The current slump in the price of oil in the global market has forced the Nigerian government to announce austerity measures aimed at cushioning its impact on the economy. But analysts say the government should have anticipated this long ago and put in place appropriate strategies, writes Frederick Mordi.
The word 'austerity,' first crept into the Nigerian lexicon in the 1980s, when the government introduced belt-tightening measures in response to the sharp drop in the price of oil--the nation's main source of revenue--and rising foreign debt.
The austerity regime caused the ordinary Nigerian no small hardship. Food items such as rice, milk and sugar gradually disappeared from the tables of many homes. This followed an import ban announced by the government, as part of the programme. Many Nigerians who were born then would not forget the experience in a hurry. The current slump in the price of oil, which fell from $115 per barrel in June to less than $70 in December 2014, has put austerity back on the agenda.
Petroleum exports make up around 90% of Nigeria's total export earnings, and the government has had to revise the $78 per barrel benchmark that it included in the 2015 budget down to $73 per barrel.
The World Bank had earlier warned Nigeria of its vulnerability to an oil price shock as prices dropped. Other oil exporting nations, including Iraq, Iran and Venezuela have all suffered from a crisis that has at its root a progressive slump in demand from the US, which has dramatically reduced its imports of oil following a ramp-up of domestic shale gas production. Nigeria's Minister of Finance and Coordinating Minister of the Economy, Ngozi Okonjo-Iweala, who unveiled the new austerity programme in November, appealed to Nigerians to tighten their belts, while government keeps an eye on global oil price movements.
However, unlike previous austerity measures that hurt the poor, this time, they are essentially targeted at the rich and government officials. Wealthy Nigerians will now pay tax on luxury goods such as private jets, yachts, champagne, expensive cars and alcoholic beverages.
She said: "The drop in oil prices is a serious challenge which we must confront as a country. We must be prepared to make sacrifices where necessary."
Part of this strategy might include trimming some ministries, departments and agencies, and the merger of others that perform similar roles. In addition, the Minister announced a cut on government spending on...