Of all the many ways to build wealth, it appears these two – savings and investment – are the most acceptable and popular. One argument elevates the notion of saving as the way to accumulate wealth. The other believes that saving depreciates your wealth especially when inflation sets in, which may affect the future value of your wealth years later. Justly, both schools of thought are correct. Sometimes, you need to save well enough to be able to invest; at other times, the available capital is sufficient to start a worthy investment, and may equate to folly to keep saving such capital. However, more importantly, both require a high level of wisdom and discipline. In the end, the man that saves can confidently boast about his savings if he’s disciplined at it. The one that invests can boldly brag about his thriving investments if he’s smart and wise about, but the hopeless man is the one with neither savings nor investments. His case will be more hopeless if he only eats from hand to mouth and survives on a daily income. Sadly, this is the practical state of the nation called Nigeria.
The Executive Secretary, Nigeria Extractive Industry Transparency Initiatives, NEITI, in a recent occasional paper titled “The case for a robust oil savings fund for Nigeria” declared to the chagrin of Nigerians that all our oil savings, as a nation, cannot fund 20% of our national budget. To put this in perspective means all our oil savings from the inception of our national efforts at saving cannot fund a fifth of our national budget. He stated that Nigeria has extracted about 31billion barrels of crude oil in the last 40years, and between 1980 and 2015 the country exported crude oil worth about $1.09 trillion (I won’t even bother converting this figure into Naira). In spite of these huge earnings from crude oil export, the country has only $3.9billion in its three oil savings funds. This would not have been as alarming as it sounds if the proceeds from crude oil export had been spent on meaningful and developmental projects. On the contrary, our federation has been busy sharing money with scarce impact on the populace.
Typically, the rationale behind excess crude savings is to prepare for the unknown future and create a wealth base for a future generation. We currently have a deficit budget which means the expected income cannot fund planned expenditure. If we had a robust oil savings, I am sure we would not be talking of taxing beggars to fund the budget; instead we would have enough to take care of them. Unfortunately, we live in a country where things are just not normal. To be clear, it is not that the oil proceeds suddenly evaporated into the thin air. Rather, the proceeds were allocated for frivolous things that are mostly non-existent and probably benefit an insignificant class of elites.
A more purposeful nation would have exploited the earnings from the oil sector to build other sectors of the economy. Unfortunately, we did not do that and on the contrary, our leaders abandoned other sectors and slurped the best out of the oil and gas sector. The sad news is that our oil is not only depleting, it is gradually becoming an alternative. Its relevance is eroding on a daily basis such that someday cars may no longer run on fuel, and there will be substitutes for many things the crude oil can be used for. That future is staring at us while we walk imprudently towards it.
The good thing about us as a nation is our unfailing but baseless optimism. The Acting President declared last week that Nigeria is aiming to become one of the 16 top economies in the world, corroborating earlier reports by McKinsey and PWC of the nation’s potential to become one of top 20 economies by 2030. But we keep forgetting that there had been predictions of this manner in the past; we even had Vision 2020 but they have all remained in the realm of vision and potential. Our economy may be large due to our population but the wealth of a nation is measured by the per capita income of its people. Interestingly we want to become great with a structure that encourages greed and provides lifetime luxury for ex-governors. Nations do not become great by wishing and declaring it; they become great by saving and investing strategically.
It hurts that we have not been able to save significantly from our oil earnings. So how can a nation with huge debts without commensurate savings or investments become wealthy? Maybe restructuring offers the all-important answer.