• A meeting of the World Bank Group and the International Monetary Fund recently took place in Washington DC
• Nigeria’s Coordinating Minister and Minister of Finance Dr. Ngozi Okonjo-Iwealla attended
• Ngozi used the occasion of the meeting to allay fears that Nigeria’s economy was in danger
• The quantity of crude oil being exported by Nigeria has been on a steady decline
• Critics were concerned that Nigeria government will make up the revenue shortfall by withdrawing and decimating the Excess Crude Account (ECA)
• A meeting of the World Bank Group and the International Monetary Fund recently took place in Washington DC
• Nigeria’s Coordinating Minister and Minister of Finance Dr. Ngozi Okonjo-Iwealla attended
• Ngozi used the occasion of the meeting to allay fears that Nigeria’s economy was in danger
• The quantity of crude oil being exported by Nigeria has been on a steady decline
• Critics were concerned that Nigeria government will make up the revenue shortfall by withdrawing and decimating the Excess Crude Account (ECA)
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• The ECA according to Ngozi’s report has a total balance of $7 billion
• According to the Minister the following factors are responsible for the shortfall in earnings:
1) Nigeria budgeted to sell 2.58 million barrels per day in the current 2013 fiscal year
2) About 480 million barrels per day (bpd) is NOT being realized for the following reasons:
A. 300,000 bpd from the Shut-in of Shell Nembe Operations
B. 65,000 bpd from the Qua Iboe force majeure
C. 50,000 bpd due to repair work at AGIP station and other unspecified issues
D. 65,000 BPD from oil thieves, pipeline vandals and other ‘other’ factors not included above
3) Current monthly losses represents approximately 19 percent of total budgeted oil revenue
• Dr. Iwealla quantified the losses at $1 billion revenue loss per month
• Nigeria government now draws regularly from the ECA to augment unanticipated revenue shortfall
• Customs revenue is significantly down due to increased higher tariff to discourage the importation of rice
• Ngozi and Jonathan are going to strive to increase tax collection.
Actions Taken By the Government:
• President Jonathan has been briefed and actions are being taken on all fronts
• Jonathan has ordered the Navy to increase its patrols around the hot spots for oil theft and bunkering
• Government is aware of the ominous threats and that is why proactive steps are being taken
• Ngozi and Jonathan are taking long term measures to diversify the economy and ensure that drawing from the ECA is a short term measure.
My summation:
• Let me start by saying that Ngozi Okonjo-Iwealla did not invent the age old habit of finance leaders lying about the budget and/or numbers in general.
• What is worrisome to me is the fact that she is engaging in such low level of lying reserved for untested amateurs
• Ngozi’s explanations suggests a finance minister who is disconnected from the real world but relies heavily on book theories and permutations to elucidate problematical issues
• All things being equal (ceteris paribus), the Nigerian economy is not any immediate danger
• Ceteris Paribus is about the only thing I remember from the gruesome economics classes from Ife
• I also remember the crazy and drunk macro-economics teacher from Uganda, Muthambuka
• But we know, all things are not always equal
• Any economy that relies heavily on one product like crude oil that it does not enjoy any exclusivity will always be in danger of collapsing
• It was not too long ago under Abacha that crude oil sold for $8 per barrel
• We will most likely experience this low price level again in our life time
• All things being both equal or unequal
• If 480 million barrels represents 19% of the budgeted volume
• Percentage of missing volumes may not be directly proportional to the revenue earned
• This is rooted in the marginal cost and revenue concepts. However
• For simplicity sake if we invoke the law of direct proportion
• Ngozi is misrepresenting the facts or I can safely confirm that she is a premeditated liar
• If Nigeria is missing 19% of her revenue base which equals $1 billion per Ngozi’s claim
• 100 % percent of the monthly revenue would be $5.4 billion per month
• The total annualized revenue should be $64.5 billion
• If we believe Ngozi’s claim, and for this particular purpose I insincerely do.
• Nigeria is currently earning about $4.3 billion per month
• This means there is absolutely no need to withdraw from the Excess Crude Account
• She pulled the exaggerated $1 billion out of her behind and it is clearly not supported by her own ‘facts’
• Nigeria’s 2013 total budget is about 5 Trillion Naira
• Converting 5 Trillion Naira using the budgeted dollar exchange rate of 160 is $31 billion
• We are either dealing with a nauseatingly incompetent bunch or a well padded budget designed to fail or both
• It was depressing that Ngozi did not provide a definite timeline on when the issues confronting the current budget including the on-going repairs will be resolved
• A good manager should have reviewed the details and provided this information without being asked
• Vandalizing pipelines and oil bunkering are not new phenomenon in Nigeria
• You will think by now that the budgeting process should have recognized this
• An estimated quantity should have been sufficiently included in the ‘risk and opportunity’ section of the budget
• Based on the above issues, I have no choice but to conclude that Ngozi came to Washington DC naively to celebrate incompetency and fraud.
• I shall end my observations until further notice
• Oh, one more thing please
• In the ‘action taken by the government’ section of this piece
• I paused hard and laughed hysterically
• Ngozi declared that the government is taking ‘proactive steps’ to combat known threats.
• That my friends does not make any sense
• If the measures taken by the government are proactive, the threats cannot already be in existence
• All things being equal, Dr Ngozi Okonjo-Iwealla is an bungling expert in the country of the blind
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