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Buharinomics: Plunging Nigeria Into Pre-2005 Paris Club Debt Peonage, CBN Alerts

The Oasis Reporters

February 17, 2019

One of the legacies of the People’s Democratic Party, PDP led administration of Chief Olusegun Obasanjo (1999-2007) was to help Nigeria exit the Paris Club huge debt overhang that successive military juntas from 1984- 1998 plunged the oil producing African country, Nigeria Into.

A former military junta leader, now civilian President Muhammadu Buhari seems to have taken Nigeria right back to the pre- 2005 debt levels, in less than four years of his presidency.

The Central Bank of Nigeria (CBN)’s monetary policy committee has warned that the federal government’s debt levels could be fast approaching the pre-2005 levels. Reading the communique of the committee’s decision at the end of its bi-monthly meeting on Tuesday, Godwin Emefiele, the CBN governor, said: “On external borrowing, the committee noted the increase in debt level advising for caution, noting that it could fast be approaching the pre-2005 Paris Club level.” On October 20, 2005, Nigeria reached an $18 billion debt relief agreement with Paris Club. Nigeria was required to pay $12.4 billion of its $30 billion debt stock in three tranches. Ngozi Okonjo-Iweala, who was the minister of finance at that time, led the Nigerian delegation while Xavier Muscat, chairman of the Paris Club, led the 15-member club to sign the agreement. The deal saw Nigeria exit the club completely after the final payment was made on April 21, 2006. According to data released by the Debt Management Office, Nigeria’s external debt stood at $21.6 billion as at September 30. Speaking on the federal government’s plan to raise more revenue through value-added tax, Emefiele said the committee was of the view that it would help reduce pressure on government expenditure. “The committee also noted the attempts by the government to broaden the base of the Value Added Tax and urge the authorities to expedite action in that effect, arguing that increased tax collection will reduce pressure on government expenditure and create fiscal buffers to improve macroeconomic management,” he said.

Godwin Emefiele, Nigeria’s Central Bank Governor

The monetary policy rate was retained at 14% while the Cash Reserves Ratio was maintained at 22.5%. Liquidity ratio was left at 30% and the Asymmetric Window was left at +200 and -500 basis points around the MPR.

One troubling aspect of the government’s economic policies is the payment of over 1.4 trillion naira as subsidy for imported Petroleum to marketers while the nation’s Refineries remain moribund, thereby making one of the largest producers of Crude-oil in Africa to be paying huge subsidy payments on Petroleum subsidy.

Nigeria graduates over a hundred thousand engineering graduates from its tertiary institutions who can’t find work, and there is no industrial framework for enterprise in the petroleum sector to give it’s teeming graduates work thereby helping to reduce unemployment drastically.

Petroleum products are refined for Nigeria by Asian countries who have no Crude-oil. They import from Nigeria, refine it in their home countries using their own native engineers, and re-export the finished products back to Nigeria. Their engineers get busy with work, while Nigeria’s own engineers are redundant. As icing on the cake, Asian and European countries that refine petrol for Nigeria receive 1.4 trillion naira as subsidy payments through their Nigerian conduits.

The PDP Vice Presidential candidate, Peter Obi, an economist and one time governor of the South Eastern State of Anambra where the first private refining company, Orient Petroleum Refinery owned by Chief Emeka Anyaoku was established during his tenure, has asserted that Nigeria’s debts were becoming “unsustainable”.

The PDP presidential candidate himself has insisted that he would place the Nigerian National Petroleum Corporation, NNPC on the stock market for sale, the oil monopoly that has utterly failed to make the nation’s refineries work due to what critics allege as entrenched corruption.

A presidential election is imminent, just few days away, February 23, 2019, if it is not postponed again due to logistics factors.

It is a straight fight between the APC ruling party president, Gen. Muhammadu Buhari and the opposition PDP candidate, Atiku Abubakar, who pundits tip to win, if the election is free and fair.

Additional reporting: The Cable

Greg Abolo

Blogger at The Oasis Reporters.

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