All through the 5 working days of last week, NewsScroll did a
series of analyses on why the Naira won’t likely perform better than it’s now (https://dsh.re/b8043), why petrol prices aren’t likely to reduce (https://dsh.re/6d09cd), why inflation won’t abate significantly (https://dsh.re/37054d), why poverty and hunger will likely worsen (https://dsh.re/353df9) and why insecurity might actually get worse (https://dsh.re/3e620).
Today, we present the final in the series, which is about the immediate and medium term solutions to these serious economic challenges. The proposed solutions for tackling these problems are crucial, addressing systemic issues like oil theft, mismanagement of fuel resources, porous borders, and inadequate electricity supply for industrial growth.
These recommendations are integral to achieving Nigeria’s economic revival.
1. Stopping Oil Theft to Restore Naira’s Value
Oil theft is one of the most significant problems affecting Nigeria’s economy. The country is reportedly losing about 50% of its potential crude oil production due to theft, sabotage, and other forms of oil bunkering. According to the Group Managing Director of NNPCL, Mele Kyari, Nigeria could produce up to 3 million barrels per day, but current official production is around 1.5 million barrels. This shortfall drastically reduces foreign exchange earnings, exacerbating the depreciation of the Naira, which is currently struggling in the currency market.
The impact of oil theft goes beyond reduced foreign exchange reserves; it also affects government revenues and creates fiscal instability. If Nigeria can eliminate oil theft and ramp up production to about 2.4 million barrels per day, as was achieved at the country’s peak, the increase in foreign exchange would strengthen the Naira, potentially pushing its value to N700/$ or better. This improvement would stabilize prices, reduce inflationary pressure, and enhance investors’ confidence in the economy.
Why this solution is critical: Without curbing oil theft, Nigeria’s foreign exchange inflows will remain subdued, making it impossible for the government to maintain fiscal and monetary stability. Oil production used to account for over 90% of Nigeria’s export earnings and about 60% of government revenues, making it the backbone of the country’s foreign exchange supply. Ensuring oil is not stolen is therefore foundational to any economic recovery.
2. Rethinking the Fuel Subsidy Narrative
NewsScroll challenges the prevailing narrative around fuel subsidies, calling it a “lie promoted by Bretton Woods Institutions.” While fuel subsidies were indeed expensive and led to fiscal leakages due to corruption and inefficiencies, their removal has resulted in significant increases in fuel prices, which have crippled many Nigerians’ ability to survive. The removal has also pushed inflation higher, as fuel costs have risen across all sectors. As things are in Nigeria, a price level of more than N200 per litre for each of the four main fuel types (diesel, petrol, aviation fuel, and kerosene) will continue to ruin the economy and lives of Nigerians.
This analysis suggests that with increased oil production, the government could set aside 450,000 barrels per day for local refineries, which would be used to refine petroleum products for domestic consumption. And this is not a novel idea! It’s what the government had done from the military era right to the Buhari government which did crude-for-imported-fuel-swap. It was when crude oil theft worsened and reached its current levels that the crude supply for fuel subsidies became unsustainable. The first duty of government is to protect lives and property of citizens, and securing this crucial natural resource is a critical element of this duty.
By doing this, fuel prices could be stabilized at N200 per litre, which would relieve the population from the crushing burden of high fuel prices.
Why this solution is critical: Affordable fuel is essential for any economy, particularly for a country like Nigeria where transportation, logistics, and industrial production heavily rely on petroleum products. By ensuring lower fuel prices through the refining of crude oil domestically, the government could reduce inflationary pressures, stabilize transportation costs, and improve the purchasing power of Nigerians. Additionally, this would prevent the importation of refined products, which drains the country’s foreign exchange.
3. Building Border Walls to Tackle Smuggling and insecurity
Nigeria’s porous borders are an enormous economic and security liability. Smuggling is rampant, particularly with petroleum products, which are relatively cheaper in Nigeria and therefore attract smugglers who sell them at higher prices in neighboring countries. In addition to the economic loss from smuggling, the insecurity exacerbated by the porous borders has made Nigeria vulnerable to terrorism, banditry, and cross-border crimes. Nigeria shares land borders with four countries:
Benin to the west 773 km, Niger to the northwest 1,497 km, Chad to the northeast 87 km, and Cameroon to the east 1,690 km - totaling 4,047 km. At $1m per kilometer, this is about $4 billion - less than 25% of the white elephant Lagos-Calabar coastal highway. The easiest way to fund this crucial project within four years is to award them to local cement manufacturers (Dangote, BUA, Lafarge, etc) on the basis of tax waivers, a model already in use by the federal government. With border walls, the inability of the government to stop smuggling in and out of the country (particularly subsidized fuel) will reduce by at least 95%. Without the walls, Nigeria will continue to find it difficult, if not impossible, to control its monetary and fiscal policies as well as its national security.
Why this solution is critical:
A secure border is essential for controlling the flow of goods, people, and illicit arms into and out of the country. Nigeria has long struggled to manage smuggling, which drains the economy by taking advantage of arbitrage opportunities like fuel price differentials. Additionally, insecurity and cross-border terrorism have destabilized regions like the northeast. Border control through physical infrastructure is a necessary first step in ensuring economic and national security.
4. Implementing Solar Power Solutions to Drive Industrial Growth
Immediate installation of solar power systems of an average of 10 megawatts in each of the 774 local government areas of the country to power manufacturing and cottage industries currently heavily burdened by high electricity costs. One megawatt of solar system without storage batteries for night use costs just about $350,000 installed on one acre of open space. This price already includes 20% profit for the contractors. For the 774 LGs, that’s a total cost of $2.71 billion, another 21% of the $13 billion Lagos-Calabar coastal highway. Installing the solar system in industrial parks in the 774 LGs will provide cheap electricity at the price of N20 per kwh for at least 9 hours daily for manufacturing, industrial and sundry production across the country. This electricity price, without subsidy, is less than 10% of the Band A charge of the unreliable and highly inefficient power supply from the national grid. This is an urgent project that will be worth every dollar even if funded by borrowing via the expensive crude oil-for-loan facility.
Why this solution is critical: Reliable and affordable electricity is a fundamental requirement for industrialization. Nigeria’s national grid is notoriously inefficient, and the cost of running generators is unsustainable for many businesses. By investing in solar power, the government can create a conducive environment for production, employment, and entrepreneurship. This would also reduce the cost of doing business and help bring down the prices of locally manufactured goods.
Conclusion
The economic challenges Nigeria faces today are a culmination of structural deficiencies that have persisted for decades. The solutions proposed here focus on addressing the root causes of these challenges rather than just the symptoms. Stopping oil theft, rethinking fuel subsidies, securing the borders, and providing reliable electricity are not just piecemeal measures; they are interconnected solutions that can lay the foundation for sustainable economic growth.
It’s with these four fundamental solutions that the President Bola Tinubu government can easily achieve its set goal of 6% annual GDP growth. There are other added solutions that can achieve at least 10% GDP growth rate for the country, but because those ones are dependent on the four fundamental solutions stated here, they are unnecessary to mention and analyze at this point. If these first four solutions are not immediately implemented, all other efforts by this government or anyone for that matter are in vain.
