In 2007, the late President Umaru Musa
Yar’Adua was desperate to solve a conundrum that was nearly as old as
Nigeria’s independence. It was an especially recalcitrant problem.
Ibrahim Babangida, former Military President, also attempted to solve it
in the late 80s but he failed. Upon return to democracy, Olusegun
Obasanjo, then President, gave it a shot too, in the early 2000s; and
although he made significant progress, there were constitutional
loopholes that the hawks were always going to exploit. It seemed to defy
logic that Nigeria had near-empty savings to show for decades of crude
oil exportation, and it’s even more baffling that no president found a
solution, however hard they tried.
The irony: we have oil yet the people toil in lack
Nigeria’s petroleum reserves are enormous, bettered only by those of
nine countries, all outside Africa. We are the continent’s undisputed
oil giant. The United States Energy Information Administration (EIA)
rates our reserves at between 16 and 22 billion barrels (2.5×109 and
3.5×109 m3); other sources have quoted nearly double that figure.
In the past, we were blessed with a favorable mix of production output and market prices too. Sometime in 2016, we recorded an
all-time-high crude oil production
of 2.7million bpd. Sometime eight years earlier, oil prices managed to
rise to one of its highest ever in recent history: $147/barrel. There
certainly have been many low moments for both production and pricing,
but we have lived all our national existence in the knowledge of our
endowment with a natural resource that we, at the very worst, simply
need to sell in return for revenue.
Nigeria is a country surviving on luck. We’re living off a resource
we’re simply lucky to possess; we didn’t earn it. Then we’re grinning
and greying in mediocrity: all we do is export and sell, and it’s hard
to imagine a cheaper survival strategy. The simplest help we could
render ourselves is to be able to refine crude oil for our own use, but
we’ve failed woefully in achieving that. Slightly better than that is to
at least secure the means to process some percentage of that resource,
so that we can export products rather than just the raw material; we’ve
so far managed to bungle that too.
Having failed to make solid secondary commercial use of oil, it’s a
no-brainer, then, that we should have been making good use of oil
revenue. That chance we have squandered as well. We are impoverished;
the people are poor. We haven’t instituted the structures to deliver
first-class education to youths; we haven’t built the roads smooth
enough to encourage inter-state travel, trade and agriculture; in short,
we haven’t used oil revenue to empower other sectors, particularly the
ones that steadied the economy in the pre-oil era. And the worst of all:
we have no savings; our crude oil savings are empty — just not starkly
so. So we’ve failed in everything we could have done with oil: we can’t
get the best deals out of the resource, we can’t use it to improve our
lives, we can’t use it to secure our future.
Of these three failures, the last is the worst. We’re getting away
with our failure to maximize crude oil simply because we manage to make
some money nonetheless. Despite the economic recession, we’re still
having a jolly good time, relatively, because oil is still there in our
reserves even if the prices are low. But with our shortcoming with
savings, we will never get away. Soon, when our oil reserves are
drained, there will be nothing to fall back on, and life will be tough
for those alive then.
What is this we have done?
In the 0.5% Stabilisation Fund that became operational in 1989 during
the Babangida regime, there is a paltry balance of $29m. In the Excess
Crude Account (ECA) instituted by Obasanjo in 2004 is a balance of
$2.3bn. Finally, in the Yar-Adua-initiated Sovereign Wealth Fund (SWF)
is another paltry $1.5bn. That is a total $3.9bn, saved from
approximately $1.09 trillion earned from 35 years of crude-oil
exportation between 1980 and 2015. The mathematics of it all is that
we’ve only ever saved 0.4% of all we earned from oil in 35 years.
Tragic!
The absurdity of these figures was put into perspective last week by
the Nigeria Extractive Industries Transparency Initiative (NEITI) at the
launch of an occasional paper titled, ‘The case for a Robust Oil
Savings Fund for Nigeria’. Thanks to the good work of Waziri Adio’s
NEITI, we now know that the $1.5bn currently in the SWF is one of the
world’s worst ratios to annual budget (10%), and one of the lowest SWF
per capital ($8) globally.
To simplify the latter, were all of the country’s crude oil savings
(since the commencement of exportation in the 60s) be evenly distributed
to Nigerians, each citizen would get $8. That, even if you went to the
black market, would fetch you only N2,904. It couldn’t even take you to
the airport much less Hajj — in case you’re a pilgrim already dreaming
of the N200/$ pilgrimage exchange rate being proposed by the
legislature; it’d only fetch you N1,800. Nigeria’s SWF record is only
slightly better than Iraq’s and Venezuela’s — but the former is war-torn
while the latter is crisis-hit.
Data from other resource-rich countries help us to analyze our
abysmal savings record. Norway, a country of 5.2 million people, has a
SWF worth $922bn, Chile $24.1bn, Angola $4.6bn and Botswana $5.7bn.
Russia’s is $89.9bn and Kuwait’s $592bn. The best summation of our
profligacy was captured in 2015 by the National Economic Council:
between 2005 and 2015, the federal government saved $201.2bn in ECA but
withdrew $204.7bn; we withdrew $3.5bn more than we had saved! Clearly,
we were not saving for a rainy day; we were merely saving for a ‘cloudy
day’. We were saving to spend.
Gluttonous ruling class
Nigeria’s ruling class, including the presidents who initiated
savings funds, has always abhorred the concept of saving. Between 1989
and 19994, $13bn accrued to the 0.5% Stabilisation Fund, according to
IMF. A 2013 audit report by NEITI revealed that N109.7bn was transferred
to the account between 2007 and 2011, but N152.4bn was withdrawn in the
same period. By May 2017, only N29.02bn was left in it. The crass
mismanagement of the political class is as old as the idea of saving. As
confirmed by a
2016 report by Premium Times, three former Presidents frittered away N247bn oil savings.
Withdrawals from ECA peaked in 2011 during the presidency of Goodluck
Jonathan, but how does one explain that this was the same year when the
country made its biggest excess crude earnings (in terms of oil price
relative to budget benchmark)? For the following five years, only $500m
was deposited into the account — just half of the seed with which it was
opened. This wasteful saving is one of at least two reasons state
governors sued the federal government to challenge the constitutionality
of ECA; the other is the share-it-all mentality of governors, many of
whom cannot fund their states without federal handouts.
We’re running out of oil and buyers — and saving time!
Our delusion with our oil wealth is monumental; we often forget that
oil is a finite resource, and that our buyers are either discovering oil
themselves or finding alternatives to the resource. Until 2010, Nigeria
provided roughly 10% of overall US oil imports, and was its
fifth-largest source of oil imports. But the impact of shale production
in the US ended Nigeria’s oil exports to the country, in 2014.
Our oil reserves have the shortest lifespan of any OPEC nation. In
2008, the Petroleum Products Pricing Regulatory Agency (PPRA) said
Nigeria’s oil reserves would be depleted in 43 years.
That’s 2051, just 34 years away. If majority of states can’t pay
workers’ salaries in a period of low oil prices, then unimaginable doom
awaits us in a little over three decades when we run out of oil.
Governors have no reason to oppose saving, even if past savings were mismanaged.
Adams Oshiomhole, former Edo State Governor, has been the most
vociferous critic of suspicious withdrawals from ECA under the Jonathan
government. But mismanagement of savings is no reason to antagonize ECA
or transfer of funds from ECA to the SWF. Most governors steal public
funds anyway, and long-suffering Nigerians aren’t pushing for political
offices to be scrapped.
Section 162(1) of the 1999 Constitution (as amended, which states
that “the Federation shall maintain a special account to be called ‘the
Federation Account’ into which shall be paid all revenues collected by
government of the federation” is due for amendment. Governors should be
pointing this out to the legislators; they should be working to legalize
a culture of saving, not antagonizing it.
Ideally, this is the kind of constitutional work that should
preoccupy our legislators. But we know better. If they’re not busy
inventing bills to shield looters of public funds,
they’re pressing for pilgrims to access FX at N200/$1 while genuine
businessmen are forex-strapped, or trying the masses’ patience by
attempting to install Bukola Saraki as Acting President when Yemi
Osinbajo is out of the country. Without the political and legislative
will to save, we’re setting up doom for the unborn generation. We’re
drinking our oil and eating our children’s future. Unfortunately, we
will not be alive to partake of the suffering we would have foisted on
them.
Soyombo is the Editor of the International Centre for Investigative Reporting (ICIR). He tweets @fisayosoyombo.
