OIL DOOM

Oil prices hit $75 per barrel on friday in Newyork.As a citizen of Nigeria,the 7th largest oil producer in the world,this should be a good news.

Higher oil prices should mean more money in the government coffers.This should in turn lead to improvements in infrastructure.This should also provide more money for more social programmes.

However in Nigeria, higher oil prices means higher prices for petroleum products, which causes a hike in the prices of other commodites.To cut the long story short higher oil prices means tougher times to come for Nigerians.

This is caused by a deficiency in refining capacity, hence Nigeria resorts to fuel importation .This is done with little subsidy,hence making Nigeria to lose benefit of being an oil producing nation.

In the short term Nigeria should sign special agreements with refineries abroad.The agreement should enable Nigeria export crude oil to the refineries at the cost of production of crude, instead of the prevailing market prices which is currently not affordable for Nigerians.The product should then be refined and payed for.Only the cost of production should be used in calculating the prices of petroleum products in Nigeria.This will greatly improve the present situation.The days of cheap oil is over and with the rate of increase in prices we may expect prices to reach $100 per barrel before 2010. Hence government subsidy is necessary or this economy will ground to a hault.

However, the answer is to provide refining capacity in Nigeria.That is why the news that the first privately owed oil refinery has been launched is a wellcomed development.Other investors that have been licensed to build refineries should emulate this investor.Government should also invest some of the oil windfall on building more refineries and in maintaining the existing ones.

The benefit of the oil boom can only be experienced in Nigeria, like in other OPEC countries, when refining capacity improves.Then the oil doom presently experienced in Nigeria will become oil boom for the prosperity of the country.

NIGERIA, FREE FROM DEBT AT LAST

On friday,21st of april 2006 Nigeria made history by becoming the first African country to exit the paris club of creditors.In a deal reached on the 18th of october 2005,it was agreed that if Nigeria pays the sum of $12 billion of the $30 billion originally owed the club the remaining $18 billion will be written off.

The central bank of Nigeria,on friday announced that it will effect the transfer of the outstanding $4.5 billion,being balance of the $12 billion ,which will finally mark the exit of Nigeria from the paris club.

This freedom from debt will give Nigeria complete control of its economic policies and save her from the influences of the IMF.In addition the about $1 billion formally spent annually on debt servicing will now be available to government.

This additional funds will enable Nigeria to invest on its decaying infrastructure.Nigeria is a country of about 140 million people and requires huge investments in order to improve on her health,energy and transportation infrastructure.

A debt free Nigeria will also be able to attract more foreign investment.This will provide employment for millions of unemployed youths in the country.This will also reduce crime and youth unrest on the long run.

In addition this will restore confidence on Nigerian businesses.It is presentlly hard for Nigerian businesses to get credit facilities from their overseas counterparts.It is hoped that this debt relief will enable Nigerian businesses to get credit facilities from their foreign counterparts to boost business activities in the country.It is also hoped that this will also make Mastercard and Visacard to be more confident on Nigeria and add Nigeria as one of its partners.This will greatly reduce the cost of running online businesses in Nigeria.It will also reduce the cost of shopping online.

However, one may be tempted to argue on the sanity in paying the sum of $12 billion to the paris club when about 60 percent of Nigerians are living on less than a dollar per day.This is also a country that lacks basic infrastructure.In addition, there was no proper verification of the actual debt stock of the country.There was no investigation on how and when this debt where incured in the first place.The paris club might have played a fast one on Nigeria.They never expected Nigeria to pay this debt in the first place.They might have used the oppurtunity provided by the oil windfall to grab as much as they can from Nigeria.

In addition there were serious constitutional breach in the debt repayment.Nigeria as a federal state should have consulted with the various state governments before effecting payment.It is important to stress that the national and state assemblies were not properly consulted before payment was effected from an account that belongs to both the federal and state governments.This should be condemned and the federal government should ensure that due process is followed in all future transactions no matter how laudable they seem to be.

However, the debt repayment must be seen as a necessary evil.It is only hoped that the extra funds now available will be well utilized in solving the many problems of Nigeria, so that Nigeria shall trully be free from debt.