While the government insists the nation’s economy is healthy, sector indicators increasingly suggest otherwise
The Nigerian economy has continued to struggle amid declining earnings from oil, as a result of rising incidences of pipeline vandalism and crude oil theft.
Though the Central Bank of Nigeria, CBN, said in the July edition of its Economic Report that gross federally-collected revenue of about N1.05 trillion (N645.7billion from oil and N404.5 billion from non-oil sources) exceeded the provisional monthly budget estimate and receipt in the preceding month by 11.1 and 33.7 per cent, respectively, the Federation Account still had difficulties meeting the N702.54 billion projected revenue target in the 2013 Appropriation Act for the three tiers of government.
Hints of a major financial crisis surfaced at the end of the Federation Accounts Allocation Committee (FAAC) meeting in March after representatives of the 36 states and the Federal Capital Territory (FCT) went home without about N140 billion arrears from their monthly allocations for February.
The amount represented the differential between the projected and the actual revenue in the Federation Account, which the minister of state for finance, Yerima Ngama, said government could not pay as a result of dwindling revenue from oil exports.
Revenue earnings of about N651.26 billion realized in January declined to about N571.7 billion in February and N595.71 billion in March. Though it rose marginally to N621.07 billion in April, it fell again to about N590.77 billion in May before reaching a peak of about N863.02 billion in June, the highest so far in 2013. It reached the lowest level this year in July, with N497.98 billion realized, while about N548.393 billion was earned last August.
The FAAC meeting in June ended in a stalemate after commissioners of finance and other members of the committee walked out on Mr Ngama, when government showed no commitment to settling the N336 billion arrears.
Again, the meeting also ended in a stalemate in August after the states accused the Federal Government of not compelling the Nigerian National Petroleum Corporation (NNPC) to pay up the N75 billion it owed the Federation Account.
Though the arrears were finally settled last week, with the disbursement of N1.19trillion windfall to the three tiers of government for August and September, it hardly doused fears among Nigerians about the true health of the country’s economy.
Economy not broke
To persuade Nigerians about the robust health of the country’s economy, minister of finance and coordinator for the Economy, Ngozi Okonjo-Iweala, penultimate week, rose in a vigorous defense, dismissing insinuations by critics of the administration that the economy was broke.
Mrs Okonjo-Iweala, who was a guest on a radio programme in Abuja, described negative suggestions about the economy as part of “a sustained systematic campaign in the last one year to distort the facts.”
“For the past one year we have been paying our bills,” the minister said. “How can they (critics) say the country is broke, or the economy is not working, when out of N1.7 trillion of personnel cost and wages, we have paid N1.3 trillion so far? Apart from the fact that people have been receiving their salaries, out of budgeted overheads of N248 billion, we have paid N180 billion so far.
“On capital, we have released N850 billion; more than 95 per cent cash backed, while 75 per cent has been utilized by the ministries, departments and agencies (MDAs); petroleum products marketers have been paid; we have been servicing our debts; other payments have been going on; the government has not shutdown,” the minister said.
Mrs Okonjo-Iweala warned those saying the country was broke to be careful, saying such statements were political, if, for over a year, that was reported and the economy has not crashed.
“I want to assure all Nigerians that this economy is working. No amount of talking it down is going to change the fact. All these people who are saying the country is broke should be very careful.
“We should not over-politicize the economy. Economy is a very precious thing. We are running this economy; the finances are there; we are paying,” she said.
Reconciling rating with economic reality
With last week’s retention of the BB minus rating of the country’s economy by Standard and Poors, which claimed that the economy remained strong with a stable macro-economic outlook, Nigerians find it hard to reconcile the rating of the economy by the international agency when most of the key sectors of the economy are comatose.
“How do we reconcile claims of strong and stable economy with the fact that a key sector of the economy, like education, has been grounded, as the universities were tottering on the precipice before being shut down for over six months now as a result of lack of funds to meet critical needs for basic infrastructure and improved learning environment,” queried Bernard Eze, an Abuja-based worker in one of the Federal Government agencies.
Though the director, corporate communications of CBN, Ugochukwu Okoroafor, dismissed as misleading reports that the economy was weak, in the face of a robust macroeconomic environment, including a stable banking system, foreign exchange stability, single digit inflation rate and GDP growth rates averaging 7 per cent over the past five years, the picture in the balance sheet of the CBN does tell a rosy picture.
CBN balance sheet casts a gloom
The balance sheet obtained by PREMIUM TIMES on Monday, showed that the country’s economy might indeed be in a bad shape in the run-up to the 2015 elections.
For Mr Eze, a financial analyst and Economist, as a lender of last resort, the CBN’s liquidity level should be enough to take care of any crisis in the entire financial sector.
He noted that since the 2009 global financial crisis, the bank has been deploying its resources either to grant loans to bailout distressed banks, or support the Asset Management Corporation of Nigeria (AMCON) in a bid to stabilize the country’s financial system.
A review of the balance sheet revealed that as at last September, CBN’s total liquidity recast stood at about $84.14billion (N13.13trillion), made up of liquid assets of about $49.999billion (N7.80trillion) and illiquid assets of $34.142billion (N5.33trillion).
A breakdown of the statistics showed that the liquid assets consisted of convertible currency reserves of about $42.5billion (N6.63trillion); foreign currency assets $2.413billion (N376.43billion); Federal Government securities $1.399billion (N218.244billion), and rediscount & advances $3.72billion (N580.3billion).
Total illiquid asset for the same period, made up of about $22.618billion (N3.53trillion) for the Asset Management Company of Nigeria (AMCON) bonds & debentures; direct finance investments & intervention loans to agricultural and other sectors $9.278billion (N1.45trillion), and fixed assets of $2.245billion (N350.2billion).
Similarly, total liquid liabilities of $83.025 billion (N12.952 trillion) consist of currency in circulation $8.809 billion (N1.374 trillion; total deposits $40.379 billion (N6.299 trillion; Federal Government deposits $11.781 billion (N1.838 trillion; bankers deposits $14.74 billion (N2.299 trillion), while other deposits stood at about $13.857 billion (N2.162 trillion, and open market operations (OMO) & Nigeria Treasury Bills (NTB) liabilities stood at about $33.837 billion (N5.279 trillion).
With the Monetary Policy Committee (MPC) reporting at the end of its meeting last month that the country’s external reserves declined from $45.83billion in July to about $45.27 billion (N7.062 trillion) as at September 19, 2013, indications are that about $23billion (N3.588 trillion) of this amount may not be available to the CBN due to its illiquidity level.
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