Why Is The Economy Crashing And Other Questions

[justseyi]

I came across this thread by Kalu Aja and I thought to share on student village for students who are interested in economics

Q: why is the economy crashing?

A: Nigeria imports more, thus losing local jobs, consumption falls

Q: why do Nigerians import?

A: Because imports are cheaper

Q: How can you reverse this

A: make local production cheaper

 

Q: how?

A: Nigeria has gas; pass a law; if you can get the gas, use it for free.

Q: For free?

A: Yes, if I want to site a factory in an area with gas, I can drill get gas, I can use it for free. However, I can sell surplus

Q: ok, so the surplus is sold?

A: Yes,

 

Q: Why can’t we just drill gas ourselves?

A: Government is slow and broke, gas demand is rising, and gas supply is not keeping pace. With this policy, a company like Exxon Mobil can drill gas and sell to Nigerian businesses at ANY PRICE it wants.

 

Q: I don’t agree; why should Exxon own & sell my gas

A: well, Exxon will get the gas out of the ground and sell; this drops the cost of doing business in Nigeria, more SMEs get cheap power, it’s a subsidy, at the cost of Exxon selling that gas at any price. Plus, you tax them

 

Q: I get it now; instead of FGN spending on Gas infrastructure, we allow Exxon to spend; their payback is they can export surplus gas, which Nigeria can tax, but local gas, they can sell at their own price.

 

A. yes, if local SMEs get cheap gas, then imports cant be cheaper

 

Q; is there a model for this?

A: yes, look at the deal between the Volta Aluminium Company, Ghana and the US Import-Export bank that involved a loan to Ghana to build the Akosombo Dam to power an American Alumumium smelting company,

called Valco 1/2

 

Q: In effect, use our natural advantage to win.

 

A: Exactly, Nigeria is a gas nation with small oil; make it open to anyone, e.g. data centres will come here, use free gas, but any excess gas they will sell. Its a win-win for everyone.

 

It’s not rocket science

 

Valco got exemptions from taxes on imports and exports in Ghana and a written promise that Ghana would not expropriate their assets.

 

Ghana got a dam, sold about 50% of power to Valco and the rest powered Ghana. 2/2

 

Share your thoughts in the comment section.

[Author]

Posts