Dollar Reserves: Who Owns What?-by Les Leba

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At the peak of the crude oil price boom in 2007, this commodity sold for as high as $150/barrel on the international market and Nigeria fortuitously garnered her highest ever external reserves of over $60bn. This figure would have exceeded

$72bn, but for the 'illegal' withdrawal of about $13bn to exit the controversial Paris and London Club debts just over three years ago!

The promised reliefs in terms of improved healthcare, education and infrastructural enhancement that would evolve from the debt repayments have turned out to be mere propaganda! Nigerians have in fact since become listed amongst the world's poorest; a class to which we never belonged before the debt exit! Meanwhile, the beneficiaries of the $13bn payout have since repositioned themselves with more funds to once again reap from our growing penchant for more foreign loans!

The over $13bn doled out could have funded the provision of critical infrastructure such as power, rail, human capacity development, etc, so as to enhance our industrial and productive base such that we could painlessly reschedule and repay external debts from the benefits realized from such investments.

Regrettably, such economic wisdom was discountenanced by our government's economic team. Several reputable financial and economic analysts including two past Ministers of Finance have indicated that the $13bn debt exit was a scam cleverly perpetrated by our Western creditors to 'relieve' us of the burden of managing our increasing dollar reserves! Of course, the process was facilitated by simply embedding Nigerian technocrats whose salaries were paid directly by the same international outfit (World Bank) which is controlled by the main beneficiaries of the $13bn pay out!

It was no surprise that our Finance Minister and other IMF cohorts in the administration bowed out soon after their mission was accomplished and it was no surprise also that these Nigerians IMF tools were quickly rewarded with promotions for a job well done in Nigeria by their principals!

Meanwhile, all indications are that Nigerians became poorer still during and after the intervention of the World Bank Experts! So, in place of the hype and promise of a better tomorrow, our gain as a nation for adopting and embracing IMF/World Bank advice and direction has inevitably been deepening poverty of our people!

After the Paris Club debt exit, former President Obasanjo also took the liberty to unilaterally commandeer billions of dollars from our dollar reserves to pay for the integrated power and expanded rail projects.

In all the instances narrated above, what is glaring is the total lack of adherence to constitutional provisions with regard to our export earnings and our reserves. In the first place, there is no provision for any so-called excess crude account in the 1999 Constitution which affirms that all revenue must be paid into a consolidated revenue account (see Section 162) and disbursed in line with constitutional provisions.

If the Executive arm of government got away with unlicensed incursions into our export revenue reserves, it was not surprising that the custodian of these reserves also decided to get in on the act. To this end, the former CBN Governor unilaterally decided that our economy would be better off if $7bn was shared between 14 Nigerian banks!

It did not matter to Soludo that the government was heavily indebted and paying over N200bn annually on interest and servicing charges at that time to the same banks that our CBN gave soft loans or dollar deposits (the actual mode is yet to be defined in the public domain) of $7bn. In spite of the current travails in the banking sector, there is also yet no official statement on the current security or otherwise of these public funds!

Indeed, it is not clear how many of the so far identified distressed banks were also beneficiaries of the dollar largesse! It would be a shame if the beneficiaries of CBN's $7bn are also beneficiaries of CBN's current bailout funds of over N700bn to eight banks! We would then simply have just bloated the money market with funds from our own pockets in order to cover the gaping holes in the balance sheet of banks who have not yet accounted for the $7bn that Soludo advanced without solicitation!

The uncontrolled and liberal manner of withdrawals from our dollar reserves must be worrying to concerned Nigerians and may induce the question of who really owns the reserves!

This might seem a trite question, as it would be expected that Nigeria's dollar reserves must be the property of Nigerians! However, we recall the caution sounded by the immediate past CBN Governor that the total declared reserves at anytime do not all belong to the Federal Republic of Nigeria! Soludo maintained that the CBN owned about $5bn or so of our dollar reserves!

The question that must be asked is what products or services are provided by CBN to earn billions of dollars outside the formal deposits from the consolidated revenue fund? Besides, even if CBN earned such huge dollar revenue from its own resourcefulness, the question remains, who owns CBN? Surely, the property and wealth of a slave belongs to his master!! So why should CBN distinguish its own dollar reserves distinctly from the federation account?

CBN's convoluted sense of dollar reserve ownership is responsible for significant aberrations in the framework and failure of monetary policy. Rather than recognize its formal role as banker to government and a custodian of government funds, the CBN now sees and disburses the federation's dollar reserves as if they were owned by the CBN!

It is only from this skewed perspective that one can understand the apex bank's capture of our dollar revenue and the substitution of increasingly worthless naira for the dollar component of monthly constitutional allocations to the three tiers of government, even when there are no statutory powers to justify such seizure!

Even as I write, the CBN is yet unable to satisfactorily explain the method adopted for the determination of how much naira should be printed and substituted for each dollar which is allocated every month!

Nigerians continue to be amazed at the rate of depreciation of the naira even when export earnings approached previously unheard of bounteous levels with no evidence of significant increase in official approved imports expenditure!

By a little stretch of the imagination, one can deduce where the billions of so called CBN owned dollars come from (as distinguished from federally owned reserves)! Afterall, after CBN's payment of naira in place of dollar allocations, the CBN may claim full ownership of the dollars which it had redeemed with naira.

If the Federal Republic of Nigeria also lays claim to the same dollars, it would be akin to eating your cake and having it (a virtual impossibility)! But we must not forget that the slave and his possessions, if anything, still belong to the slave owner; so, in spite of the disbursement of naira, the dollars which formed the basis of naira supply must still belong to the Federal Republic; in which case, if such dollars remain recognized as part of our dollar reserves, then, of course, there is the fraudulent opportunity to spend the dollars once again, despite the fact that the three tiers of government had earlier taken the CBN's unilaterally declared naira value!

In this event, the CBN will always be left with billions of dollars in its kitty every month. It is not surprising that the CBN consequently embarks on a dollar selling spree every month to shake down its huge load of now unencumbered dollars! Various auction models with fascinating acronyms have been adopted for these dollar auctions, but the underlying diseased framework of CBN as a monopolist of naira and dollar supply continue to plague our economic development and progress.

In view of the above analysis, we must wonder in which category the billions of dollars unilaterally illegally diverted during Obasanjo's tenure and the $7bn CBN largesse fall! Are the billions of dollars disbursed balance sums after naira sums were substituted, or were they truly part of the illegal excess crude account or indeed bona fide reserves from the consolidated revenue account? Nigerians need clear and unambiguous answers to these questions so we can determine the components of the current $40bn or so dollar reserves that CBN claims we now have.

Nonetheless, monthly allocations in excess of $2bn to Bureau De Change, BDCs, is no way to reduce the burden of captured dollars on the CBN. Without doubt, the BDCs are the major conduits for capital flight and treasury looting and a major obstacle to our industrial growth and development.


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