by Laolu Akande

Findings show that the depleting financial resources of the country during the highest windfall ever, has been a source of agony to those saddled with managing the country’s financial resources

Economic  technocrats in government may have, in the last few years, been expressing deep, but secret, concern over mismanagement of Nigeria’s oil wealth during the years of “continuous” rise in price and export volumes.

Oby Ezekwesili, a former Minister and World Bank Vice President, who first introduced the Due Process Unit, blew the lid recently during a lecture to mark the 42nd convocation of the University of Nigeria, Nsukka.

Incidentally, minutes of a meeting of the Central Bank’s Monetary Policy Committee (MPC), a few years ago, showed clearly that top Central Bank of Nigeria officials concluded that “there was a puzzle to be unraveled to know why foreign exchange reserves had been falling, as oil production and prices were rising.”  The meeting, therefore, bemoaned declining foreign reserves during continuous periods of oil windfall.

According to the minutes, a CBN report in 2010 indicated that, while “oil export volumes recovered in 2010 relative to 2009 on account of the rebound in both output and prices,” this was not at the level attained in 2008.

Continuing the document noted that “external reserves, which peaked at $62.08 billion in September 2008, had since declined steadily to $40.23 billion in April 2010 and further to
US$33.60 billion by end of October 2010.” The minutes was dated November of that year.

Furthermore, it was noted that, “the major reason for the decline was the near exhaustion of the excess crude oil account from a peak of $20.44 billion, in January 2009 to $1.99 billion at the end of October 2010.”

Also, the minutes disclosed, “the CBN portion of the external reserves had also been falling since August 2008 due to the high demand for foreign exchange. The report also showed that during the period, payments to the joint venture partners for cash calls and subsidy deductions for the NNPC rose significantly.

The CBN officials noted that “there was a puzzle to be unraveled to know why foreign exchange reserves had been falling, as oil production and prices were rising.”

It was this same puzzle that had been expressed by technocrats in government behind closed doors, and the attendant paradox of poverty in the midst of plenty that became a matter of public controversy when Ezekwesili decried the ravaging poverty caused by poor choices of the Federal Government, especially under the last two administrations that followed the Obasanjo presidency.

Although, the former World Bank vice President has come under increasing attacks, findings show that the depleting financial resources of the country during the highest windfall ever, has been a source of agony to those saddled with managing the country’s financial resources except that they cannot speak out publicly.

This worry by those at the CBN as shown in the minutes, for instance, tallies with Ezekwesili’s position that Nigeria has enjoyed five circles of oil boom since independence, bemoaning the failure of governments to convert the resulting windfalls to renewable assets through proper management of human capital, development of other sectors or investment in foreign assets as other countries have done.

In that CBN minutes, the top government officials in attendance, including the CBN Governor Lamido Sanusi, agreed among themselves that huge government expenditures, subsidy of petroleum products, and electioneering were part of the reasons for continued budget depletion in the face of rising price of oil.

Other factors agreed among the economic managers were the increase in wages to federal civil servants, loss of revenue through daily waiver on rice imports and the joint venture cash calls among others.

Although the CBN officials “agreed that fiscal discipline and structural reforms were needed to reduce the substantial budget deficit” in the face of growing oil revenue, it is not known if these position was transmitted to Aso Rock.

The minutes of the MPC meeting noted that “much of the domestic revenue was devoted to recurrent expenditure, which left very little room for capital projects.” It also corroborated Ezekwesili’s position that “Nigerians, mostly the poor, continue to suffer the effects of failing public health and education system as well as decrepit infrastructure and battered institutions.”

 

Read this article in the Guardian Newspapers

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