Friday, May 25, 2012

THE FUEL SUBSIDY SAGA IN NIGERIA: A drawback resulting from government inefficiency (Part 3)


OPEC MEMBER COUNTRIES: A holistic analysis of their Individual Economies

This section focuses on the 12 OPEC member nations. The focal point of attention on these countries will be having an overview of the effects of their individual local oil prices on the living standards prevalent in the countries. Secondly, the National Economy Performance of these states will be examined. In arriving at this, two tables would be created as thus; the equitableness of Oil Price on living standards and the Efficiency of National Economy Tables which will respectively represent the earlier two stated focal point. 

These tables will be the drive towards an all round profundity and logical precision in arriving at the degree of responsiveness of the local price of the oil on the inhabitants of a country further exploring the effects a well managed economy has on the living standards of the people, the general economic viability and also the demerits attracted by a sickly managed economy. 

Also, having had an overview of the correlation these variable factors have with one another as regards the OPEC member nations, the Nigerian correlation would also be weighed up. The purpose of this is to have a broader picture on the need for the Nigerian government to learn from other governments that are getting it right as put forward by this work, thereby driving her to an unprecedented level of economic viability. 

The reasons for limiting the comparison to OPEC member countries is guided by Nigeria being a member of the cartel, added to the fact that I opine that a country’s membership of an International Organization of any sort is primarily to share, enjoy and benefit advantageously from the bilateral or multilateral relationship with other member countries of the International Organization other than being a member of the International Organization with no purpose, notably as a sleeping member. A country with this sort of membership is one that in no time will deplete and drive towards doom rather than boom. 

I believe that the advantages benefited by a country from its membership of an International Organization is directly correlated with the activities carried out by the country, from the policies made and activities embarked upon to get the country prosperous, having had a turnaround status, for example being a 3rd world country to a 1st world country. 

In arriving at this turn around, such countries that are perhaps underdeveloped through the bilateral and multilateral relationship at their disposal, courtesy the International Organization to whom their members of will be able to import  knowledge and learn from other countries in the respective international organizations that were once in the depleted state and through the pragmatic knowledge gained, forge towards correcting the depletion, thereby importing productive ideas and projects prevalent in other countries that have made such depletion history with the country being an epitome of one having an economy that is buoyant for the betterment and benefit of the generality of her citizenry, a perfect example in this regard is Qatar.



TABLE 1: EQUITABLENESS OF OIL PRICE ON LIVING STANDARDS



















Table sources:
www.travelmath.com/country/Angola “Estimated gas price in Angola”

As illustrated in the table above, 4 approaches are employed in adequately having an economic analysis of the OPEC member nations from the equitableness of oil price on living standards point of view. These approaches as illustrated in the table are; the local oil price, minimum wage, percentage of population living below 2 US dollars a day in each of these countries and lastly, the national average living age. 

From the table 1, it is observed that Venezuela has the cheapest oil price. At $ 0.023/litre (l) she is no questioning the true epitome of a Father Christmas Government as against the Nigerian government being wrongly addressed as one by her Central Bank of Nigeria (CBN) Governor. In recapitulation to the prequel part to this subsidy saga series, the Governor of the C.B.N. in his defense on the need for the Nigerian government to remove the subsidy on petrol said; “the Federal Government is not and cannot continue to be a Father Christmas.” 

However, from the table, it could be conclusively stated that the very low oil price in Venezuela, added to the impressive minimum wage are the strengths to Venezuelans having a high life expectancy of 73.7 years and also, a meager percentage of 10.1% of her population living under $ 2/day.

Interestingly, as regards the oil prices of these 12 countries, at $ 0.6164, that of Nigeria is second to the highest and ironically, the minimum wage of Nigeria at $112.062/month is what I perceive as being monetarily third to the lowest but economically second to the lowest after Angola. The reason for the 2 variations in analyses is due to the fact that with respect to singularly identifying the OPEC member states with the lower minimum wage, Angola and Libya come before Nigeria but when adding other added benefits by the individual government to its workers in terms of subsidy and other government economic relief expenses, Libya has her workers receiving more pay and benefits than the Nigerian public worker thereby displacing Nigeria and having a shift in the radar, falling behind Nigeria.

These said, the low minimum wage in Nigeria, added to her high oil price is contributory to the West African State having 83.9% of her people living below $2/day and 46.9years being the average life expectancy. In addition, the free flowing corruption in the public sector is also causative to the general poor living standards experienced by most of Nigerians due to the fact that money which ought to have been used in rendering qualitative governance to all Nigerians is wasted by the fiends in government. 

Though the figures with respect to the minimum wage of Qatar and United Arab Emirates were not available in the source as at the time of this work, having a look at the prevailing average living age in both states at 75.6 and 78.7 respectively brings to conclusion the fact that the minimum wage of both countries will be equitably decent. This is because a well paid individual with the right living standard would definitely live long due to him or her having a better proximity to being able to take care of his or her primary needs, precisely health. Also, the level of economic development of these countries and the low corruption levels is one to be greatly commended.

Also, from the table, at $799.963, the minimum wage of Saudi Arabia is the highest while that of Kuwait at $781.248 comes second.

However both countries have a well structured minimum wage that is grouped to cater for different groups of individuals. With regards to Saudi Arabia, the $799.963 is for the government sector employees while that of unofficial citizen workers in the private sector is $399.9634. On the other hand, as revealed by wikipedia.org, Kuwait has its minimum wage grouped into 3 categories. $781.248; $349.221 and $144.009 are paid to the public sector, public sector non citizen and domestic workers respectively. The overall average living age of Saudi Arabia is 72.8 and Kuwait, 77.6.

Venezuela with a minimum wage of $326.3408 has her average living age as 73.7. On the other hand, Iraq with her minimum wage at $ 9.009/< $ 4.505 per day for the skilled worker and unskilled worker respectively has her overall life expectancy at 59.5. Iran, its neighbour and also, another middle-east country has its minimum wage at $ 179.23 and life expectancy at 71.

Libya has a life expectancy of 74.0 with a well structured minimum wage as follows; $104.42; $144.586 and $176.716 respectively for single person, married couple and family of more than two. In addition to the minimum wage is government subsidized rent and utilities. Motivationally, government workers receive additional $130 per month for basic food staples.

Moreover, Ecuador with a minimum wage of $ 240 + mandated bonuses has her average life expectancy at 75. In addition, her oil price at $ 0.44 is also low.

Algeria has its oil price at $ 0.41, minimum wage at $196.88 and life expectancy at 72.3. 

In the case of Angola, the low minimum wage at $ 90.7425 added to its recently increased oil price of $ 0.79 which makes her having the highest oil price is one that deserves no questioning. This is due to the 27 years post independence civil war that almost swallowed up the Southern African country between 1975 and 2002 and that the present low economic state of the country would take a very long time for her to fully recover. Though worrying, it is not surprising to see Angola having 70.2% of its people living below $ 2 a day. The speediness of the economic recovery of Angola is dependent on the nation being rightly governed and corruption not allowed to breath, this the government of Angola is thriving towards achieving. 

Besides, it is evident that the population living in abject poverty and average life span of citizens and residents of any nation could be correlated with the living conditions with regards to the National Minimum Wage and perhaps the oil price which has a significant effect on the general price level. These said, a country with an economically beneficial wage rate to her citizens has this as a merit that would be contributory to them being salvaged from poverty, thereby having a better life span.

Nonetheless, Nigeria is widely perceived as one of the most richly blessed nations but in general, her people are nothing to make obvious this richness that flourishes her. 

These said Nigeria indeed has a long way to go in its tall ambition of being among the top 20 developed economies of the world before the year 2020. 

In this regard, I am not a prophet of doom but I need no clairvoyant to tell me that no matter the policies embarked on directed towards the achievement of Vision 20 2020, Nigeria will best be a shadow of this group or perhaps best acclaimed to being a wannabe come 2020. This is because asides the time not being available for achieving this, the corruption stricken Nigerian economy added to the wastages in the public sector are rooted deterrents to the materialization of this dream. The rootedness of Nigeria in these economic advancement pitfalls, due to these ills still being freely transpiring further makes the Vision 20 2020 a joke that is to be frowned at.

I opine that in the quest of a Nation achieving this developed nation status, it is firstly paramount for the living standards of the people in the country to be taken care of and made positive. One of the reasons for this notion of mine is cemented on the believe that the higher the living standards of people in a country due to the favourable minimum wage prevalent and positive individual economy of the people, the more closer the nation will be driven towards its attainment of the development status.

To this end, there is no way a developing nation will have most of its people poor and get developed, it just doesn’t and can never work that way. 

This is primarily why with 83.9% of Nigerians being mudded in poverty, drastic actions need to be taken by the government to ensure that Nigerian economy that has long been riddled with the economic terrorist is timely appropriately addressed.


THE EFFICIENCY OF NATIONAL ECONOMY
This table is primarily employed to have a comparative illustration of the efficiency of the economy of the 12 OPEC member nations. In arriving at this analysis, the Per Capita Income, Unemployment Rate and Per Capita Consumption of Electricity will be the bases of analysis. Likewise, the Local Oil Price will be used in this table just as it was used in table 1.

With regards to the unemployment rate of the 12 countries in view two different sources are referenced. These are figures provided by 2 somewhat comparable sources i.e. CIA World Factbook and the trading economics. As at the time of carrying out this research, Ecuador, Iran, Iraq, Kuwait and Libya had their unemployment rates not available in the data as put forward in the Trading Economics website while the CIA World Factbook Unemployment Analysis only had the status of Angola not available.

Also as noted, the figures of the unemployment rates as put forward by these 2 sources are slightly different but are definitely pivotal towards having an all round analysis of the unemployment rates prevalent in the OPEC member nations

TABLE 2 – THE EFFICIENCY OF NATIONAL ECONOMY


















Table Sources:
www.ifitweremyhome.com/compare/US/DZ “Algerian electricity in view”
www.ifitweremyhome.com/compare/US/AO “Angola electricity in view”
www.ifitweremyhome.com/compare/US/EC “Ecuador electricity in view”
www.ifitweremyhome.com/compare/US/IR “Iran electricity in view”
www.ifitweremyhome.com/compare/US/IQ “Iraq electricity in view”
www.ifitweremyhome.com/compare/US/KW “Kuwait electricity in view”
www.ifitweremyhome.com/compare/US/LY “Libya electricity in view”
www.ifitweremyhome.com/compare/US/NG “Nigeria electricity in view”
www.ifitweremyhome.com/compare/US/QA “Qatar electricity in view”
www.ifitweremyhome.com/compare/US/SA “Saudi Arabia electricity in view”
www.ifitweremyhome.com/compare/US/AE “United Arab Emirate electricity in view”
www.ifitweremyhome.com/compare/US/VE  “Venezuela electricity in view”

A  PIE CHART PERCENTAGE DEPICTION OF THE PER CAPITA INCOME OF OPEC MEMBER NATIONS

                  
Of all the bases of economic analyses as indicated in table 2 above, the Per Capita Income (GDP Per Capita) stands out at adequately examining the economy of a country. Simply put, the per capita income is defined as the income per person in a given country or population. It is generally accepted and viewed as the most efficient means of calculating and knowing the average quality of life of individuals in a country. The per capita income is calculated by dividing the Gross Domestic Product of the retrospect country by her total population. The Gross Domestic Product is the value of all goods and services produced in an economy in a given period such as a year. 

These said, the higher the per capita income, the higher would be the general living standard and quality of life of the average individual in the country in view and vice versa.
 
From the table above, Qatar which is in 1st place in the Per Capita Income world rankings has its Per Capita Income at $ 102,943 with a correlating unemployment level of 0.40%. In addition, of all the 12 countries in view, Qatar’s per capita income has a 37% share as indicated in the pie chart. This brings to light the fact that the economy of Qatar is one that is an epitome of efficiency in governance with resource efficiency and management being one that is judiciously assiduously executed by the government of Qatar.

In addition, the $ 0.22/litre price of oil in Qatar further entails that she is a country that has the government favourably working for its people in all ramifications of her, primarily her economic activities. The 16, 327 kWh per capita power consumption of Qatar is one of the strong points to her economy and notably per capita income being on a flying note. Asides this, the level of private and foreign investment in the country greatly contributes to her economic success, added to the efficaciously managed oil industry that results in her oil price being low and affordable by all.

The economies of fellow Middle Eastern Asian Countries as thus; Kuwait, United Arab Emirates and Saudi Arabia which all have their per capita income as $ 41,691 (15%); $ 48,158 (17%) and $ 24,237 (9%) respectively seals the fact that these four oil rich countries do not take their economies for granted and are devoid of exhibiting nonchalance in leadership. Saudi Arabia’s 10.90% unemployment level seats her at the 7th in the unemployment standings among the 12 OPEC member states. Also, United Arab Emirates and Kuwait with the unemployment level of 2.40% and 2.20% respectively are seated in 3rd and 2nd place behind Qatar, the country with the least unemployed people among the cartel of OPEC member nations. In addition, of all these four countries, Saudi Arabia has the lowest oil price at $ 0.13 which I perceive is instrumental at partly having a downward shock effect and further pinning her unemployment level to 10.90%.

Additionally, the 14,417 kWh; 13,261 kWh and 5,653 kWh per capita electricity consumptions of Kuwait, United Arab Emirates and Saudi Arabia have a significant effect towards making their per capita incomes favourable. From this it could be concluded that the level of power generation in a country is contributory towards making her per capita income advantageous, added to the level of foreign and private investment which further helps to encourage a drop in the unemployment level.

Also, Iran and Iraq have their unemployment rates at 15% apiece even though the margin in their Per Capita Income is huge with Iran being $ 13,053 (5%) and Iraq $ 3,886 (1%). From these figures, I postulate that the reason for this similar unemployment level in both countries is due to the advantage Iraq has over Iran with regards to her lower oil price as thus, Iran being $ 0.655 and Iraq $ 0.38. 

In addition Iraq’s more encouraging private sector/foreign investment driven economy in contrast with Iran which has the private sector and foreign investment having a little contribution to her economy, it is anticipated that the unemployment in Iraq would be better than Iran in the coming years. Though, an obstacle to this is the security issues that have over the years been a worry to the government and people of Iraq. 

Venezuela, the country with the cheapest oil price has her Per Capita Income at $ 12,568 and unemployment level at 7.30%. More importantly, the 3,050 kWh per capita electricity consumption of the country is of great help to keeping her per capita income above $ 10, 000 and unemployment level below 10%. This analysis further adds usefulness to my earlier postulation that the oil price in any nation is contributory towards a positive per capita income and unemployment level. This is due to the effect the price of oil (petrol) has on the general price level of goods and services thereby playing a silent but pivotal role at directly or indirectly encouraging or discouraging the engage in productive services by members and residents of a country. 

Of all the 12 countries in view, Angola with her oil price at $ 0.79 is at the ceiling. Also, her per capita income at $ 5,895 (2%) and per capita electricity consumption level at 243 kWh easily puts her ahead of Nigeria with respect to the quality life enjoyed by citizens of both countries. The 25% unemployment level of Angola, added to her high oil price could be significantly attributed the 27 years civil war that ravaged the country. Remarkably, Angola is currently putting its pieces together at a commendable pace.

In the case of Nigeria, the economy is somewhat similar to that of Angola, though the richness of Nigeria in natural resources is far more mouth watering than Angola but the living standards of its people is shockingly the reverse and on a high low. The per capita income of the self acclaimed giant of Africa at $ 2,578 (1%), her unrepentantly shameful per capita electricity consumption at 126 kWh gets the economy of the West African country more deepening. It is critical to state that with the erratic power supply level in Nigeria the potentials of Nigeria and Nigerians has not been exposed and for as long as the power sector in the country is not addressed the economy of the most populous black country in the world will keep deepening. 

Also, like I have reiterated timelessly which I will still do, the benefits that would be “magnetted” to the Nigerian economy if she can utterly get her refineries to meet all her local needs, added to the export benefits will not go unnoticed.  

The oil price at $ 0.6164/litre only makes life more miserable for her citizens and I will not be surprised if the unemployment level of Nigeria in no time rises above the current 21.00%. I infer that a reason for this is due to the expected further increase in the price of petrol.

Remarkably, Ecuador has her unemployment level at 4.20 % and her per capita income, $ 8,492. It is no doubt that her local oil price at $ 0.44/l plays a key role in amazingly bringing down the unemployment level in the country even though the economy has had its setback in recent years, notably 1999/2000.  Suffice it to identify that with the low oil price and per capita electricity consumption at 1,069 kWh, Ecuadorians are encouraged to independently partake in the production process. 

Libya with a per capita income of $ 5,787 has its unemployment level at 30.00%, making her have the worst unemployment level of all OPEC member states. But, as observed in the source to this table, the current unemployment analysis is not available but that of 2004. So for this reason, the analysis of Libya with respect to the unemployment level should not be taken into much account. But the local oil price of Libya at $ 0.17 added to her per capita electricity consumption at 3,431 kWh should be highly commendable.

Last but not the least is Algeria. Algeria with her local oil price at $ 0.41/litre has her per capita income at $ 7,333, unemployment level at 9.70% and per capita electricity consumption at 819 kWh. 

However in the quest of any country driving towards economic development and the fastest growing status, the venom that could get this ambition easily thwarted is what I have always referred to as the economy terrorist (ET). It is one thing that a nation carelessly brings upon herself, a thing that if let loose and carelessly allowed to breath in government as a result of greed, wickedness, a somewhat zero-supremacy of the law and a loss and misplacement of a once upon a time ambitious government, will get the country economically doomed rather than boomed up. This said the ET is corruption.   

Fundamentally, the following are the advantages a country will benefit from power supply being regular and an efficiently managed oil industry;

With Respect to Power Supply, the Country Will Benefit the Following;
 
1. The encouragement of foreign investment will be more realistic. The level of industrialization of any nation is largely dependent on the level of power supply prevalent in the country. The reason for this is that most Multi National Companies or foreign investors in general are aware of the dangers an inconsistent power supply poses to their overhead cost and will as such avoid investing in countries with a struggling power sector like the case of Nigeria. This is where Qatar stands out and a perfect example for other countries to follow and take a cue from.

2. A regular power supply in a country ensures an easier approach to the country easily securing the lives and properties of its citizens and residents and as thus, a well lighted country will have fighting crime easier than a country covered by darkness.

For example, in Nigeria, most times in the night, everywhere one goes, one sees darkness and where one does not see darkness, one hears heavy disturbing noise that are accompanied with the fumes of the power generating sets which are detrimental to ones health. The widespread darkness and “earthquaking” noise from the generators of lighted areas adds to the difficulty in crime fighting in the night, a time that has crime on a high and vice versa.

3. It ensures proper planning. With the high level of power failure in Nigeria, planning is regularly disrupted due to the importance and many functions electric power supply serves to man. From individual needs, to job and work needs. In addition, the incessant power failure in Nigeria makes the power generating firm in Nigeria; Power Holding Company of Nigeria (PHCN) plan for one rather than one planning for oneself.

4. It ensures a drop in unemployment level and a remarkable contribution to the per capita income. Apart from the advantage to be benefitted from an increase in foreign investment, a never-ending lighted up country has the advantage of having more of its citizens being their own bosses and entrepreneurs which has the multiplier effect of these entrepreneurs also being employers of labour. This is due to the fact that not everyone can afford a generator and even those that can afford it cannot regularly fuel it. In addition, an irregular power supply in a country also increases the need for establishments, especially the small scale ones to have a very limited workforce due to the unnecessary added cost of generating power.

5. Beauty to the environment. Though not having a direct economic significance to the economy, a well lighted up country makes night movement encouraged due to the beauty that is more manifested in the night. In addition, the availability of light at every nook and cranny of the federation will get more people, business establishments etc working at night.

With Regards To Efficiency in its Oil Industry;

1. It would ensure that the price of refined petroleum is on a low and very affordable.

2. It would ensure an ease in the affordability of goods and services. This is due to the fact that the general price level of goods and services is largely dependent on the price of oil, a good that I will say is the most used and purchased goods after water. To this end, everyone uses oil at one time or the other for production activities.

2. It eases the difficulty of an ease to daily living. This is dependent on the fact that higher oil prices make living much more difficult for the average individual in a country.

3. A low oil price is directly related to the cost of electricity bills on the end user. This is with respect to if natural gas and petroleum is majorly employed by the country in generating power.  

Having discussed the economies of these countries it is advised that in a country’s quest to economic development and viability, it is imperative for every government to work towards having a high and favourable per capita income which is achieved by the government taking advantage of the resources at its disposal through ensuring its continued efficient management and the need to have a limitless drive directed towards keeping the economy on a high, having its citizens and not just the people in government as its most valuable assets.





References:
Begg, D., Fischer, S. & Dornbusch, R. (2000) Economics sixth edition, McGraw- Hill Publishing Company. Berkshire


Please leave your comments, opinions and views in the comment(s) box provided below.

Thank you!!!



To be continued...

No comments:

Post a Comment

Kindly post your comments, as I anticipate getting back to you on your findings, opinions and suggestion with regards to what you just read.

Thank you.