The public space has recently been inundated with conflicting claims over the quantum and use of public revenues. While critics allege that high oil revenues, reserves and savings have been recklessly squandered by President Goodluck Jonathan, the government insists that it has actually been very prudent and flaunts what it calls a successful scorecard. For ordinary Nigerians and our development partners, however, one question begs for an answer: where did all the oil wealth go?
This question is imperative in the light of contemporary and historical factors, especially since what economists call the Fourth Oil Boom began in 2003. The debate has been reopened as Nigeria faces a bleak and uncertain future as oil prices plummet and with them, public revenues. Oil fell to $45.95 per barrel on Wednesday; effectively confirming the stillbirth of the 2015 national budget that was unwisely anchored on oil price of $65pb and crude production of 2.21 million barrels per day even when the market was in free fall.
Second, a former president, Olusegun Obasanjo, has alleged that reserves and savings, that hit about $67 billion in 2007, were misused by Jonathan and his immediate predecessor, the late Umaru Yar’Adua. “Anyone who is wise enough should know that since we depend on just one mineral resource and since we have no control over its pricing, we should be planning for this type of situation we currently find ourselves and the way out of it,” he said.
Stinging rebukes of Jonathan’s economic management have also come from stakeholders at home and abroad with a near universal consensus that our government has lost the plot. In an election season and the presidential poll only four weeks away, these barbs rankle and directly contradict the generous assertions of achievements claimed by the government.
This newspaper has consistently alerted the government to the need to end rampant waste in public office, the plunder of the Excess Crude Account and other fiscal buffers, diversification of revenue sources and the economy, as well as advocated the prudent management of resources for sustainable development and job creation. Our advocacy has fallen on deaf ears, and now the oil price crash and over-reliance on crude have caught up with Nigeria.
So, where has all the oil money earned since the Fourth Oil Boom 2003-2014 – ending only in August last year when the latest price crash began – gone?
According to the United States Energy Administration Agency, average oil prices began rising after the US-led invasion of Iraq in 2003, from less than $40pb, hitting about $78pb in 2006 before settling at $56-59pb in 2007 when Obasanjo left office. They rose sharply thereafter, peaking at $147pb in 2008, fell in 2009 but began rising again. Significantly, oil prices remained higher than $70pb and averaged around $100 for the five years – 2010 to August 2014 (when prices started sliding) –that Jonathan has occupied the Presidency. Yar’Adua began the trend of rampant recourse to ECA.
Denying the charges of waste and recklessness, the Federal Ministry of Finance has contested the reserves and savings figures, saying that gross reserves were actually $43.13 billion in May 2007 – $31.5 billion reserves, $9.43 billion in ECA and $2.18 billion savings. It cited records showing that reserves peaked at $62 billion in September 2008. It also says oil production sometimes missed set targets.
Even if it is true that gross revenue was $43.13 after debt payment, and at a time when oil prices rose from less than $20 per barrel to between $56 and $59, how come there was no further rise when oil prices averaged $100? What would have been the fate of the country if prices had remained at the 2007 level?
The Ministry’s explanation that reserves and ECA have not risen due to draw downs by the Central Bank of Nigeria to defend the naira and maintain exchange rate stability does not fully satisfy critics who compare our low reserves with those of other major oil exporters. The government continues to blame the state governors. Savings in the ECA, it said, would have been higher “but for the fact that a number of state governors, against strong professional advice, actively kicked against continuous building up of the ECA and, indeed, pushed for its sharing.”
This is an admission of poor leadership. You do not succumb to such pressure when you know you are pursuing a cause that will benefit the society, especially when the case is actually before the Supreme Court. It demonstrates a lack of conviction on Jonathan’s part and his refusal to stand for a principle.
However, the government explains that since it is the CBN that, by law, manages them, it could not have mismanaged foreign reserves. But we recall that the immediate past CBN Governor, Lamido Sanusi, was suspended after his credible alarm that over $20 billion of oil earnings was unremitted to its coffers by the state oil company.
Significantly, in contrast to Nigeria where reserves have failed to rise, dropping to $34.49 billion by January 5, this year, most other major oil-rich countries have built up reserves and savings from the high oil prices, and have also embarked on massive infrastructure projects. Here, we have neither infrastructure to show nor savings, while we have re-entered the debt trap with $9.51 billion in external peonage and still rising.
Saudi Arabia, according to the International Monetary Fund, had reserves of $740 billion by November 2014 and $757 billion in its main Sovereign Wealth Fund; Algeria had $192.5 billion and $77.2 billion; imploding Libya $129 billion (2013) and $66 billion; Russia $378 billion and $170 billion; Iraq $68 billion; United Arab Emirates $58 billion and $773 billion, and Kuwait $34.94 billion and $548 billion.
Saudi Arabia in May unveiled a new $400 billion infrastructure building plan; UAE’s port, road, tourism and aviation infrastructure were rated among the best in the world in 2013 by the World Economic Forum’s Travel and Competitiveness Report, the result of its oil earnings. Algeria is investing $55 billion in road infrastructure in 2015-2019, while Angola, already on an oil-boom fuelled infrastructure binge, in December, announced it was launching a fresh $1.6 billion tourism infrastructure plan through its SWF.
But after five years in office, Jonathan is perceived to have no significant new signature infrastructure project to boast of and this is simply not good enough. No wonder some past leaders with less than sterling records have been reminding us of their own landmarks such as the Lagos Third Mainland Bridge, refineries, petrochemical plants, airports and highways, built even at a time oil prices were nowhere near what has been experienced in the past five years.
Nigerians have been left holding the short end of the stick. We had an oil boom but little reserves or savings: the ECA is down to $1.2 billion; our SWF is a paltry $1.5 billion, while special funds have been serially raided. Meanwhile, we have very little new infrastructure, unlike other Organisation of Petroleum Exporting Countries members, while old facilities have been run down. The government goes borrowing for rehabilitation projects and even that is mired in massive corruption and delays. To compound all this, domestic and external debts combined have risen to $69.6 billion (September 2014) and N943 billion is proposed as debt servicing charges in 2015, representing 21.6 per cent of the N4.35 trillion budget.
How did others build reserves, savings and infrastructure but all we have here are debts and gloom? Instead of instinctive denials, the government should thoroughly investigate the Nigerian National Petroleum Corporation to ascertain its accounts, open and secret, and allegations by audit agencies, whistle-blowers and government’s own probes that oil revenues are simply not being remitted to the Federation Account. There should henceforth be a strong commitment to prudence and zero tolerance for corruption.
Long-suffering Nigerians are convinced that oil wealth, while it lasted, has not been fully accounted for and demand answers.