As I was in the process of releasing this piece into the mass media, the news broke that President Bola Tinubu had on Wednesday July 12, 2023 put forward a request to the House of Representatives for N500 billion as extra funds for the provision of succor for the masses undergoing what Mr President referred to as pains similar to child birth pang experienced by women who are mothers.
The sum which is to be specifically deployed in the provision of succour to the masses distressed due to the immediate consequences of the withdrawal of subsidies on both petrol and the naira policies being implemented by the incumbent administration.
The fund is expected to be deducted from the 2022 Supplementary Appropriation Act, which has a provision of N819.5 billion for palliatives envisaged by the predecessor administration.
It was quite a pleasant co-incidence to me because a critical question that l had posed in the later part of this piece before the request for the approval for the allocation is: where would President Tinubu find the funds to provide the much needed cushion for his temporarily painful but ultimately economically revolutionarily positive policies?
Having searched and not being able to identify other more viable alternatives in the horizon,my answer to the question is that taking the option of the International Monetary Funds loan may hold a better promise for our beleaguered country.
That is because although Nigeria is currently distressed financially, it is endowed with the resources and potentials to thrive as a prosperous and successful country which are yet to be tapped or harnessed.
But with the self-imposed reforms-removal of petrol subsidy and end of multiple exchange rates of the naira with foreign currencies which President Bola Ahmed Tinubu’s government has voluntarily embarked upon in less than 45 days of being in the saddle of leadership, Nigeria is eminently qualified to seek and obtain the IMF loan.
Having basically fulfilled all the loan conditionalities made by the IMF as far back as 1986 under the watch of then military president Gen.Ibrahim Babangida, IBB, through the sweeping reforms introduced by president Tinubu via his Tinubunomics initiative since 29 May this year, the question that comes to mind would be: is Nigeria taking the IMF loan?
Everyone knows that our country is in dire need of revenue, and its external debt burden that is hovering around fifty trillion (N50Tn) naira added to its local debt that brings its indebtedness to an estimated eighty (N80Tn) trillion has been acknowledged as unsustainable.
Given the paucity of revenue inflow that has been compounded by an epidemic and pernicious crude oil theft (Nigeria’s main source of revenue) that has assumed an alarming dimension, the country may not have any other option than to go the way of its neighbor, Ghana which recently sought and received a loan of three ($3b) billion dollars from the International Monetary Fund, IMF.
The option of IMF loan recommends itself because it is becoming increasingly difficult for Nigeria to service her external debt due to the fact that the cost of servicing it practically consumes most of the revenue accruing into the coffers of the federal government, to the extent that our country’s debt to equity ratio is in the negative territory and the world bank reckons that our debt servicing obligations matched against our national income, is at about 96 per cent.
In fact, by some estimates in some quarters ability a year ago is that our debt payment obligations,(all things remaining the same)would outstrip our revenue inflow in less than one year time.
Consequently, in recent times there has been very little or nothing left to apply in providing infrastructure or even somethings as little as basic remedies or palliatives for the hardship triggered by the removal of subsidy on the pump price of petrol and multiple naira exchange rates unification in the last one month of president Bola Ahmed Tinubu’s sweeping economic reforms.
For instance, the economy is in such a dire strait that it is the N400 million that used to be pushed into the black hole otherwise known as petrol subsidy on a daily and four hundred billion (N400bn) on a monthly basis that are being targeted as the funds for the new administration to kick start the much anticipated palliatives to ameliorate the hardships currently being faced by Nigerian masses.
It may be recalled that the outgone administration of President Mohammadu Buhari had programmed for petrol subsidy regime to be over at the end of last June beyond which there was no financial provision in the 2023.
And the Nigerian National Petroleum Corporation Ltd, NNPCL had claimed that the federal government was owing it a princely sum of N2.8 trillion naira after netting off the income from crude oil sales from the cost of petrol imports.
That is despite the fact that N3.5 trillion provision was made in 2023 budget for petrol subsidy up till June which is just half of the year after N6 trillion was appropriated as subsidy for petrol in 2022.
That brings subsidy in 30 months to a mind boggling N9.5 trillion which the House of Reps is determined to investigate its disbursement.
That is on top of Nigeria producing crude oil below the 1.8 million barrels a day quota from OPEC and its income from the sale of the commodity which constitutes about 79 per cent of our country’s foreign exchange earnings (gas is 11 per cent) and as a result earning only a paltry income in the neighborhood of $5b which when converted to the naira is approximately less than N30 trillion annually.
Meanwhile, the world bank has estimated that about $5.6b would be saved owing to subsidy removal from petrol and naira which is about half of the over $10 billion that the country used to earn annually in not too distant past.
In light of the above, despite the best efforts of tax experts, finding funds to sustain government would be like trying to squeeze water out of stone. And even the dollar proceeds hitherto applied in defending the naira by the Central Bank of Nigeria, via weekly interventions in the foreign exchange market through the sale of dollars to a vast array of bureau de change outfits that were mainly owned by government officials and fronted for by surrogates located in popular hotels, airports and strategic street corners, the bonanza is not available anymore as NNPC ltd had been mandated to use the dollar income from crude oil sales to import petrol into Nigeria and sell at subsidised rate, which has been returning a net deficit for the federation.
At some point, the weekly dollar bazaar which was carried out ostensibly to shore up the naira/ FX rate was no more available for the twin reasons of crude oil proceeds being exclusively managed by NNPCL that collects and uses the funds to import refined petroleum products into our country and which it subsidises before it is retailed to motorists.
And it is a largesse diverted to the NNPC that has also ended with President Tinubu’s bombshell decision/ pronouncement in his inauguration speech on 29 May: “Petrol subsidy is gone”.
As observed earlier, NNPCL in the wake of the petrol subsidy removal had claimed that our country is owing it N2.8 trillion in payment areas for subsidising the pump price of petrol which an activity that it had been carrying out on behalf of the Federal Government of Nigeria, FGN.
What the narrative above indicates is that our crude oil revenue was not even enough to support the cost of subsidizing petrol pump price because the FGN was still owing NNPCL N2.8 trillion.
That explains why the FGN has been borrowing to pay civil servants emoluments and meeting other governmental responsibilities.
In the light of the grim fiscal and socioeconomic situations described above ,even as President Tinubu’s team that l have, for the lack of a better nomenclature branded Tinubunomics evangelists are able to come up with strategies to ease the burden of galloping inflation that has been taking a heavy toll on the masses, the initiatives would need to be cash backed.
Whence cometh the funds, Nigerians would wonder?
Definitely not the paltry $800m that the world bank offered Nigeria to help cushion the harsh effect of subsidy removal just before former President Buhari’s tenure ended, neither is it the new $500m that has been offered to President Tinubu’s new regime by the world bank, perhaps as a demonstration of its support for the far reaching reforms so far introduced.
Clearly both world bank funds to be availed or already disbursed to Nigeria, even when combined are inadequate as they would not even scratch the surface of our country’s need.
***Magnus Onyibe is an entrepreneur, public policy analyst, author and democracy advocate.*
