Category Archives: Economy

Four Questions for the Jonathan Government – Tolu Ogunlesi


Question 1

What became of the annual savings from the debt relief deal of 2006? Starting in 2006, a “debt relief savings” item of around N100bn began to show up in the Federal Budget. This is how the then President Olusegun Obasanjo explained it in his 2006 budget speech: “Budget 2006 commits all the gains from debt relief, that is, the Federal Government resources that would have gone for external debt service in 2006, amounting to N100bn, to poverty reducing expenditures in Health, Power, Education, Agriculture, Water Resources, Environment, Housing, and support for women and youths. All the expenditures are targeted at programmes and projects aimed at scaling up our effort to reach the Millennium Development Goals.”The 2007 budget, Obasanjo’s final budget as president, followed up on this. He said: “Included in these allocations are the debt relief savings for 2007 totalling N110bn. As in 2006, these savings are being used exclusively to support and scale up spending on MDG-related initiatives and programmes…”The 2008 budget, President Umaru Yar’Adua’s first, contained the sum of N110bn, set aside for the same purpose.After that, silence. I’ve checked every budget since then, and I can’t find any item remotely resembling debt relief savings. I actually also didn’t find ‘MDGs’ mentioned in any of the budgets after 2009. Hence my question: Can someone please explain this? Did the savings transmute into something else?The disturbing irony is that when a sum similar to the debt relief savings shows up in the 2013 budget, it’s for a dedicated fund that’ll be swallowed by the monster of domestic debt. In President Goodluck Jonathan’s words: “In this respect, a sinking fund of N100bn is being established in the 2013 fiscal year to be used for repaying Government’s maturing debt obligations and to curb the rising domestic debt profile.” We have gone, it seems, from (foreign) debt savings to (domestic) debt sinking funds.

Question 2

How much did the Obasanjo government leave in the Excess Crude Account, in May 2007? How much was there in November 2009 when President Yar’Adua left the country? How much was there in February 2010 when Jonathan became Acting President? And how much in May 2011? There’s been heated debate about the foreign reserves and the ECA in recent weeks, kickstarted by Mrs. Oby Ezekwesili’s University of Nigeria, Nsukka Convocation Lecture. In the speech, she says that the Obasanjo administration left $45bn in foreign reserves and $22bn in the Excess Crude Account. An obviously displeased government has been on the offensive, insisting she is wrong, but failing to give us a clear(er) picture of things. The Ministry of Finance released full-page advertorials telling us what the ECA held in the last half of 2012, which, in my opinion, is not what we need. What will be helpful is to get a sense of the inflow and outflow for the Excess Crude Account, between May 2007 and May 2011. Before now, it was widely believed that Obasanjo left about $20bn in the account (something close to Mrs. Ezekwesili’s figures). Today, this government is telling us there was only $9bn in it in May 2007.For more information I’ve turned to Finance Minister Ngozi Okonjo-Iweala’s new book, Reforming the Unreformable. On page 22, she writes that at the end of 2006, Nigeria had $8bn in the ECA. On Page 120, she says that the ECA “accumulated up to US$17bn, boosting foreign-exchange reserves to US$60 as Nigeria entered the Great Recession of the global economy in September 2008.”So, while she doesn’t tell us exactly how much was there in May 2007, what we know is that as of mid-2008, there was still at least US$17bn in the ECA. “The availability of these savings allowed Nigeria to introduce a fiscal stimulus to the economy equivalent to 0.5 per cent of GDP at the height of the global financial crisis,” she adds.And then on Page 122, she acknowledges that “the ECA was raided several times after the Obasanjo administration ended – even when the triggers for sharing were not met.” Reuters quotes the then Accountant-General of the Federation (now Governor of Gombe State), Ibrahim Dankwambo, as saying, in August 2010, that the ECA contained only $460m. And last week in Lagos, the CBN Governor, Sanusi Lamido, was quoted as saying that the six-fold increase in fuel subsidy payouts between 2009 and 2011, were funded from the ECA.So, what we have are all these bits of random information. We desperately need the Federal Government to give us a coherent picture.

Question 3

What happens to the ongoing projects for which Federal funds have been appropriated, but have now been passed on to SURE-P for completion? SURE-P is currently working on completing a number of transport infrastructure rehabilitation projects that predate its creation. One example: In the 2007 budget speech, President Obasanjo said that all the three tiers of government have decided to, from the Excess Crude Account, “jointly execute and fund six major developmental projects, with large foreign exchange components. One of the projects listed is the “Lagos – Minna – Kano (railway line) with Minna – Abuja – Kaduna Spur, Standard Gauge Double Track, (150km per hour design Speed) Railway Line – estimated to cost US$8.3bn in four years.” (The Yar’Adua government would later cancel that contract, and then re-award it). Today, SURE-P lists “Jebba-Kano Railway Rehabilitation” (Jebba-Kano is part of the northern leg of the Lagos-Kano line) as one of its projects, and says it has paid N1.12bn to take it from 87 per cent to 98 per cent completion. In essence, SURE-P, an “intervention” vehicle, that has helped ensure the completion of something started and budgeted for by a different arm(s) of government. My question then is: What happens to the monies already appropriated in the Federal budget for these projects, if any? How can we track these potentially overlapping expenditures, and prevent double-budgeting?

Question 4

Can we get an update on the plans of the government to boost local refining capacity, more than one year after Occupy Nigeria and all the promises to reform the oil industry? I read an interesting interview last week, by Mr. Aigboje Aig-Imoukhuede, CEO of Access Bank, in which he argues that building new refineries is not such a big deal, and that local banks have the capacity to easily finance such projects; we don’t have to wait for foreign investors. So, the question hangs in the air: What is the government doing to develop local refining capacity? All we know is that the Minister of Petroleum intends to spend $1.6bn on trying to fix the four broken refineries (which have a disgraceful capacity utilisation currently below 20 per cent). As The PUNCH said in a November 2012 editorial, “Nothing will come out of it, except opening up another avenue for graft.” So, putting that (throwing money at the existing refineries) alongside these facts: one, that we’re still spending billions of dollars importing petrol; two, the bank CEO’s comments (the capacity of local banks to fund refinery construction), and three, that the Niger Delta is full of thriving illegal refineries (proving that local refining can be a viable business), it’d be good to know what the government plans to do differently, beyond wasting more money on trying to redeem the apparently irredeemable?

Tolu Ogunlesi Twits @toluogunlesi

Blogger Twits @Femiolas

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Posted by on Dec 22, 2013 in Economy, Politics

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