Oil at $40/barrel? You wouldn’t really say
Iam out of Nigeria t his week, travelling for business and for pleasure. It seems it doesn’t matter whether I am chatting to family, friends or fund managers, the question is the same: “Ooh, Nigeria, things must be getting nasty with the oil price so low?”
Well, the answer is yes and no. When people talk about getting nasty, what do they mean? That crime is rising? That unions are protesting on the streets? That the poor get poorer and the rich don’t get that much richer?
It’s certainly true to say that the government isn’t in a position to splash cash; President Buhari has been clear that he inherited a Treasury all but empty, despite the previous administration hav ing enjoyed a period of historically high oil prices. That scant inheritance will tie his hands when it comes to big spending projects over the next few years, assuming oil fundamentals don’t drastically improve or China growth doesn’t get a serious kick up the backside.
At state level it’s the same story: there was plenty cash coming in, but there was just as much going out. Being diplomatic, let’s just say it wasn’t always being spent on infrastructure or development.
But when I am walking around, do I see less money, do I feel people who always benefitted from high oil prices have fallen on hard times? Certainly not. If we use the number of super cars outside my local nightclub as a handy metric for the Nigerian elite’s economic confidence (or at l east conf idence i n t heir London or Geneva f und managers), you’d still think $100 a barrel is the order of t he day, not $40. At my nearest Abuja supermarket at the moment, it’s easier to buy a magnum of Cristal than a loaf of bread, and in the chichi bars of Lagos the bottle popping continues at its usual frenzied pace.
It would be unfair to say t hat everyone sipping on champagne has had their hand in the ti l l , but the insulation from the oil price shock is partly a result of the vast sums taken from the Nigerian state over the last few decades, and the number of people who saw f it to take a share. Again, look at the cars on Abuja’s streets: it’s not uncommon to see state designated number plates on vehicles worthy of a sheik or a movie star.
Perhaps t his goes some way to explaining why Buhari is making his way through the Nigerian National Petroleum Corporation, c ut t i ng, chopping and changing. He knows that $40-something oil doesn’t allow room for lassitude or for the impunity witnessed during the Jonathan years. If ever the majority of Nigerians (though they may well have missed the boat) are going to benefit from their nation’s vast reserves, it’s going to demand far less champagne and far more discipline from the state.
So, ask me again in a year’s time how the oil price drop is affecting life. I never want anything to get nasty for Nigeria (it’s had more than its share), but perhaps by then we’ll be seeing some change. Not at the bottom of the pile, because the oil wealth never made it that far, but perhaps at the top.
IT’S EASIER TO BUY A MAGNUM OF CRISTAL THAN A LOAF OF BREAD, AND IN THE CHICHI BARS OF LAGOS THE BOTTLE POPPING CONTINUES AT ITS USUAL FRENZIED PACE.