Buhariconomics: 2017–2019 Fiscal plan hanging on Crude Oil? Not Again.

In 2009, Energy analyst predicted that Shale oil (light tight oil) and horizontal drilling would unravel the Crude Oil Market significantly and impact strongly on Nigeria’s ability to find a market for its vast hydrocarbon.

It turns out that the Government’s fiscal and monetary assumptions that anchored Nigeria’s Spending plan and diversification strategies from 2009 till 2014 fail to recognize the shale oil production projections.

Today, batteries and Electric Cars are projected to “upend” the crude oil markets much sooner than everyone thinks.

The cost of Building batteries for electric vehicles is falling fast. Tesla Gigafactory among others could trigger chains of change.

Time to charge up batteries is collapsing faster than one could imagine.

By 2020, Batteries should become cheaper that internal combustion engine meaning electric cars can beat conventional vehicles on price in just four years.

How about converting your fuel gripping car to electric vehicles on the cheap?

Interestingly, 46% of the 6.89billion barrel of crude oil produced in the world is converted to Gasoline and used primarily to power cars.

The electric car revolution, cheaper batteries, more efficient cars alongside increased production of Crude oil from alternative sources including shale oil and bitumen tar should impact the price and ability to sell crude.

Gas-to-gasoline plants are becoming more efficient, fuel-cell and battery technology are moving from labs to market.

One would expect Nigeria to learn from the past mistake and correct accordingly.

Ironically, Nigeria’s future and fiscal plans for the next 3year as contain in the draft MTEF 2017 to 2019- just approved by the Federal Executive Council allows little room for excitements.

The government continues to bet that somehow, something will happen, and price of crude will stay afloat, demand for Nigerian crude will remain at 2.2million barrels per day, and the headwinds are mere talks.

Building a future of the economy around the price of crude oil standing at $42.5, $45 and $50 in 2017,2018 and 2019 is somewhat dangerous for the Naira, the economy, and Nigerians.

It is understandable that Government biggest pool of revenue will be coming from the non-oil economy.

One expects the class benchmark that should anchor the economy going forward revolves around consumer spending, business operating margin, jobs, gross capital formation.

Kenya road to industrialization is defined. Under a new law, lending rates are capped at four percentage points above the central bank’s benchmark rate. Caps on Lending rate exist in Germany, France, Italy and Switzerland.

Nigeria will need to move faster.

First, The anchor of monetary policy in any country with free floating currency is “Lending rates” not “exchange rate.”

Nigeria will have to shift ground on its plan and get serious with implementation.

Agriculture is never going to be the soft golden bullet that creates jobs and hang the economy.

The future lies in between the plans.