if all these are not enough trouble, the world’s biggest consumer of crude, the US, has now found a formidable alternative in shale oil. I wouldn’t mind if the alternative would take 30 years to develop. We could brace up for it. But it is developed already! So, the demand for our oil has fallen and will only continue to fall. In two to four years, the picture will be very clear to us. The new reality is that crude oil is no longer a monopoly! We are losing our swagger. Demand is falling and will continue to fall. As demand falls, the price will fall. As the price falls, production will fall. Many oil fields will become unprofitable to operate. They are likely to close down. You see, we may soon start drinking our oil for breakfast, lunch and dinner. Yes, you heard me right.
In the event of an oil doom, expect these: One, the naira would crash. Oil brings in most of our forex. A fall in forex inflow will hurt us since we are rapaciously import-dependent. Two, we would deplete our external reserves trying in vain to protect the naira. Three, a falling naira would impact negatively on the general prices of goods and services. Four, there would be less money to build infrastructure. Five, there would be less money for government overheads, leading to retrenchment and salary cuts. Six, there would no more money to fund fuel subsidy and petrol price will be increased. If petrol price goes up, there would be mass unrest as cost of living rises. I can go on and on.
Indeed, if crude oil revenue were to dry up today (July 14, 2013), only Lagos State would be able to pay workers’ salaries from its internally generated revenue. The other 35 states do not generate enough non-oil revenue to pay wages, much less meet other basic obligations. Most states are in debt, in any case, as they have taken loans or bonds. They will begin to default on the repayment and penalties will set in. The immediate option for the government would be to take more foreign loans to meet mounting obligations. Our children would inherit such a debt burden that they will curse us for enslaving them. And Okonjo-Iweala would not be around to explain to them our fantastic debt-to-GDP ratio.
Taken from :
Nyemike Onukwu fb update