerian federal legislators are the highest paid in the world with basic salaries around $175,000 a year, while over 60% live in “absolute poverty”.

Increasing taxes on Nigerians to maintain the 1% in lifestyles they have become accustomed to is a recipe for disaster and should be resisted by all progressive-thinking Nigerians.

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