The Oasis Reporters
April 16, 2018
By Dr Nnaemeka Onyeka Obiaraeri, FICA,
I was a guest at the TVC morning breakfast show two days ago to debate the issues that border on the current level of our foreign reserve at $47billion. The CBN paraded this as a great achievement, benchmarking itself with that of South Africa, currently at $50 billion.
Honestly, I am sorely grieved at the low level/nadir of deceit and propaganda that the FGN can sink to just to deceive the gullible Nigerians with absolute figures that do not truly reflect our economic situation/realities as a country.
NOW LET’S INTERROGATE THIS DECEIT.
1. As at April 2017, the total external debt position of Nigeria was $11.41 billion (Up by $2.4 billion from the position of $9 billion it was when the current government took over power in 2015).
Fast forward to March 2018, our external borrowing is now $18.9billion. That means we have borrowed externally $7.5billion within this period and $9.9billion from 2015.
2. 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 N2.3 trillion to be funded via borrowings .
3. However, within the same periods, crude oil prices averaged $60/BPD (It has been above the $66/BPD 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 $11billion from crude oil sales. That is even after discounting output to 2 million bpd 200,000 BPD less than budget benchmark of 2.2m BPD. (Kindly note that it is not every cent of this $11billion that comes to the Federal Govt of Nigeria, but a substantial portion of it does).
4. Within these periods till date Nigeria’s Domestic debt profile rose by over 4 Trillion. That is, we borrowed additional N4.3 trillion beside the $7.5 billion/N2.3 trillion we borrowed externally.
KINDLY NOTE THAT THE 2017 BUDGET HAD A PROJECTED DEFICIT OF N2.3 TRILLION . But within the same period, Nigeria borrowed N4 Trillion (the FG portion of this was over 3 Trillion) to fund a deficit of N2.3 trillion, this is despite the fact that we earned far more oil revenues than we anticipated.
5. Kindly also note that as at April 2017, the Nigerian foreign reserve was $31.22billion (CBN records).
6. For those who do not know, what grew our foreign reserve from $32.22 billion in April 2017 to $47billion today, it 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 $7.5billion .
7. Sincerely, if we are to capture all our excess crude oil earnings within this period, our foreign reserve should actually have been in the region of $51 billion today.
8. HOWEVER, RECENT REPORTS SHOW THAT A HUGE PORTION OF OUR CRUDE OIL PRODUCTION ARE BEING STOLEN. THIS IS WAY ABOVE THE THIEVERY FIGURES RECORDED UNDER THE PAST GOVERNMENTS. (so much for the new government of integrity and anti-corruption).
NOW THE QUESTIONS THAT THE AGENTS OF THE GOVERNMENTS OF NIGERIA AT ALL LEVELS NEED TO ANSWER ARE THESE:
What landmark infrastructure did we build up in Nigeria within these intervening periods that we borrowed over $36billion/N12 Trillion 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 $16 billion in our foreign reserve from $31billion in April 2017 to $47billion today, yet the Naira continues to remain at N360/$1 at the I & E forex market?
How come global investors are not so sweetened by this 50% growth in our foreign reserve 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 pussy footing 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 ground.
We are playing ponzi games.
They know that an economy that borrows $36billion in less than three years and still grandstands about an accretion of their reserve by $16billion 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 reserve accretion is just provident 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 Nigerian 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 over 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 manners of primordial considerations.
I SHALL COME BACK HERE IN SERIES TWO OF THIS INTERVENTION TO SHED MORE LIGHT ON HOW THE ACTIONS OF THE NNPC/THE PETROLEUM MINISTRY AND THE PRESIDENCY IN POLITICAL MANIPULATION OF THE DOWNSTREAM OIL AND GAS SECTOR HAVE LED TO MASSIVE LOSS OF JOBS, DEPRESSION IN THE INDUSTRY AND HAS CREATED HEAVY TOXIC ASSETS IN THE BANKING SECTOR.
WE SHALL ALSO DISCUSS AS USUAL THE WAY FORWARD. KEEP A DATE HERE.