If it's true that Nigeria sinks or swims on the fortunes of its oil industry, then this country -- black Africa's major economic power -- is no better than treading water these days.
Since January, crude production slid from 2.1 million barrels per day to just over 1 million, and oil industry sources here expect little or no improvement at least through the end of the year. In August, oil exports, which account for more than 90 percent of Nigeria's foreign-exchange earnings, fell to one-quarter of normal, costing the country over $1 billion for the month.
The drop-off in oil revenue, in turn, has forced the government to dip into its savings, with the result that Nigeria's once-for-midable foreign reserves have dwindled at the rate of $1 billion a month since May.
In an attempt to slow the drain, President Shehu Shagari last month imposed a freeze on government hiring, and drastic curbs on everything from official travel and office expenditures to use of public vehicles.
At the same time, his top budget adviser said the 1982 budget would be trimmed by 30 percent -- and his finance miniter bluntly warned state governments, already upset over less-than-expected revenue from the federal government this year, that next year would be learner still.
State and federal capital budgets, a major source of employment in this country of 100 million, are likely to be hard hit by the cutbacks, and even priority projects, like the new capital at Abuja, which only months ago was considered immune from austerity measures, will probably be scaled down. Though nothing has been said officially, many Western businessmen expect that some form of the hated import controls, eased only a year ago, will be reintroduced.
In spite of the coming austerity, Nigeria looks to a visitor anything but a country heading for recession. Two years into its experiment with US-style democracy, there is an optimism among Nigerians that is clearly at odds with the bleak oil outlook.
Lagos's jammed hotels are as crowded as usual, primarily with Western businessmen. The better restaurants and bars are full of tie-and-jacketed foreigners hammering out deals with fez-clad nigerians.
Thanks to an easing of the import controls last year, and a 25 percent increase in the minumum wage last month, there is an aura of consumption and abundance that contrasts sharply with the shortages of even 18 months ago -- when oil prices were firm.
The feeling of plenty reaches even to Lagos's legendary traffic jams -- known quaintly as "go-slows" here. Vendors take advantage of them, wandering among the cars, hawking veachballs, bathroom rugs, and even candy.
To some extent, the lack of visible effects of the oil glut is due to the time lag needed for developments to work their way through the economy. The sharpest falloff in oil production didn't occur until early summer, and the government announced its austerity measures only three weeks ago.
By most accounts, the government's revenue problems have not yet hit the man in the street. In fact, the Shagari administration has gone to considerable lengths to see that the glut, which both official and civilian Nigerians view as a temporary aberration, does not become a major preoccupation for the average Nigerian.
According to a reliable Western financial source, the country's foreign reserves have dropped from $7.5 billion at the end of May to $4.6 billion in early September -- or roughly $1 billion a month to cover the gap between the country's import needs and its diminished oil revenue.
At the same time, Shagari insists that the nation is not in an economic crisis. Western analysts who closely follow the Nigerian economy agree that "crisis" is too strong a description for the situation.For one thing, they point out, the government can cut a good deal of fat from its expenditures.
More importantly, say Western bankers, Nigeria's low level of debt and high credit worthiness give it the option of borrowing to bridge the gap between its import bills and slumping oil revenue. Nevertheless, most business analysts expect the glut to begin to have a more painful effect before too long.
The reason is that few oil-industry sources expect production -- and exports -- to improve substantially soon despite Nigeria's decision in late August to cut its price from $40 per barrel to $36 per barrel.
Continued low production will force Nigerian to either borrow or tighten its belts further, in the opinion of most businessmen. And while the option to borrow it open to them, oil company sources say that any heavy balance-of-payment borrowing now could cause problems if the government tries to arrange financing for the $14 billion for a liquid natural gas plant, for which a decision is expected later this month.
Western bankers report that the Nigerian government has in fact made no move to line up balance-of-payments help.
In the absence of borrowing, tighter budget cuts are certain, and several Westerners here say that some form of import controls -- imposed three years ago by the military government after the 1978 oil glut, an deased by Shagari last year -- are in the offing.
Like borrowing, however, controls have their drawbacks. For one thing, they are relatively ineffective because of Nigeria's flourishing smuggling trade. Controls increase smuggling and raise prices of banned goods, businessmen say.
Another problem is political.Shagari has largely avoided criticism of his handling of the oil glut despite private assertions that many problems stem from a misreading by the government of the oil markets.
Controls, still remembered with distaste by most nigerians, would of course change that. Although Shagari is still very popular here, several of his oppenents are already jockeying for power.