By Nkanu Egbe
Nigeria is in the fourth week of official lockdown in Lagos, Ogun States and the Federal Capital Territory (FCT) as a preventive measure against the COVID-19 coronavirus. Monday, 14th April, President Muhammadu Buhari announced a further two weeks of complete lockdown. And while it may seem that restrictions in these areas may or may not be slightly relaxed going into the fifth week, other states in the country have begun to announce more intense restrictive measures as the numbers of COVID-19 cases have begun to show up or climb. But whether or not, Lagos relaxes restrictions by Friday, residents will be forced to wear face masks as a preventive measure, while social drinkers can amble over to their neighbourhood tavern shops to buy a bottle or two of lager beer.
A bigger problem though has shown up in the past few weeks, the falling global price of crude oil culminating in Monday’s crash of US oil prices. Bloomberg reports, “The day started like any other gloomy Monday in the oil market’s worst crisis in a generation. It ended with prices falling below zero, thrusting markets into a parallel universe where traders were willing to pay $40 a barrel just to get somebody to take crude off their hands.” In other words, -$40 per barrel! It has never happened before.
What does this mean for Nigeria? Nigeria whose economy is preponderant on crude oil sales had projected its budget on $57 per barrel of crude. In March 2020 when the realities of the COVID-19 coronavirus set in, it had to cut back its projection down to $30 per barrel of crude oil sales. A $0 per barrel situation for Nigeria portends grave consequences. However, one must be quick to note that such sharp drops in crude oil sales are very temporary. There would definitely be a rally by OPEC+ and other oil producing countries including Russia. Oil sales volumes would definitely have to be cut for this to happen.
Nonetheless, such a sharp drop in crude oil price is indicative of a strong need for Nigeria to look for other premium goods to peg its projections on. Many economists had before COVID-19 advocated diversification of the economy through increased production of other goods, chief of them, agricultural produce.
These propositions are against the backdrop of free international trade and division of labour where countries trade mostly in those areas where they have comparative advantage. Nigeria’s comparative advantage has been in crude oil sales. With a wipe-out of crude oil value, this comparative advantage naturally falls away.
The spectre of the COVID-19 coronavirus resulting in an international lockdown, with countries closing their borders and having to depend solely on their internal resources, has changed the economic dynamic. Whether one appreciates it or not, it means every country is in a temporary autarky.
It is definite that most countries will relax the restrictions they have imposed on international trade and travel as this is the only way their economies can be sustained especially given the argument that extreme lockdowns are not sustainable and may affect “poorer communities”. However, they must strike a balance. If the countries make things too open, the virus will ravage deeper and take longer to wipe out. Albeit, man must wack.
If there must be extreme caution applied in the management of the COVID-19 pandemic, then there would definitely be some form of autarky by most countries especially those in Africa. Why Africa? As against the quantum medical leaps in research and development of prophylactic and curative measures recorded in the developed countries, most of Africa has to wait for these developments to take place before they can relax since they, at present, lack the capacity to create and provide long-lasting medical protocols aside from implementing physical restrictions to contain the spread of COVID-19. It is not saying that in future African countries would not step up. However, in the interim, as they would say, it is what it is.
An extended country lockdown for beyond six months is officially autarky. Personal view. In this entire crisis, Africa has the shorter end of the stick. Can Africa then, especially Nigeria, manage the reality of autarky? What is autarky, by the way? The Oxford dictionary, says it is “economic independence or self-sufficiency.” So is Nigeria economically independent or is it self-sufficient? The answer is NO. Apart from crude oil exports and a few basic goods, we are dependent mainly on manufactured imports. Autarky for Nigeria will only connote mass hunger and suffering.
But the time has come to consider some critical success factors that can lead Nigeria into some measure of economic self-sufficiency. It is easy to say that we must develop our infrastructure like power and roads, provide good education, good health facilities, and then all will be well. These are all good but there must be a consideration of some elements in the event of such an eventuality.
One cannot elaborate on the success factors of autarky because there are a lot more discussions that will need to take place to arrive at very concrete suggestions to drive profound economic actions but we can name them. E.P. Torkanovsky of the Russian Academy of Sciences Institute of Economics (Moscow) helps name some of them.
Biopsychics. Restructuring is a word that is avoided by many policy decision makers but needs to be addressed almost immediately. If there must be robust internal economic development, then there must be a mix of production, trade and travel within Nigeria where each state is its own production unit, developing its own comparative advantage.
Risk minimisation. Insurance and pension schemes, food and energy security are schemes that need to be ramped up to create sustainable communities and encourage strong states.
Technology. Development of technologies demonstrate the possibility of autarky as a physically sound path to development. Providing oneself with energy and food is sufficient for effective economic development, and this is what demonstrates the development of renewable energy based on sun and wind, which allows one to get rid of energy flows from production sites to places of consumption and transportation of energy resources.
Demographics. Torkanovsky writes: “The pursuit of autarky is characteristic of states with a variety and wealth of resources, first of all, the able-bodied population.” Restructuring will allow states to develop their human and natural resources quickly. While it may not be possible for each state to develop these at equal strength, it is possible that each will develop its own area of comparative advantage and thus, foster inter-state trade.
In reality though, the current lockdown may not go beyond June 2020, given the already growing tension within households who are diminishing not only in provisions but are capable of developing another epidemic – cabin fever. Realistically also, autarky is not a recommended policy and should never be considered as a viable option for any country but if we were forced to deal with it, we must be prepared.
- Nkanu Egbe is the Publisher/Editor of Lagos Metropolitan