I was a guest at a Lagos-based TV station’s morning breakfast show the other day to discuss issues that bordered on the current level of Nigeria’s foreign reserves at $47bn. The Central Bank of Nigeria paraded this as a great achievement, benchmarking itself with that of South Africa, currently at $50bn.
Honestly, I am sorely grieved at the low level of propaganda that the Federal Government can sink to just to deceive gullible Nigerians with absolute figures that do not truly reflect our economic realities as a country.
Now, let us interrogate the issues.
As of April 2017, the total external debt position of Nigeria was $11.41bn (up by $2.4bn from the position of $9bn it was when the current FG took over power in 2015). Fast forward to March 2018, our external borrowing is now $18.9bn. That means we have borrowed externally $7.5bn within this period and $9.9bn from 2015.
Our 2017 budget parameters were fixed as follows: Crude oil output: 2.2 million barrels per day. Crude Oil price benchmark at $44.50/pb. Exchange rate was pegged at N305/$1. Budget deficit was put at N2.3tn to be funded via borrowings.
However, within the same periods, crude oil prices averaged $60/pb (It has been above the $66/pb mark since January 2018), which is a net ECA gain of $15.5/pb in excess of the budget benchmark. In dollar and naira terms, we made excess $11bn from crude oil sales. That is even after discounting output to two million bpd 200,000bpd less than budget benchmark of 2.2m bpd. (Kindly note that it is not every cent of this $11billion that comes to the FG. But a substantial portion of it does).
Within these periods till date, Nigeria’s domestic debt profile rose by over N4tn. That is, we borrowed an additional N4.3tn beside the $7.5bn/N2.3tn we borrowed externally. Kindly note that the 2017 budget had a projected deficit of N2.3tn. But within the same period, Nigeria borrowed N4tn (the Federal Government’s portion of this was over N3tn) to fund a deficit of N2.3tn, this is despite the fact that we earned far more oil revenues than we anticipated.
Kindly also note that as of April 2017, the Nigerian foreign reserve was $31.22bn (CBN records).
For those who do not know, what grew our foreign reserves from $32.22bn in April 2017 to $47bn today is attributed to the combined excess crude oil earning of over $15-25 per barrel of crude oil over these periods to March 2018 and the external borrowing of over $7.5bn.
Sincerely, if we are to capture honestly all our excess crude oil earnings within this period, our foreign reserve should actually have been in the region of $51bn today.
However, recent reports show that a huge portion of our crude oil production is being stolen. This is way above the roguish figures recorded under the previous governments said to be corrupt. (So much for the new government of integrity and anti-corruption).
Now, the questions the minders of this government need to answer are:
What landmark infrastructure did we build up in Nigeria within these intervening periods that we borrowed over $36bn/N12tn, both locally and domestically?
What did we do with the bumper crude oil earnings over and above our budget benchmarks?
How come we have an accretion of over $16bn in our foreign reserves from $31bn in April 2017 to $47bn today, yet the naira continued to remain at N360/$1 at the forex market?
How come global investors are not so sweetened by this 50 per cent growth in our foreign reserves and bet more on the naira? This is because, logically and other normal circumstances, the naira should have gained more grounds on the basket of other convertible foreign currencies in the light of this development.
So, why are global investors still pussyfooting in giving more exchange values to the naira?
The answers to the above questions are clear. They know what a few of us, who are deeply knowledgeable and savvy, know about the true realities on the ground. We are playing Ponzi games. They know that an economy that borrows $36bn in less than three years and is still grandstanding about an accretion of their reserves by $16bn is a “wash wash” economy. They are not easily deceived. They know that the deck does not stack well.
They also know that what led to our foreign reserves accretion is just Providence and Ponzi borrowing and cannot be attributed to any scientific and creative economic policy/programmes of the government of Nigeria. They know that we are paying lip service to the diversification of the economy. They also know that this deck of cards that are not properly stacked will soon come crashing. They also realise that a majority of Nigerians, even those who claim to know, are economic and financial illiterates who cannot dissect the numbers appropriately.
They know that our governance and choice of those who lead us or run our MDAs are not mostly based on merit/excellence, but mostly driven by mediocrity, nepotism and all manner of primordial considerations.
Dr Nnaemeka Obiaraeri, Fica,
Ikoyi, Lagos
END
Be the first to comment