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How Nigeria Squandered N20tr 2014 Revenue

By Roman Oseghale.

How much income does Nigeria really generate yearly? This question is hard as there seem to be no answer in sight. However, authoritative sources place visibly accrued incomes from the Crude Oil Export, Federal Inland Revenue Services (FIRS) and the Nigerian Customs at about N20tr annually.

On January 30, 2015 ThisDay newspapers reported that the FIRS generated a total of N4.69tr for the Federal Government while on the 12th of the same month, the Sun newspapers reported that the Nigerian Customs generated N977.09bn revenue in 2014.

In 2014, Nigeria according to OPEC report of June 3, 2015 made about $90bn in net revenues from crude oil sales and with the 2015 Central Bank of Nigeria, (CBN) exchange rate of N155 to the dollar, Nigeria made a whooping N13.950tr from net crude oil sales in 2014 alone. With the addition of the FIRS N4.69tr and the Nigeria Customs N977.09bn, the country generated about N20tr in the fiscal year 2014.

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According to Premium Times report, Nigeria’s budget in 2014 was N4.962tr and it was signed by the then president Goodluck Jonathan with 20% of that budget allocated to Defence. The budget at approximately N5tr is just 25% of Nigeria’s total earning from Crude oil, FIRS and the Nigerian Customs. We should note that the other government revenue generating agencies including solid minerals are not included in the N20trn annual revenue. So if the Federal Government generates this much and only 25% of it is used for the annual budget, the country sure has enough money to transform, it into the Dubai of Africa. And again what happened to the remaining income from the reported N20tr.

The government had paraded itself as building roads and revamping the railway sector, contrary to what the government had told the country on the usage of public funds it was gathered that the administration had been borrowing from the Chinese since 2012. On September 12, 2012, the Financial Times reported that Nigeria had borrowed $600 million from the China’s Export-Import Bank to Finance its railway sector which means that all the present infrastructure in the railway sector that the government credits to itself were actually borrowed funds. In July of 2013, President Jonathan travelled to China to sign another $3 Billion in loans from the Chinese to build infrastructure both in the railways and road constructions. (Voice of America, 2013).

Nigeria’s debt now is said to stand at $63.7bn. The former Minister of Finance and coordinating Minister of the economy Mrs. Okonjo-Iweala during the fuel crisis in May, 2015 had come out to defend the Administration saying Nigeria’s total debt indeed stands at $63.7 billion but it is the totality of all the debts incurred by successive governments since 1960. The same Mrs. Okonjo- Iweala also stated that out of the $63.7bn debt owed by the government, $18bn was accumulated between 2012 and 2015. (THE CITIZEN, 2015). In conclusion, if Nigeria accumulated a debt of $63.7bn in 55 years since 1960, $18Bn represents 28.3% of the total debt and was accumulated in just 3 years from 2012 to 2015, which means the Jonathan administration borrowed an average of $6bn yearly from 2012.

1If we were to do the maths from Mrs. Okonjo-Iweala’s statement and facts, the nation’s debt stood at $45.7bn as at 2012 and
this will give all successive governments from 1960 an average of $878.84 million debt per year representing 1.92% of total debt per year as compared to the Jonathan’s administration of 33.3% per year from 2012 to 2015 of the total debt of $18bn incurred
during that period.

The Jonathan Administration sold crude oil at an average price of $110 per barrel for five years with a profit margin never before imagined, but the irony of the sales was that the administration never saved appropriately and instead depleted the money they met in the foreign reserve. In 2008 crude oil prices dropped from $147 to $38 per barrel, dollar price was stable and the economy continued to grow and that was because the country had $62 Billion in external reserve and that served as the shock absorber. Today, with that massive sales in oil and the overwhelming profit we only need to ask ourselves how much do we have left in the foreign reserve.

The worst that ever happened was depleting the foreign reserve. How can you deplete your foreign reserve when it determines the strength of your currency and the strength of your currency determines the stability and growth of your economy? If the Jonathan’s government was prudent and knew how to  manage the economy coupled with the massive profit made from crude oil sales, the external reserve of the country should have hit about $120bn as of 2015 and the street value of the dollar would have dropped to about N80.

When General Abdulsalam Abubakar left in 1999 we had $4bn in the external reserve, OBJ came and with the alleged massive corruption in his government and with the fact that he didn’t sell crude oil at over $100 per barrel for 5 years was able to pay off the Paris and London Club debt. He built up the foreign reserve to about $60bn and another $40bn in the excess Crude oil account. Prof. Charles Soludo, the governor of Central Bank met the dollar at about N145 but because of the increase in the external reserve he was able to bring the dollar price down to N117 before he left office. So if you were earning N1 million as your salary before Soludo assumed office you were actually worth $6,896 but after Soludo increased the value of the naira you were worth $8,547, which means your Purchasing Power Parity has increased and your buying power increased. That is one way amongst others to measure progress in an economy.

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If the present government had built on the $62bn they met in the foreign reserve rather than depleting it, it should have been hitting $120bn by now and your wealth would have increased. You may have made more money in naira between 2010 and 2015 but in economics, it is not what you have that matters but the value of what you have. You may have more than you had in 2010 but what is the value? This is a simple calculation for you. If you had deposited N10 million equivalent of $85,470.80 at the dollar rate of N117 in the bank in 2010 at 12% compounding interest for 5 years to mature in 2015 you would have N17,623,416.83. I am sure you are happy at the figures, this is the surprise. As of 2015 your N17,623,416.83 at N222 is only worth $79,384.76.

You actually made more money but you are in reality worth less. Your buying power has greatly reduced. While your N10 million in 2010 was $85,470.80 your N17,623,416.83 in 2015 is now $79,384.76. You are actually worth less with $6,086.04. Your N10m deposited at the bank 5 years ago has made you poorer by N1,351,100.88. After 5 years of intensive planning, hard work and labour, and without any fault of yours the government made you poorer.

2014 budget was N4.962 trillion, with crude oil sales pegged at $77.5 per barrel. At $77.5 per barrel Nigeria generates enough profit and even pays state allocations every month. That is why the state allocations is not a fixed amount and fluctuates between 10 to 15% above or below every month depending on the average sales and exchange rates.

Crude oil sales that was used to plan the budget at $77.5 per barrel was now being sold at an average of $110 per barrel for more than 5 years. Do you know what the profit margin now becomes? It jumps to over a 100%.

The same year Defence got N968.127 bn, approximately N1 trillion, yet military had no arms to fight Boko Haram. GEJ confirmed
this himself, in his interview with the BBC correspondent where he talked about the present state of the country before the elections.

What was going on was a monumental scale of corruption never before recorded in the history of Nigeria and the president was too weak to confront the perpetrators and yet GEJ was seeking approval to borrow $1 billion to fight Boko Haram. Think about it!

Roman Oseghale is CEO at Canadian
Trans-Atlantic Company, Ontario,

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