To whom much is given, much is expected, is a popular saying. Nigeria is a country blessed with enormous human and natural resources to the point that she is the sixth largest oil producer in the world. Yet, there seems to be v ery little to give back to her teeming citizens. Or at best, show for the exploration and exploitation of this black gold over several decades. DAVID AGBA analyses the back and forth arguments over the country’s economy and given that the Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala only last Tuesday stated emphatically that Nigeria is not broke.
Citizens of Nigeria mostly live below the One Dollar per day mark that obtains in the developed climes or other oil producing nations of the world.
Several issues account for this anomaly. Challenges of corruption, lack of infrastructure, no good governance, insecurity, ethnic and tribal squabbles among others.
Over the years, different administrations have come up with different economic policies ranging from Operation Feed The Nation, Green Revolution Programme, Seven Point-Agenda and now there is the Transformation Agenda of President Goodluck Jonathan’s administration.
The respective administrations have had to contend with how to raise money and use it to ensure that the government machinery goes on with its activities without any hitch.
Nigeria being a mono- crop economy with over 90 per cent dependence on oil has continually had problems with its economic base since the economy is not diversified.
This over dependence on oil has so affected the country and its citizens that most of the states have become lazy and cannot work towards improving their internally generated revenue (IGR). More so, the kind of federalism practiced in Nigeria is skewed towards a unitary system of government.
So much power is concentrated in the centre that the federating units called states are always looking up to the man at the centre to be able to eke out a living and this does not augur well for the socio-political and economic development of the country especially in the 21st century.
There is no doubt that once in a while, countries face upheavals in its revenue base and this is always followed with questions as to whether the particular country is broke or not because such situations have left some countries bankrupt.
Nigeria is no exception, but, analysts have expressed dismay that since the federal government projected in its 2014 budget based on $79 per barrel of crude oil, and the country has been selling above $100, its not fair for any minister, whosoever to dilly dally with figures, when actually, the money on ground cannot solve some unique national problems.
This was brought to the fore last week, when the coordinating minister of the economy and minister of finance, DrNgoziOkonjo-Iweala was asked if Nigeria is broke?
Her response was a confirmation of the fact that things are really not rosy with the Nigerian economy, but she could not do more than defend her principal by saying “though Nigeria may be facing some financial challenges owing to the fluctuation in production output and price of crude oil at the international market, but that has not yet rendered the nation broke.”
Rendering the account of her ministry’s stewardship in the last nine months Okonjo-Iweala insisted that all the economic fundamentals remain strong with a sound macroeconomic stability and the country meeting her obligations to stakeholders like workers and creditors.
Besides, she revealed that because of the diversification efforts of the President Goodluck Jonathan administration, Nigeria’s economy was gradually no longer solely relying on oil.
She added that mineral resources and non-oil revenue proceeds has in the first nine months of this year alone generated a whooping N1.838 trillion with the potentials of doubling or tripling the figures in the next one to two years when the benefit of the Mckinsey partnership in the growing of the non-oil revenue begins to rein in.
Reassuring that all was well, the minister announced that the botched monthly Federation Accounts Allocation Committee (FAAC) meeting which could not hold last week in Enugu during the National Council on Finance and Economic Council (NACOFED) meeting would hold in Abuja for the purpose of distribution of federally collected revenue for the month of September 2014 to the three tiers of government.
This meeting held as said but, with some level of grey areas in terms revenue available for sharing among the three tiers of government.
During the meeting, the states’ finance commissioners had to step out of the venue to a separate room to brainstorm on whether to accept what the government presented for sharing or not and this disagreement prolonged the deliberations till late hours of Wednesday night.
One of the nagging issues reported to have further created disagreements between members was the outstanding debt owed by the Nigerian National Petroleum Corporation (NNPC), to the Federation Account.
Consequently, the FAAC meeting was forced to break midway to allow the state finance commissioners consult their governors on how to break the impasse.
It was gathered that the figures presented by the Federal Government was so inadequate, thereby compelling the states to reject the sum and to canvass the sharing of the N2.7 billion Excess Crude Account (ECA), savings.
The Federal Government team was said to have shared a different view with the finance commissioners who had wanted the money in the ECA shared.
Minister of state for finance, Amb. Bashir Yuguda, and other Federal Government officials were said to be more disposed to a no-sharing option based on the view that the country’s savings should be beefed to mitigate any likely fiscal shocks on the economy, following the lingering international oil market uncertainties.
However, the chairman of States Finance Commissioners, Mr. Timothy Odah, who is also the finance commissioner from Ebonyi State said there, was no controversy over the ECA.
He said that the position of the Committee was that the ECA savings should be saved, and that the general consensus was that savings should be beefed up and that revenue base should be diversified to increase earnings.
Responding to the question on whether Nigeria is broke owing to wrangling at the FAAC meeting, he said: “Nigeria is not broke, there is no problem with the Nigerian economy but we need to diversify because this over dependence on oil revenue is dangerous.”Still responding to the economy
issue during the ministerial briefing Okojno-Iweala also declared that as part of efforts by the ministry to support the growth of the economy and create jobs for the teeming unemployed population, her ministry has within the period mobilised outside the normal budget provision a whooping $14.1 billion to the real sector to strengthen the sector and also uplift the welfare of the citizenry.
The minister who was accompanied at the briefing by the Minister of State in the Ministry, Ambassador Bashir Yuguda, and all heads of parastatals within the ministry commented on the nation’s liquidity position: “Its like some people want to
force this nation to brokerage, because this same headline appeared in some newspapers about two years ago that Nigeria was broke.”
She continued: “The country is like a household. There may be periods that your income may shrink because of some unforeseen circumstances and you just adjust if you were indulging in very expensive food you may tell your children that its time we just manage garri and if you have a spouse that is not working, you tell her please you must go and start a trade. You would not jump out and begin to tell people that your condition is worst and you are dying because you know that it’s a temporary condition. That is the same with a country.
“We are facing a temporary challenge because of the fluctuation in both price and quantity of oil produced. Yet we are meeting our obligations. We have not got to where we can’t pay our salaries nor are we failing to meet our obligations to our creditors. Our foreign reserves is robust at $39.48 billion as at October 16 and it can finance nine months of import. We are gradually rebuilding our excess crude account, which is at $4.11 billion at the moment and we are working to increase the account.
“Our Sovereign Wealth Fund to day holds investment of $1.55 billion and the yield on our Eurobonds are now dropping steadily. This is as a result of confidence in our economy which is today the third destination of foreign direct investment in Africa as a result of the recent rebasing of our economy.”
Analysts have continued to worry that while it’s true that many foreign investors want a share of energy and infrastructure projects in Nigeria, foreign portfolio inflows into naira-denominated treasury bills and government bonds, which had accelerated earlier in the year, have fallen off lately, on the back of weakened global economic outlook, as investors take a flight to safety, exiting their holdings of about $5 billion in naira debt, for the traditional safe havens of choice like the dollar, US treasuries, German Bunds, and gold. The Debt Management Office’s planned sale of N83.9 billion ($515 million) in debt (including up to N30 billion of 15.1 percent bonds due 2017) in the coming week may flop, despite yields on the existing 2017 notes rising seven basis points to a record high of 15.71 percent on June 25.
These ominous signs may not be so apparent in Aso Villa, but the truth is that debt overhang could debase Nigeria’s credit rating, if the debts are not paid on schedule. Inflation, which slowed to 12.7 percent in May from 12.9 percent in April, is projected to peak at 14.5 percent in the third quarter, according to CBN. The lending rate has been inching up of late, to 28 percent officially, as against 26 (unofficial rate is between 29 and 30 percent).
The CBN will resist easing up on the lending rate because higher inflation would finish the job started by depleting forex and depreciating naira exchange rate. Economic growth will be stifled, further draining the meagre government revenue from non-oil sector.