Wanted: A moratorium on crude oil production (2)

There are indeed very enormous other costs associated with the ‘oil as economic domino’ model that the country currently operates. These include oil spillage and the despoilation of the environment, criminality, banditry, piracy and illegal bunkering, the rise of an easy money culture, spiralling corruption and graft, lowering of the work ethic and indeed the incentive to work and an overall decline in productivity. The truth is that when people see that they can get things the easy way, they would not be motivated to go about their lives following what they consider to be a somewhat ‘more difficult route,’ even when for all practical intents and purposes, their greater reward and achievement is to be found there. However, it is important to address the other side of the tale, namely, what does the nation do in the short-term to address the issue of immediate revenue declines that would accompany the coming into force of our proposed moratorium on crude oil production? And then for how long should the moratorium be in place? Two quick answers can be deployed here. One, while it is true that there would be a resource strain on the nation in the short term on account of the moratorium, the point is that the hope of the gains that would emerge at the end of the day as well as a combination of deft and sincere economic management strategies and the putting in place of a staggered programme of implementation would help ameliorate the short-term challenges. For example, we could in the first instance request the Organisation of Petroleum Exporting Countries, OPEC, to progressively reduce our assigned production quotas to 75 per cent of current figures in the first year, 50 per cent in the second year and 25 per cent in the third. For the next three years after then, we could cut back further to just only 10 per cent of current production quotas which should almost exclusively be used to power local demand and needs. Two, the continuing improvement in Internally Generated Revenue, IGR, in states like Cross River, Ogun and Lagos suggests that there is indeed a basic premise for the more efficient generation of revenue and opening up of the economy countrywide if the enabling environment to drive this is put in place. Our moratorium which would reduce revenues going to states would serve then as a litmus to tighten efficiency in governance and administration at the state level which is the critical plank upon which the new and more productive economy being envisaged would be hinged. The benefits from this scheme therefore would include improved fiscal discipline across board, the development and expansion of alternative economic paths, reduced oil spills and expectedly also, agitation from local communities and a lowering of the presently denuding practice of very ferocious intra-elite contestation for more and more resources from the little that is presently being generated. In its own way, this scheme being proposed is not without precedents in our history. We have already made allusion to the First Republic where the regions grew their internal revenues better, stimulated increased development and promoted a far greater regime of transparency and scrupulous spending than we presently have today. A second reference would come from the effects of the withholding of revenues due Lagos local government councils by the then Obasanjo administration which propelled the state to take even more seriously the need to generate more and more of its own revenues outside of the Federation Account. Today, the state is a net winner for it as it generates well over 70 per cent of its revenues internally. To be most effective however, the proposed moratorium scheme must be seen for what it is. It is not a scheme to punish any section of the country. It is not a scheme to withhold revenues that should be contributed by a section of the country at this time. It is not a ‘victor or vanquished’ project. No, it is a critical economic and social imperative that would help all of the constituent parts of the nation to grow better as well as result in a regime of increased revenues across board, along with additional side benefits that include an enhanced sense of mutual respect by Nigerians for each other, a healthier environment and eco-system and an overhaul of our presently retarded work ethic. Second, the season of implementation of the moratorium would have to be supported by political reform to ensure that states control the bulk of the resources and economic activities from their areas as an incentive to getting them to explore more and more resources that lie within their power to tap. And this is where leadership from the Presidency would be most critical. For example, under the current Constitution, the President, in conjunction with the Revenue Mobilisation and Fiscal Commission is empowered to make proposals to adjust the revenue sharing formula. Equally, the Executive along with the ruling political party is also empowered to make proposals for constitutional reform to the national Assembly to ensure better and more timely governance. Given the very obvious limitations that we have seen in say the award and supervision of road projects in distant states and locations by Abuja-based bureaucrats, a reform-minded Presidency would do well to work on the emergence of a new model where both the resources for as well as the implementation of the bulk of road projects countrywide goes to the states even if this would result in the extant Federal Ministry of Works losing as much as 90 per cent of its current budget. Another reform that would boost productivity, internal competition and growth for example would be a review of the current VAT model to ensure that states receive VAT only on goods and services within their own precincts. There are of course many more but the point has been made. For Nigeria today, economic reform is a task that must be done.