No sane Nigerian should be amused that, despite the high crude oil prices in the international markets and a significant step-up in production output from the offshore oilfields, the Federal Government claimed it suffered a revenue shortfall in the first three quarters of the year.
It is even more baffling when this is matched against the fact that production output from the Niger Delta oilfields is almost fully recovered following the atmosphere of peace heralded by the amnesty programme.
Government’s order for a forensic audit of the accounts of the Nigerian National Petroleum Corporation (NNPC) could best be described as cosmetic. Truth be told, that audit is not going to unravel anything because the corporation and its bosses at the Presidency have perfected the act of cover-ups and manipulation of account details especially as it concerns the nation’s oil earnings and the joint venture funding abracadabra.
Data from the Budget Office shows that the average crude oil price in the first quarter of the year stood at an average of $77.65. In the second quarter and third quarter, it averaged $79.54 per barrel representing an average margin of $12.54 per barrel on Nigeria’s 2010 budget benchmark of $67 per barrel.
The price of crude oil fluctuated between $75.06 and $85.29 per barrel during the period under review while crude oil production data from the NNPC shows that average crude oil production per day stood at 2.39 million, representing an increase of 0.04 percent on the budget benchmark of 2.35 million barrels per day.
The Federal Budget Office had reported in June, a revenue shortfall in net crude oil earning into the Federation account of 35.37 percent for the second quarter of the year. The first quarter of the year had also seen a net crude oil revenue shortfall of 33.07 percent. This trend continued into October though with slight improvement in the shortfall.
The question is: which market is the NNPC selling Nigeria’s crude oil? Do they sell to their buyers at prices different from spot market rates? The corruption mess in the NNPC was taken to a criminal crescendo by former president Obasanjo and his administration when he took over the supervision of the corporation as a sole administrator. And until the harm inflicted by that era is probed and remedied, nothing good in terms of transparency and accountability can ever come from the NNPC system and this is the truth.
Yar’adua’s unsteady period at the presidency also worsened the mess Obasanjo created as cronies, family members and some aides of the late president had a field day doing what they wanted with the corporation and the nation’s oil earnings while Umaru was incapacitated.
Now, the present administration in its bid to win acceptability across the country is also allowing ‘funny’ things happen to the nation’s oil earnings.
Anything short of a comprehensive probe of the activities of the NNPC dating back to 2000 will not solve anything. Mark my word!
Another issue is that if President Jonathan is sincere with the move to sanitise the NNPC and the entire oil sector, he should immediately pursue the de-bottling of the corporation as prescribed by the Petroleum Industry Bill (PIB). At least let’s have these funny leaches sucking us dry dispersed to smaller constituencies.
As expected, the unbalanced accounting of produced oil and revenue earnings has obviously been blamed by the Finance Minister, Olusegun Aganga for the poor performance of the 2010 budget. So the gravity of the issue goes beyond mere politics to the overall wellbeing of our economy and the daily survival of the ordinary Nigerians.
A break-down of Federal Government’s N5.2 trillion expenditure in 2010 shows a capital expenditure of N1.8 trillion; Ministries, Departments and Agencies recurrent expenditure, including personnel cost and overheads of N3.2 trillion; and statutory transfers of N0.2 trillion. However, of the N1.8 trillion capital expenditure, only about N900 billion, or 50 percent, is expected to be utilised. As of June 2010, only about 30 percent of the cash-backed capital expenditure released had been utilised.
So where is the logic that the rapacious raid on the Excess Crude Account was to fund development of the critical sectors? The truth is that the ECA, which was created in 2003 to mitigate the boom and burst cycle that has characterised Nigerian economy since the first oil boom in the 1970s, at its peak in 2007 stood at $20.1bn. This has been brazenly raided and more than $15 billion dollars squandered from it. And the rapacious raid continues with impunity!
The Minister of Finance was quoted as saying that ‘it did not make sense to have reserves while the critical sector was suffering from lack of development” (ThisDay, November 25, 2010). The irony is that while the Minister was thumping his chest for a 100% implementation of the current side of the budget, he was coy on why only 30 percent or less of the capital side of the budget which drives development has been implemented.
The depletion of the Excess Crude Account and continued steep fall in the nation’s foreign reserves at a time of high oil prices and record high oil production should be a major concern to Nigerians.
A recent report by BGL Securities puts the total debt outstanding at the end of third quarter of 2010 at N 4.229 trillion. The Debt Management Office (DMO), meanwhile plans to issue N70 billion worth of FGN bonds this month. In consideration of this, the security company puts the outstanding domestic debt in 2010 at N4.511 trillion. This means that the total public debt is estimated to reach as high as N5.747 trillion by end of 2010, meaning about 21 percent of GDP (2010 estimate).
The relief Nigeria enjoyed since the debt forgiveness of 2005 is being threatened as the country recorded a high debt growth profile in 2010 alone, since the debt cancellation by the Paris Club five years ago.
The country’s foreign debt profile was US $4.5 billion as of the third quarter of 2010. And if the US $3.702 billion new loan being sought by the government gets the approval of the National Assembly is added to the outstanding external debt, total external debt will be US$8.2 billion (N1, 234 trillion) by the close of 2010.
Contrary to what the Minister would have us believe that the raid on the ECA was to avoid borrowing, this government has not only accumulated huge amounts of debt but seem to have done nothing with the borrowed funds. What impact has the borrowed funds and the depletion of the ECA made on the lives of ordinary Nigerians? Perhaps the Minister would have us believe that in ‘the long run it will be better’.
In fact when challenged on why the alleged growth in the economy has not made any dent on the unacceptably high incidences of unemployment and poverty, Dr Aganga was quoted by the Vanguard of August 27, 2010 as calling it a ‘paradox’. For most Nigerians however, it is not a paradox. It is simply a failure of economic policies and political leadership. It is in fact only in voodoo economics that a Finance Minister would be proclaiming that the economy is sound when it is in fact hanging dangerously on the precipice.
IFEANYI IZEZE, ABUJA ([email protected])