Nigeria's Crude Oil Fueling Crude Corruption
A British born Journalist by name Duncan Clarke has done a great service to Africa by documenting in a book form, the various ramifications of resource instigated corruptions amongst Africa's political elites since the last five decades..
Mr. Clarke, has worked as a reporter in Africa for forty years and so is very conversant with the terrains of the African business enterprises.
His book is called "CRUDE CONTINSNT: THE STRUGGLE FOR Africa's Oil Prize".
He made a very interesting statements about the crude oil industry in Nigeria.
One of those statements is this one that attracts my attention in which he wrote thus: "NIGERIA'S political order remains fragile, with struggle over oil and it's control at the heart of the power nexus in Abuja and elsewhere. This is illustrated by the unrest in the Niger Delta before and since March 2003 which initially shut in 40% of Nigeria's oil production, resulting in riots and heavy handed military operations and induced force majeure by Shell and Chevron Texaco. NIGERIA'S history has revealed the mixed blessings of the government's management of petroleum, which has threatened both the stability and continuity of this integrated state".
Duncan Clarke is right in this evaluation and many others especially if we take a holistic look at the management of the natural resources of crude oil in the last five years and view it alongside the inexplicable habit of the President Muhammadu Buhari to keep going to all kinds of places to borrow money to be able to pay bills as a federal government..
CRUDE oil is also one source of organised crimes being committed by officials of government due to a failure of the officials to properly render accounts and to be transparent in the administration of the crude oil industry.
In this reflection therefore, we will use factual news reports to show that the tradition of ineptitude and corruption have been elevated to a dangerous level by the current administration since the last five years. It has reached a very dangerous crescendo so much so that we now have a Finance minister who believes that Nigeria will continue to borrow. The government of Nigeria at the moment have succeeded in building a huge amount of debts for the Country. To these officials, accumulating foreign debts is no big deal. Probably because they will not be in government when the time would be ripe to pay. But can i tell you something, borrowing is not a sign of growth. Borrowing is a sign of diminishing returns.
Recently, the Minister of Finance, Budget and Planning, Mrs Zainab Ahmed, said the dual reality of COVID-19 pandemic and the drop in the price of oil in the international market has made it inevitable for Nigeria to keep borrowing from external bodies.
She stated that before the global health and economic challenges, Nigeria had been grappling with low revenue, noting that the crises had put the country in a difficult situation, which had made it difficult for the government to meet some of its obligations. This claim is farther from the truth. Can they open the books for forensic audits to be carried out?
The minister spoke recently at a webinar organised by the Nigerian Economic Summit Group, Fiscal Policy Roundtable and Tax Investment and Competitiveness Policy Commission and was anchored by a tax expert, Taiwo Oyedele, who is the Fiscal Policy Partner and West Africa Tax Leader at PricewaterhouseCooper.
The minister, who was represented by the Special Adviser to the President on Finance and Economy, Mrs Sarah Alade, said government was doing its best to make sure the revenue base was broadened and expenditure reduced. She noted that if citizens also participated by paying taxes and doing the right things, it would go a long way in solving the country’s problems, especially raising revenues. These are all tales by moonlight told to idiots. I will tell you why.
I will quote a report from the Organisation of Petroleum Exporting countries (OPEC) to show the huge revenue profile the government made in the last five years from the export of crude oil so we know that the claims by the Finance minister is a big lie and so we know that we have a set of officials in the Federal Government who are lying to us about the revenues generated by different government agencies in the last five years..
The question which Nigerians are not asking from the Federal Government is why the same government that netted in over $206 billion USD in five years has gone to all manner of dubious creditors to borrow to run the government business. Where then are these huge funds generated from just one natural resource called crude oil?
The result will tell you simply that CRUDE OIL FUELS CRUDE CORRUPTUON AMONGST OFFICIALS OF THE FEDERAL GOVERNMENT and in THE last five years that critical voices are muzzled through military force and there is a semblance of police state in Nigeria with protests being banned and protesters hounded and killed, the scale of corruption keeps growing signposted by the huge revenues made and stolen and the growing foreign debts by government officials.
As of March, the Vice Chairman, Senate Committee on Local and Foreign Debts, Senator Muhammad Enagi, said the country’s total debt would have risen to about N33tn after the Senate approved the President’s request to take another $22.7bn foreign loan.
Even when available data shows otherwise,Muhammadu Buhari through his Finance minister MS. Ahmed said, “We’ve had to grapple with low revenue, even before the pandemic. We had high debt, weak infrastructure base, low human capital and low revenue that is largely dependent on the foreign exchange earned from oil. So, there are many things we have loved to do that we cannot do.
“Due to the global economic slowdown and the revenue issues, what we are expecting is a GDP that would contract, in the best case scenario, by about 4.4 per cent and in the worst case scenario, it could be about eight per cent or more.
“We are in a very difficult situation but we are trying to manage that because if nothing is done, up to about 21 million jobs could also be affected by the impact of the pandemic. So, with all these statistics, we cannot overemphasise the importance of raising revenue.”
She said in addressing the situation, government had come up with key fiscal measures that government could not but borrow to accomplish. She identified them to include the 12-month economic sustainability plan to mitigate the effect of COVID-19; measures to support the private sector, which includes the implementation of the Finance Act 2020 aimed at supporting MSMEs and strategic industries affected by the pandemic.
She added, “We also have the establishment of an N86bn intervention fund for health infrastructure; conversion of World Bank Regional disease surveillance system enhancement programme to support COVID-19 intervention in the states; accelerating infrastructural development; preparation of a Fiscal Stimulus Bill to provide legislative backing for the fiscal stimulus packages that we have; deregulation of the price of refined petroleum products – we know how important that is, given the amount of money that we spent in that area.
“We also have the adoption of financing plan for the power sector recovery programme; incentivising the use of up to N2tn of pension funds for roads and housing development, supporting and encouraging states to achieve state fiscal transparency and accountability, sustainability and other World Bank programme actions in order to access external support and we are collaborating with state governments on affordable mass housing.
“To achieve all these, we will have to keep mobilising external funding and seek debt relief. We continue to engage with the multilateral and donor agencies to access additional funding for crisis response, we seek moratorium from official partners for some of the loans that we have and support arrangement to secure commercial debt relief.
“If the revenue had performed, then we probably will not be seeking this much support from external sources, we know we cannot but keep working at generating more revenue so that the economy can be better for it.” Madam minister, you lied. Show us where the huge revenues made from crude oil in 5 years are kept?
The forum must have been organised for public relations sake. Otherwise, why were critical stakeholders not involved so hard questions are asked and answers demanded from the Finance minister to tell Nigerians the simple answer to the question why we have as a nation generated over two hundred billion dollars in USD but yet we keep going to borrow even from dubious creditors. On July 14th 2020, we were told through a media publication that Nigeria, Africa’s top oil producer, generated $206.06bn in revenue from crude oil exports in the last five years, the Organisation of Petroleum Exporting Countries has said.
OPEC, in its 2020 Annual Statistical Bulletin released on Monday, said the country’s oil export revenue fell to $45.11bn in 2019 from $54.51bn in 2018.
Nigeria was the fifth biggest revenue-earner last year in OPEC after Saudi Arabia ($202.37bn), Iraq ($80.03bn), Kuwait ($52.43bn) and the United Arab Emirates ($49.64bn).
The country earned $37.98bn from oil exports in 2017, compared to $27.29bn in 2016 and $41.17bn in 2015.
Exports of Nigeria’s crude oil to Europe plunged to 680,600 barrels per day in 2019 from 1.06 million bpd in 2018, according to the report.
The total volume of oil exported to North America slumped by 84 per cent to 27,500 bpd in 2019 while exports to Africa fell by 15.77 per cent to 260,700bpd.
The country’s exports to Asia and the Pacific rose by 71.72 per cent to 664,900 bpd in 2019, while exports to the Middle East jumped from zero to 122,300bpd.
OPEC’s 13 members suffered an 18.4 per cent contraction in their oil export revenue in 2019 on slumping prices, the report showed.
The price of Brent crude, the international oil benchmark, averaged $64 per barrel in 2019, down from $71 per barrel in 2018, according to the US Energy Information Agency.
The value of OPEC petroleum export revenue fell to $564.9bn in 2019 from $692.3bn in 2018 as weak demand growth and continued competition from non-OPEC producers impacted the group.
Let us assume that demands have fallen but the question remains unchanged and that is to find out where the huge funds generated in the last five years are kept or have they been stolen? Why do we borrow even with this massive amount of revenue from crude oil alone despite the declining demands in the last few months?
Let us look at our frightening debts profile so we can reinforce the question why the government could continue to borrow.
Officially, Nigeria’s total external and domestic debts rose to N24.387 trillion in 2018. It has been revealed that the total Public Debt grew by 12.25%. This data was published 1 year ago on April 5, 2019 by Nairametrics
It stated that Federal Government of Nigeria Bonds recorded first undersubscription in 2 years, More borrowing expected as DMO’s Oniha explains President Buhari’s thirst for loan
But Nigeria’s total external and domestic debts rose to N24.387 trillion in 2018. This was disclosed in Abuja by the Director General of the Debt Management Office (DMO), Ms Patience Oniha.
While analysing the public breakdown of the nation’s public debt, Ms Oniha reportedly revealed that the Total Public Debt stood at N24.387 trillion as at December 31, 2018, representing a year-on-year increase of 12.25% in Nigeria’s debt stock.
The breakdown of the debt stock revealed that the Federal Government of Nigeria’s (FGN) external debt increased by 42.69%, from N4.527 trillion in 2017 to N6.460 trillion in 2018.
On the other hand, the FGN domestic debt only increase by 1.46%. In 2018, FGN domestic debt stood at 12.7 trillion up from 12.5 trillion in 2017.
Also, the total sum of the external and domestic debt stock of the 36 states and the Federal Capital Territory (FCT) was put at N5,152 trillion. This is further broken down as N3,853 trillion domestic debts, and N1.29 trillion external debts.
“The DMO strategy of using relatively cheaper and longer tenured external funds is achieving the expected objectives.
“Some of the objectives were to create more space for other borrowers in the domestic market AND extend the average tenure of the debt stock in order to reduce refinancing risk and increase External Reserves.”
Borrowing will improve key sectors
According to the DMO boss, the implementation of cheap and long-tenured external debt led to an injection of N855 billion through the redemption of Nigerian Treasury Bills in 2018 and a general drop in the FGN’s borrowing rate in the domestic market from over 18% p.a. in 2017 to 14 – 15% p.a. in 2018.
Also, Ms Oniha reportedly stated that the N3.4 trillion Promissory Notes Issuance to is basically to be used for the settlement of Inherited Local Debts and Contractual Obligations of the Federal Government.
The programme reportedly covers Contractors; Exporters; Judgement Debt; State Governments and Oil Marketing companies. Specifically, the features of the promissory notes to be issued are such that it will serve as Sovereign and Negotiable Instruments.
The sad thing about this excessive borrowing is that the future of the Country is being mortgaged for many years to come. Take a look at what the Debt Management Office stated below.
Furthermore, the DMO announced plans to issue 30-year Federal Government of Nigeria Bonds (FGN Bonds) for the first time. According to Oniha,
“The issuance of the Bond will meet the needs of annuity funds and other long term investors while also developing the domestic capital market and reducing the re-financing risk of the FGN.”
As I put pen to paper to make these observations, an international television station Al Jazeera aired a programme in which it stated that Poverty amongst Nigerians have widened just as inflation is at the peak with the highest state of insecurity and instability which fuels food insecurity because farmers are being killed and kidnapped by armed bandits and armed Fulani herdsmen. There is a nexus therefore between crude oil, crude corruption and the growing inability of the armed security forces to maintain stability and security in Nigeria. Nigerians ought to wake up and demand answers to why Nigeria makes so much revenues but the government officials have promoted thievery as an ideology. If loans are good as we are being told by the current administration why is it called DEBT CRISIS?"
This is what scholars say about our growing foreign debts: "Concerns about an impending debt crisis in Africa are rising alongside the region’s growing debt levels. As of 2017, 19 African countries have exceeded the 60 percent debt-to-GDP threshold set by the African Monetary Co-operation Program (AMCP) for developing economies, while 24 countries have surpassed the 55 percent debt-to-GDP ratio suggested by the International Monetary Fund. Surpassing this threshold means that these countries are highly vulnerable to economic changes and their governments have a reduced ability to provide support to the economy in the event of a recession."
They stated too: "While debt is a global issue, Africa’s past debt crises have been devastating, creating the need to cautiously monitor this recent debt buildup. There are parallels between the present rising debt in Africa and the Heavily Indebted Poor Countries (HIPC) initiative period that proffer solutions to prevent another crisis."
They then asked if "IS AFRICA HEADING BACK TO THE HIPC ERA? and responded thus: "Not quite…but the present composition of debt is worrisome."
These academics stated also that: "The drivers of the present rising debt situation are similar to, but not the same as, that of the HIPC era (Highly indebted poor Countries)," ( www.brookings.edu).