₦airaland Forum

I have to say, even asset sales and a major currency devaluation will prove insufficient. I was trying to cut the FG some slack but I can't see either happening given Buhari's inclinations but even if it did happen, it will still be insufficient.

I posted much of this in an earlier post but I thought I create a separate topic for those interested in discussing or reviewing this.

Some background first. The FG has announced the 2016 budget with revenue projections of 3.8 trillion Naira based on, inter alia, $38 per barrel oil. Revenues of 3.8 trillion Naira imply a monthly average of 316bn Naira per month accruing to the FG. A common sense inference is that the FG's capacity to raise that amount of revenue in 2016 can be estimated from its performance today. Anyone paying attention will know that the FG's revenue profile today demonstrates that its 2016 estimates are unlikely to put it mildly.

Let's look at the last 3 monthly data:

The FG received 139.5bn Naira in the last FAAC allocation based on an oil price of $49.5. Note that November's allocation is based on October's oil price and so on and so forth. See here -

Giving the breakdown, Adeosun said the Federal Government received N139.5billion, representing 52.68 per cent; states, N70.7billion, representing 26.72 per cent.She said that the local governments received N54.5billion, amounting to 20.60 per cent of the amount distributed.

Adeosun said the country generated N198.5billion as mineral revenue and N98.8billion as non-mineral revenue.

“Also, there was revenue loss of $19.4million as a result of drop in federation export, even though the average price of crude oil increased from $46.9 per barrel in September to $49.5 per barrel in October’’.

http://leadership.ng/news/485842/faac-fg-states-lgs-share-n369bn-november.

The previous month was 191bn Naira for the FG at $46.9 per barrel, so it was largely due to non-oil revenue -

Giving the breakdown of revenue among the three tiers of government, Adeosun said the Federal Government received N191.9 billion, representing 52.68 per cent; states, N97.3 billion, representing 26.72 per cent. . . . . . "Also, there was revenue loss of 1.3 billion dollars as a result of drop in average price of crude oil from 47.3 per barrel to 46.9 per barrel in Sept. 2015", she said.

http://www.news24.com.ng/Politics/News/fg-states-lgs-share-n4738bn-for-october-20151128.


And before that 151.3bn at $47.3 per barrel: https://www.nairaland.com/2697931/faac-fg-states-lgs-share#39470160.

So you can see from the above that at just below $50 per barrel, FG revenue under Buhari has not gone above 200bn Naira per month. However, at $61 per barrel, FG received 201.1bn Naira in July -

Government received N202.1 billion, representing 52.68 per cent; states, N102.5 billion, representing 26.72 per cent.

http://dailypost.ng/2015/08/27/faac-fg-states-lgs-share-n511-8bn-for-july/. At $67 per barrel, the FG received 218.92bn Naira -

Addressing journalists at the end of the meeting, Mrs. Anastasia Nwaobia, Permanent Secretary of the Federal Ministry of Finance, said the sum of N449.685 billion was shared as statutory allocation, with the Federal Government pocketing N218.928 billion.

http://thenationonlineng.net/fg-states-lgs-share-n518-5bn-for-june-faac/

Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly. The last 3 months, the FG averaged 161bn Naira when oil was close to $50 per barrel. The FG needs to more than double current revenue collection just to come close enough to its revenue target.

Hence, never mind borrowing 1.88 trillion Naira (FG says it will recover another 350bn Naira from looters even though it has yet to recover much thus far), for the FG to fully implement its 6.07 trillion Naira budget at current assumptions, it will have to borrow at least 4 trillion Naira!

The FG simply cannot implement its budget in the current form without lots of asset sales and a huge devaluation in Naira but this is not proposed in the budget. My guess is that much of the capital expenditure will not be implemented. I leave you guys to ponder this.

PS: I know there will be some die hard Buhari fans who will proclaim that revenue collection will miraculously improve from 2016. Such feeble-mindedness is not worthy of a response.

@Passingshot,

I have to say that unlike most posters on here, you are more likely to admit error and that's a laudable attribute as it demonstrates intellectual courage and integrity.

That being said,you still maintain some redoubts of denial aimed at circumnavigating the logical discontinuties in your and APC's present policy positions and previous policy positions. As the previous poster chudionu58 noted, it is simply inexcusable to claim in one breadth that Nigeria's GDP stats as of May 29 2015 were bogus but to now claim that is logical to rationalise today's spending and borrowing plans on what you deem bogus data. If the data is bogus, it is the height of irresponsibility to borrow and spend on the strength of it.

Everyone has forgotten that it was not long ago we were in uproar over the quantum of debt left by GEJ which most Nigerians claimed was irresponsible. GEJ borrowed $21bn in his 5 years in office. The import of this budget is that Nigeria plans to borrow at least close to $10bn in 1 year, almost half of what GEJ borrowed in 5 years. This is justified on the basis of debt-GDP ratio being low when the GDP data has been described as bogus!

Another issue that comes to mind is how anyone can continue to claim that the $20bn loot claimed by Sanusi to have been stolen over 18 months is plausible. PassingShot accepts the goverment's claim that at $38 per barrrel, oil revenues will be 850bn Naira or $4.3bn at the official exchange rate. Extrapolate from that to $100 per barrel and anyone with a basic grasp of numeracy will start to notice that the purported sum of theft is unlikely. This is partly what GEJ in his dim-witted way referred to when he said "America will know."By the way, isn't funny that these sorts of sums, $20bn is 4 trillion Naira, were stolen and no one has been charged? We are all going bananas over the charges made against Dasuki but the actual charge, not the media tittle-tattle, refers to sums significantly smaller. Sahara Reporters claimed $10bn was used for the elections, that's close to 2 trillion Naira. How come no one has been charged for anything remotely close to those amounts?

Finally, a lot of attention has been focused on the probability of the oil estimate of $38 per barrel being met. FG revenues are projected at 3.8 trillion Naira in 2016, an average of 316bn Naira a month. What is not noted that it is unlikely the non-oil revenue estimates and the total revenue estimates will be met. Simply look at current revenues today, the FG received 139bn Naira in the last FAAC allocation based on an oil price of $49.5. See below:

Giving the breakdown, Adeosun said the Federal Government received N139.5billion, [/b]representing 52.68 per cent; states, N70.7billion, representing 26.72 per cent.

She said that the local governments received N54.5billion, amounting to 20.60 per cent of the amount distributed.

The minister further said that N25.6billion representing 13 per cent derivation revenue was shared among the oil producing states.

Adeosun said the country generated N198.5billion as mineral revenue and N98.8billion as non-mineral revenue.

“Also, there was revenue loss of $19.4million as a result of drop in federation export, even though the average price of crude oil increased from $46.9 per barrel in September to[b] $49.5 per barrel in October’’.

http://leadership.ng/news/485842/faac-fg-states-lgs-share-n369bn-november. Please note that the monthly allocation are based on the previous month's revenue.

The previous month was 191bn Naira for the FG at $46.9 per barrel, so it was largely due to non-oil revenue -http://www.news24.com.ng/Politics/News/fg-states-lgs-share-n4738bn-for-october-20151128.

Giving the breakdown of revenue among the three tiers of government, Adeosun said the Federal Government received N191.9 billion, representing 52.68 per cent; states, N97.3 billion, representing 26.72 per cent. . . . . . "Also, there was revenue loss of 1.3 billion dollars as a result of drop in average price of crude oil from 47.3 per barrel to 46.9 per barrel in Sept. 2015", she said.

And before that 151.3bn: https://www.nairaland.com/2697931/faac-fg-states-lgs-share#39470160.

So you can see from the above that FG revenue under Buhari has not gone beyond 200bn Naira per month at a time oil sells close to $50 per barrel. Hence the likelihood that the FG will raise 3.8 trillion in 2016, averaging 316bn Naira monthly and at $38 per barrel, from mainly revenue collection alone is far-fetched to put it mildly.

I will do a separate thread for the above as it is easier to discuss.

Nigerians have no shame. In saner climes, she would be facing legal investigations for her numerous shady dealings. But not in anything-goes Nigeria.

We have a remarkable tolerance, even reverence for the most dubious and shady of characters. Yet, we wonder why the country is such a mess.

seunmsg:
Times have change. Then, crude oil was sold for over $100 and today, it has gone as low as $36. All reasonable Nigerians know that keeping the subsidy regime is the surest way to bankruptcy for the country.

I was against the removal of petrol subsidy in 2012 because we have the resources to sustain it then if well managed without the attendant corruption. Now, I fully support the removal of petrol subsidy because it is no longer sustainable.

You do realise that fuel subsidy cost more when oil prices are high? So when it was more expensive to maintain subsidy you wanted it left in place but now that it is a lot cheaper, you want it removed.

In some way, it's apt as APC is the offspring or grandchild of PDP/failed past leaders. APC blaming PDP for today's difficulties is like a grandson who blames his granddad for his poverty- this is because underachievement is partly down to inherited factors and partly down to poor choices. APC is the continuum of and succesor to Nigeria's history of bad leadership.

The 2 parties are the 2 cheeks of the same backside.

omohayek:
As ever, you display in your analysis an impressive level of insight into the Nigerian political scene. Buhari's economic illiteracy is something I have been harping on here, and as you say, the real theme in the change of government is continuity of incompetence, rather than any sort of "change" for the better.

Thanks. I must return the compliment by noting that your incisive posts are a rare breed on Nairaland. Sagamite is usually a cerebral poster, but he seems to have drunk the partisan kool aid on this one.

You are right, and this budget only served to reinforce my fears. A fiscal stimulus package is fine in a demand-deficient environment facing deflationary pressures, not so great in an inflationary environment. We need structural reforms to address stagflation and not stimulus. No doubt, there is an infrastructural deficit which needs to be addressed but not at the expense of maintaining fiscal credibility.

The funny thing is that if stimulus is effective, there could be monetary offset as CBN interest rates have to go up combat inflation. Whether effective or ineffective, public finances are likely to deteriorate given the debt. Also, in a stagflation environment, public sector borrowing tends to crowd out the private sector reducing the economy's growth.

Buhari's economic illiteracy was predictable and predicted. My hope was that the likes of Fayemi and Fashola would nudge him in the right direction. Unfortunately, that doesn't seem to have happened.

I don't thnk the mention function works very well: I will make some rebuttal points on this matter but I don't think the premise of my original post is disputable now that the budget has been officially presented.

Firstly, I do not share your optimism about the new government as it is an optimism that has a tenuous link with reality. What is conspicuous by its absence in your posts, in a debate about public finance by the way, is recourse to data. I said in a post about a month ago that the easiest prediction to make in the social sciences is "more of the same." Buhari's government would prove to be inept just as every previous Nigerian government since independence. I would explicate more on this later but let me deal with some of the points you raised:

Sagamite:
Well, I think there are 3 points you have to consider here:

1) The drastic drop in oil prices mean that revenues has drastically dropped. To make that $20bn now would probably take, at least, twice the amount of time it would take to have made it during the Yam Festival. Even after discounting the 40% of the yam being eaten during the time the country had a yam rush. Revenues from $110 per barrel is far higher than that at $42 per barrel.

Except that this point has already been factored in in my comment. You only need to look at my post that you quoted to see that I made reference to February 2015 data and compared this with September 2015 data. I did this primarily because February 2015 revenue was derived from a time oil prices were circa $50 per barrel. For the February 2015 report link:

“There was loss of about 24.48 million dollars in revenue due to further drop in crude oil prices from 52.3 dollars in December 2014 to 48.6 dollars in January.

- From the September 2015 report link:

" There was revenue loss of 32 million dollars as a result of drop in average price of crude oil from 56.7 dollars in July to 47.3 dollars in August 2015.

. In summary, reported revenue for that month was circa 522 billion Naira when oil was circa $50 and a 40% yam eater was in charge and 390 billion Naira when oil was circa $50 per barrel and a non-yam eater was in charge. Notice also that my post had cited non-oil revenue which is largely unaffected by the oil price.

If GEJ's government ate 40% of the yam, the only reason revenue would continue to be lacklustre now that a non-yam eater is in charge is if yam eating is continuing in earnest. The more probable scenario is that, like the claim that Buhari stole $2bn as NNPC boss, the scale of yam eating is exaggerated for political effect. Witness how you made a statement which you believed to be a fact - that Dasuki alone pocketed $2.1bn which is N420bn at the official rate. Have you asked why he's being charged for a small fraction of the amount you "know" he stole? I have not taken time to address your claim that 40% of our budget was stolen in the GEJ era as it is frankly so absurd that it is not worth the time refuting.

2) Change/Transformation does not happen like that. Just because you change leadership does not mean people would change. They would need to see the change in paradigm and punishment being enforced at a level and style that is a deterrent. That would not happen in 6 months. Definitely not in 6 months PMB & YB used for planning. Many would have thought "This is Nigeria, you can't change anything. It is the way it is", so why would they change a habit their lifestyle depends on when they still have their system of crookedness in place? Worse still when the government had no ministers in those 6 months to control anything.

If the lack of improved revenue collection is because "change/transformation" would take time, that point has no place in a debate about public finance in the coming year since if revenue has not improved now it certainly is not going to do so, at least sufficiently, to ward off expanding the debt load significantly in 2016 which is the original point I made. This has been somewhat conceded by the government in its projected borrowing estimate.

3) When you want to implement a transformation (which is actually what we are having in Nigeria now, not just "change" ), things tend to first get bad at the beginning before they get good (sometimes, very bad especially when what existed before is very bad and entrenched in the culture). Many things have to be deconstructed before being reconstructed. So much uncertainty creeps in because people struggle to see how it would all end and tie up together as they have not seen such transformation before and it is complex. That is what is happening in Nigeria now. Uncertainty is one thing that is the worst enemy of investors. That is why we are seeing and would be seeing a series of job losses in Nigeria for another 6 months or so.

I find risible the use of APC bromides of change and transformation and rather feeble exculpatory claims that things getting worse for Nigerians is an indication of transformation. Such a claim requires an incredible leap of faith as it based on hope rather than history. I say this because the President did not distinguish himself in previous roles as PTF boss (where his underlings misappropriated 25bn Naira, a lot of money in those days), as military president (where Buharisms wrecked havoc on the economy as alluded to in this article -http://www.reuters.com/article/us-nigeria-election-analysis-idUSKBN0MS4T920150401) and as oil minister/NNPC Chairman. This echoes my query to those who in 2010/11 littered Nairaland shouting Fresh Air! in support of GEJ -what in the new president's past history demonstrates competence which imbues you with such confidence in his abilities for such an intellectually tasking role as being president?

Further, there is a glaring absurdity to the claim that pain-inducing uncertainty is the logical consequence of Buhari's awesome transformation. As if to say, that the deterioration in the economy and the flight of foreign capital is evidence that Buhari is working. In reality, uncertainty is the result of policy ineptitude, i.e., it's not just the inexcusable lack or delay in setting up a clear policy framework, it's that policies when announced are economically illiterate. Witness the declaration by the president that the Naira would not be devalued reinforcing the CBN's hamfisted attempt to maintain a fixed peg or the rather odd attempt to effectively extort money from foreign investors like MTN.

You have to also remember that financial markets are a forward discount mechanism, they reflect investors present assessment of future economic prospects. If you believe today that Buhari is embarking on a transformative path that will improve Nigeria significantly, you will invest today not adopt a wait and see attitude. There is, at the very least, a lack of supporting evidence by any objective criteria for the claim that we are witnessing benign transformation.

We were living in an artificial economy where the Cretin and his Goats were lying to the people about all things while creating an unsustainable bubble. Now they have their cretins out there criticising on all things shamelessly to distract the government.

It's funny that as the government has justified the 2016 borrowing on the basis that debt-GDP ratio is very low and, therefore, sustainable. In other words, they are operating on the basis that GEJ's economic data is accurate. I view data/info from GEJ's era suspiciously and the present governments wholsesale adoption of such data confirms my prediction of "more of the same."

As far as criticising the government causing it distraction, maybe the government should lock up its critics a la the first Buhari government. A Nigerian government certainly should not be put in a position where it is exposed to too much criticism.

In summary, Nigeria, like a lot of African countries, has been endowed with utterly incompetent leaders from the sectionalist Balewa to the brain-dead GEJ. There is nothing in Buhari's past history or policy leanings that convinces me that this time is different. At best, we might see a reduction in corruption but this is more likely to be offset by the deleterious effects of economic illiteracy. I have made this point several times - bad policies can cause more economic loss than all the Maduekes and Dasukis put together. When you insist on spending 1 trillion Naira per year subsidising fuel consumption, on fixing exchange rates and on doing fiscal stimulus in a high-inflation macro-environment, this can prove far more damaging than any attempts by an individual to change a nation's way of life for the better. It is for this reason that I suspect that the FG will have to scale back its 2016 borrowing if it wants to keep Nigeria on a fiscal sustainable path. We may have a good rally in oil prices in which case much of this is moot but that is a gamble the FG should not be making. As we go into the new year with many federal health workers yet to be paid their November salary and news of delays in paying federal workers, our judgement of our leaders should be grounded in empiricism borne out of verifiable facts and not blind faith in politicians supplemented by tendentious bromides like transformation and change.

PS: Wasn't transformation the buzz word of the GEJ administration?

You have to laugh at the sheer audacity displayed by many partisan posters on here. Yes, the GEJ government should have saved more money but GEJ and Yar'Adua undermined Nigeria's long term fiscal sustainability by awarding above inflation public sector wage rises. Under these two, the minimum wage went from 5k to 18k. Nigerians think that our main problem is corruption. In my view, these examples of policy ineptitude are a bigger problem than corruption. It is the reason why, predictably, changing from the corrupt GEJ government to the self-claimed "clean" government of Buhari has not and will not improve lives for the better.

As for the APC propagandists here like Gbawe, people who used to post in support of Aregbesola, hypocritically bemoaning the lack of saving when oil prices were higher, I posted the following in another thread:
-----------------------------------------------------------

Nigeria’s main opposition party said it will scrap the country’s sovereign wealth fund and a separate excess crude account if it wins elections in February.

“We’re going to put a stop to them,” Lai Mohammed, a spokesman for the All Progressives Congress, or APC, said in an interview in London yesterday. “The sovereign wealth fund and the excess crude account are illegal.”

http://www.bloomberg.com/news/articles/2014-09-30/nigeria-s-opposition-wants-to-scrap-sovereign-oil-funds

You cannot today bemoan Nigeria's financial illhealth and lack of savings when in words and in deeds, you did not make any provisions for oil prices crashing. To the contrary, at both the national and state levels, APC ran state governments and made pronouncements that seemed to assume that oil prices will always remain high.
---------------------------------------------------------------

Do people ask why it's only up to the FG to have a rainy day fund when states and local governments collect almost half of government oil revenues? Why didn't Kemi Adeosun, ex finance commisioner for Ogun state, prepare her state's finances for such an eventuality?

Very few people, apart from yours truly, who post on Nairaland were making regular posts 2 or 3 years ago bemoaning the lack of sufficient government savings to guard against oil prices crashing. The Naija mentality was "the money is there" and it seemed like Nigerians could not forsee an oil price crash. It is the reason why APC's official public position was against excess crude account and SWF. Now that the folly of this position is apparent, the same people want to pretend that they are any different from GEJ.

jomoh:
So you mean Nigeria cannot generate N1.6trn from all these

Customs (huge)
Ports (huge)
FIRS (huge)
Aviation
Immigration
Agriculture
Mining
CBN (remember the BVN fines)
Fines (remember MTN and other companies to come)
Ministry of justice (remember huge bail fees)


Please think again. Nigeria is filthy rich if we manage our resources very well. Far richer than any african country.

Simple question: why are they not generating those revenues as we speak?

I can see you expect to achieve a sustainable budget by imposing huge fines on foreign investors. There is a phrase economists use which is apt here: there is no free lunch in economics.

vizion:
The Federal Inland Revenue Service (FIRS) says it generated N1.97 trillion in revenue in the first half of this year (2015).
http://www.vanguardngr.com/2015/08/firs-realises-n1-97trn-revenue/

See Also
FIRS Generates N4.69tn Revenue in 2014

The report also indicated that N2.45 trillion, representing 52.96 per cent, was collected from petroleum profit tax while N2.24 trillion, representing 47.04 per cent, was collected from non-oil taxes during the period.

http://www.thisdaylive.com/articles/firs-generates-n4-69tn-revenue-in-2014/200484/

If you look at that 2014 Thisday article, 4.6 trillion was generated in a year oil prices were above $100 for the first half of the year. That 4.6 trillion is 1.4 trillion less than we are planning to spend in year we are expecting oil prices to be less than $40. It takes some optimistic assumptions to expect that those gaping revenue holes will be filled.

What is even more chilling is recent revenue collection stats in the post-GEJ era, if revenue collection remains lacklustre now how are we supposed to believe it will improve markedly in the coming months?

PS: For those in the know, are those FIRS stats after states and local governments have collected their 48% share of revenue?

obailala:
First of all, the exchange rate at the parallel market was N220 to $1 as at the time of handover in May 2015. The exchange rate was N155 in early December 2014.

Secondly, it is only airheads that still believe and spread the falsehood that PMB said he will make N1 = $1; this issue was thrashed and eventually trashed during the elections. Obviously, only airheadds would still hold on to this even though the only journalist who claimed he heard PMB make this statement in public couldn't provide a recording (meanwhile he alleged that the statement was made in public at a campaign rally).

Now both GEJ's government and Buhari's governmment suffered the impact of this oil price crash and recession; GEJ's government at its tail end felt the impact while PMB's government has suffered the impact from day 1. Within the last 6 months of GEJ's reign (Dec'14-May'15), the value of the naira at the parallel market dropped by 42% (N155 to N220) while within the 7 months of PMB's reign, the value of the naira in the parallel market has dropped so far by 27.27% (N220 to N280). This is notwithstanding the fact that even as at handover, the oil prices were still marginally higher than what it is today.

The exchange rate at the parallel market was not 155 Naira to the US dollar in early December 2014. It was circa 185 Naira. A good Internet search should rejig your memory or even this Nairaland thread:https://www.nairaland.com/68738/how-much-did-exchange-dollar/88

baralatie:
Point 2- projected revenue

"Oil Related Revenues 820 billion Naira
Non-oil Revenues 1.45 trillion Naira
 Projected Independent Revenues 1.51 trillion Naira

Revenue =#3.86trillion

It's the projected non-oil revenues that I find wildly optimistic. 2016 is only a few weeks away and so far we are not seeing any substantial increase in non-oil revenues which will justify the revenues projection being made for next year.

What might save us is a rally in oil prices which could happen next year but that is a big gamble. My view is that this is budget of irresponsibility.

Iykopeee:
These APC minions do no longer have an opinion. Right in their own eyes the country is moving in d negative direction with signs of imminent collapse, yet GEJ is even the reason why they cudnt afford 3 square meals.

The explanation for why Buhari fans go to comical lengths to rationalise away the apparent failures experienced by Nigerians in their day-to-day lives is the same as what explains why the numpties who used to shout "fresh air" in support of GEJ never recanted: ego or self-pride will never permit the respective supporters to admit that they were taken for a ride.

In a blog post by Krugman relating to why Trump's support will hold despite his unhinged rants, he notes as follows:

Bear in mind that embarrassment, and the desire to avoid it, are enormously important sources of motivation. Consider, as a weird, self-aggrandizing, but I think relevant observation, what has happened to supposedly smart guys who predicted soaring interest rates and runaway inflation 6 or 7 years ago. Almost none of them have conceded that they were wrong, and should have done more homework. Instead, many of them — especially the academics — have become ever more obsessed with claiming that they were somehow right, and/or trying to tear down the reputations of those of us who were in fact right. Nobody likes looking like a chump, and most people will go to great lengths to convince themselves that they weren’t.

http://mobile.nytimes.com/blogs/krugman/2015/12/15/the-donald-and-the-chump-factor/?referer=

As with GEJ, the more Buhari's failures become apparent, the more absurd and hysterical those who placed faith in him will get.

People used to marry as soon as they hit puberty and courtship was relatively brief. Now many wait till they finish university and go through lengthy periods of courtship so to expect that pre-marital sex would be as rare now as before is comparing apples to oranges.

Bevista:
Give Kemi & APC a break. The party inherited a battered economy from the PDP. NOI & PDP should have utilized the opportunity of high oil prices to position and diversify the economy, but alas, they squandered away everything. And you have the effrontery to abuse a man who is trying to clean up the mess with very little oil revenue.

I have always marvelled at the audacious hypocrisy in Nigerian political discourse. The poster demands that we give Kemi Adeosun and APC a break whilst bemoaning the mismanagement of Nigeria's economy. This is odd given that Kemi Adeosun was responsible for the management of Ogun state's finances and she left office having overseen the accumulation of debt and the undertaking of expenditure which left her state requiring a bailout as it was practically bankrupt. Having been rewarded for this "excellent" performance by being appointed finance minister, she is proposing an unprecedented expansion in FG expenditure and debt in her very first budget and we are supposed to maintain hope in her. Hope has to be hinged on experience and not faith.

She also represents a party that makes the corrupt and venal PDP seem like a symbol of fiscal rectitude. It is funny seeing the financial carnage left by state governments managed by APC politicians. We should also not forget that APC's official position, when oil prices were high, was that we should scrap our rainy day funds which were meant to provide a bulwark against oil price falls:

Nigeria’s main opposition party said it will scrap the country’s sovereign wealth fund and a separate excess crude account if it wins elections in February.

“We’re going to put a stop to them,” Lai Mohammed, a spokesman for the All Progressives Congress, or APC, said in an interview in London yesterday. “The sovereign wealth fund and the excess crude account are illegal.”

http://www.bloomberg.com/news/articles/2014-09-30/nigeria-s-opposition-wants-to-scrap-sovereign-oil-funds

You cannot today bemoan Nigeria's financial illhealth and lack of savings when in words and in deeds, you did not make any provisions for oil prices crashing. To the contrary, at both the national and state levels, APC ran state governments and made pronouncements that seemed to assume that oil prices will always remain high. To cap it all, they have been running a misinformation campaign against the one person who was notorious for demanding fiscal prudence:

ABUJA – Coordinating Minister for the Economy and Minister of Finance, Mrs. Ngozi Okonjo-Iweala, yesterday raised alarm over the depletion of the Excess Crude Account, which stands at a mere $ 3.6 billion.

Speaking at the first civil society forum organized by her ministry to acquaint civil society groups with the Jonathan transformational agenda, Okonjo-Iweala also appealed to state governors challenging the constitutionality of the Sovereign Wealth Fund to have a re-think, noting that the Fund is critical to national survival given Nigeria’s mono-economic status.

According to her, the nation could go broke in the next few years if it does not initiate savings from oil proceeds while lamenting that the Excess Crude account which has depleted to $3.6bn cannot sustain the nation in the event of an economic crisis.

- See more at: [url]http://www.vanguardngr.com/2012/04/okonjo-iweala-raises-alarm-over-depleting-excess-crude-account/#sthash.ZtXi5GPl.dpuf [/url]

Further, I have noticed a tendency among Nigerian commentators to make the following ignorant claim: Nigeria does not have a diversified economy. This claim is made out of ignorance. Nigeria has a diversified economy as oil and gas represent less than a fifth of the economy. Agriculture is a bigger component of GDP than oil. What these people should be saying is that Nigeria should raise further the share of non-oil tax revenue and non-oil export revenue. Again, I would have taken APC more seriously if the state governments it ran, with the exception of Lagos, were not so comically dependent on FG allocations which allocations were largely dependent on oil tax revenues.

I don't know if this story is true or not but I am curious about the legal authority for the claim that former heads of states are legally entitled to have the FG provide them with bullet proof vehicles. Which law confers such entitlement?

These are people who have sufficient money to buy as many bullet proof vehicles as they want. At best, the FG can provide security details for our ex-president but it does not include purchasing bullet proof vehicles. No law requires such purchases.

Seun:
Lately, I just feel so sad whenever I read about anything the CBN is doing. I feel as if Nigeria is turning into Argentina, Greece, or Zimbabwe.

The CBN governor is not up to the task but it does not help that he is working under a regime where the president has ruled out devaluation. Presidents have no business saying things which undermine central bank independence.

Policy ineptitude will prove the bane of the Buhari era as was the case with the first Buhari regime in the 80s. What you are witnessing is slow-motion economic implosion. Only an oil price rally will save us.

Sagamite:
I doubt.

I think no one should expect anything tangible from 6 months of cleaning up a cretin's 5 year mess.

Nigerian government makes money from 6 streams:

1) Oil revenue
2) VAT
3) Company Income Tax
4) Customs and Excise
5) Sale of Assets/Equity/Licences
6) Return on Equity/investments

By and large, the oil revenue forms the largest bulk of these streams. Considering the budget planning from this was pegged at a realistic, if not conservative, level of $38 per barrel, I can hardly see any error in this.

NNPC is also being cleaned up. No more selling of Nigerian assets for peanuts, oil bunking and the non-remittance of billions of oil revenue to the federal account with impunity, while the Cretin of Otuoke was shacking Orijin in Aso Rock.

(3) is likely to increase after we now have ministers. Policies would be revealed and investors would know it is a clean party they are being invited to, not the "goat must eat yam" party rot the Cretin of Otuoke was running. We are likely to see new FDI and an increase in existing FDI.

(4) was another avenue of leakages that is going to drastically improve. PMB was already cleaning that sector with the mass sack of the crooks running it. Now we will no longer have Customs men pocketing import duties and turning into Abubakar Atiku.

Mate, Nigeria had a previous budget of about $28bn. Of which (conservatively) at least 40% was being looted. Only a NSA on his own was stealing $2bn because they knew it was a Mumu that was running the country. Don't let us talk about what PDP officials were looting. I know of a PDP Chairman that was filling a private jet with millions of dollars during elections.

Despite these lootings, Nigeria was functioning without much debt. Even if PMB reduces these looting to just 10%, we will be able to manage.

Also don't forget some of these criminals, pendusky loves to worship, would be returning their loot before going to jail. That would be going into the pot too.

The reason I hadn't replied to your post is that an adequate response requires copious references to data which I don't have the time to gather here but I will make a few points. You have to note that the premise of my original post - that the new budget must be fuelled by debt - has already been conceded. The budget projects 1.8 trillion Naira in debt will be required, nearly a third of projected spending. That Naira sum of projected debt in one year has no historical parallel. Given Nigeria's budgeting history, you will know that it's likely to prove an underestimate by the completion of the fiscal year.

Now, in my original post, I made a point which I have noticed much of the analyses in the post-GEJ era has overlooked. I said the following: "If revenues next year would be high enough to meet such spending, it should be happening already."The boilerplate response has been that 6 months is insufficient time to remedy many years of damage, but that misses the point. If GEJ's administration was stealing 40% of our budget as you claim, not to mention stolen revenue as Sanusi's famous $20bn claim alludes to, merely changing government should see an improvement in revenue reported. Instead, data on non-oil tax revenue, oil production and oil revenue remain lacklustre.

This is not a question of fixing our problems within six months, that is a straw man. It is a question of seeing some measure of improvement which justifies the outlandish claims about previous corruption. Think of a simple thought experiment: Supposing as a UK resident you entrust a business in Nigeria to family friend who reports to you that yearly and monthly revenue were circa 24m naira and 2m naira respectively. Eventually, you are told that the friend is looting 40% of the revenue and as a result you replace him. After 6 months with the new replacement in charge, won't you be a bit taken aback if the new person is still reporting circa 2m naira a month in revenue? If you look at official reported data, it is as if the old government is still in power. In the light of the lack of improvement, continuing to claim that things will be better next year is the triumph of hope over experience. What Paul Krugman refers to as a zombie idea, i.e., a false idea which is not killed by evidence.

I thought it might be useful to leave you with a few links which illustrate what I am referring to: Here is an extract from an article referring to February 2015 revenue:

The Minister of State for Finance, Mr Bashir Yuguda, said on Wednesday that N522 billion was shared among the federal, states and local governments as revenue for February, 2015........ He said also, that the non-mineral revenue for February was N94.5 billion, which when compared to the N110.6 billion generated in January, showed a decrease of N16.1 billion.

http://leadership.ng/news/418438/faac-fg-states-lgs-share-n522bn-for-february

Here is September 2015 revenue:

FAAC: FG, states, LGs share N389.9bn as revenue for September NAN-HE-20 FG, states, LGs share N389.9bn as revenue for September FAAC Abuja, Oct. 28, 2015 (NAN). . .... She said that the country generated N213.1 billion as mineral revenue and N108.8 billion as non-mineral revenue.

https://www.nairaland.com/2697931/faac-fg-states-lgs-share#39470160

Once you adjust for currency depreciation and the fall in oil prices for the respective periods, you can't see much evidence of improvement.

texazzpete:
Oil is still our major earner, and our production will soon be on decline. From exploration to production can take YEARS, so now is the time to look for reserves to replace our depleted volumes...not waiting until oil price becomes more favorable.

Let me be brutally honest here. All the people in this thread that have condemned the Government's exploration efforts are morons.

There has to be some limit to this lickspittle defence of the government. So declining production requires that the Govt expend scarce money looking for oil?

If there was a compelling commercial logic to this, there are plenty of private oil companies who will happily undertake the exploration themselves. This is more a political decision than a commercial decision. In the light of the revenue straitjacket they're operating under, it is complete and utterly idiocy to embark on such expenditure.

Firefire:
Thank you for your comment.

Your submission shows your deep understanding of the subject matter and your awareness of the trend of events.

As you rightly posited, which I somewhat agreed with, that "The Govt has to allow the Naira to fall until such a point that we have the reserves to hold the line", if we continually follow this line of argument while other variables remains constant, don't you feel that is also inimical to the

purchasing power of Nigerians? Unless they (Nigerians) will not transacts in USD and got no FX impact in addition to the inflation rate of 9.4 percent.

Hence, we would see a big shift between the Nominal Income vs. the Real Income.

On the aspect of FDI, the unclear economic direction of the current administration is already putting off potential investors not minding the challenges and FX impact of the official/market rate off USD.


South Africa's Tiger Brands cuts off funds to Nigeria's DFM: "Tiger Brands has decided not to provide further financial support with respect to its investment in Tiger Branded Consumer Goods plc of Nigeria," Tiger Brands wrote down the value of DFM twice last year for a total 954 million rand ($66.3 million) as the business suffered from tough competition and a weakening naira currency.
http://www.dailymail.co.uk/wires/reuters/article-3320489/South-Africas-Tiger-Brands-cuts-funds-Nigerias-DFM.html

Nigeria administrators must come together to address the issue NOW!

Shalom!

Allowing the Naira to reflect its market rate will reduce consumer purchasing power for obvious reasons - higher import costs will increase inflation. However, not doing so will achieve the same outcome as a fixed rate requires restiction to forex access with such restrictions increasing import costs. The difference is that a fixed exchange rate not backed up by sufficient reserves has the ironic effect of accelerating currency depreciation because - as earlier stated - it reduces the incentive for bringing in foreign exchange into Nigeria.

Ultimately, the root cause of Naira depreciation is reduced forex coming into the country due to lower oil prices. Anything that further reduces forex coming in, such as restrictions necessitated by a fixed exchange rate, will have the unintended effect of accelarating currency depreciation. Of course, the official rate will stay the same but the greater the divergence between the official and market rates, the more the former becomes irrelevant.

Firefire:
As much as I agreed with your line of thought, I want to ask you, how much more or low will Naira exchange for USD before it is deemed to be at "appropriate level of market forces" ?

FG was subsidizing Naira at 155/$ as of Oct. 2014, before the devaluation of about 27% at current rate of 197/$.

Yet, Naira keep depreciating, don't you feel the government need to Re-approach her existing monetary policies ?

I have argued this topic ad infinitum in previous posts so will restrict myself to a few comments here. The Govt cannot successfully maintain a fixed rate without sufficient reserves to defend the Naira. The answer to your question is that the Govt has to allow the Naira to fall until such a point that we have the reserves to hold the line.

The difficulty with maintaining an official rate, at odds with market rates, as we are doing is that it dissuades investors from bringing in foreign capital into the country. Investors will be wary to bring in money because of restrictions in taking profits out, which restrictions are necessitated by the official rate. Further, if you want to build a factory and the cost of the factory is estimated at 200 billion Naira, you will not want to spend circa $1bn at the official rate when the market value of 200bn Naira is circa $770m. Hence, these CBN exchange rate restrictions become counter-productive and self-reinforcing as you need the inflow of foreign exchange to stabilise the Naira. Like I pointed out before, during Abacha's era, the official rate stayed at 22 Naira whilst the market rate hit 85 Naira to the dollar. Excellent round-tripping opportunity for the highly connected, not so much for the rest of Nigerians.

[quote author=Gaborone post=40920639][/quote]I said to a friend of mine that Nigeria's exchange rates are a good signal as to the efficacy of the much vaunted anti-corruption fight. If you believe 3 things: that GEJ's administration stole gargantuan sums of money, that Buhari's regime has put a stop to this and that Buhari is retrieving or will retrieve money stolen previously, it's unlikely the Naira will continue to fall. This is because those 3 premises will lead to large inflows of repatriated money.

NaLaugh:
Each time I see one these "Naira Crashes" topics on Nairaland, I rush to check the official rate, to see if it's a sweet time to send cash to Naija.

But it is ALWAYS hovering at the same $1 = 199.05. Other than the very few people in Nigeria who have to make payments in USD for visas and such, I don't see how the "black market" rates are relevant to average Nigerians.

These fluctuations at the "black market" are only driven by arbitration done by people running that market.
It has zero reflection on the strengths or weaknesses of the Naira. ONLY an official change in the exchange rate signals that.

At this moment, the official exchange rate remains $1 = 199.05.

The government can fix the offical exchange rate by fiat, during the Abacha era the official rate was 22 Naira to the dollar whilst the black market rates hit 85 Naira to the dollar. You may think this does not matter but the bigger the divergence the more difficult it is to access the dollar in the official market and the less likely it is that foreign investors would invest in Nigeria.

The official exchange rate will increasingly become meaningless with time given this divergence.

Looks like Nigerian fiscal policy is going to go the Osun way, i.e., debt fuelled spending. I say this because fiscal revenue remains disappointing 6 months into the new regime. If revenues next year would be high enough to meet such spending, it should be happening already.

If you read this part, you will realise that the subsidy for 2015 will be in excess of 1 trillion Naira.

However, the committee uncovered unappropriated subsidy payments to the Nigerian National Petroleum Corporation (NNPC).
Providing details, Senator Akpan Bassey (Akwa Ibom) said intelligence reports before the National Assembly showed that the total subsidy claims including that of NNPC stood at N950 billion, and the corporation had been pretending that the entire subsidy from January to September was N413 billion.

This revelation implied that the corporation has been withdrawing its subsidy claims from source without appropriation.
Bassey said: “What I was trying to clarify at the committee meeting is that we know from our own intelligence that the total subsidy today is about N950 billion. “But what the NNPC and Petroleum Products Pricing and Regulatory Agency (PPPRA) are reporting is the subsidy due to major oil marketers alone. “Major oil marketers import 52 per cent while NNPC
imports 48 per cent. So the subsidy that the NNPC is presenting, in our opinion, is subsidy due to oil majors only and we asked what is the subsidy due to the NNPC on the basis of their own importation of 48 per cent of the total fuel consumption in the country.

seunmsg:
You are the terrible liar and propagandists here. You have to quote a report dated 7th of August, that's about 4 months ago just because you want to make the president look bad.

Between then and now, a lot must have happened and there is a strong possibility that looters under the corrupt GEJ must have returned part of their loot.

Quit hating your president and support his effort to recover our stolen wealth from the rogues that served under GEJ.

A strong possibility based on what evidence? CBN's reserves have fallen in the last 4 months, FAAC monthly allocation for August and September have been lower than in the preceding 2 months. Is there any shred of evidence, evidence is not statements or rumours, that you have to substantiate what you are claiming?

mekd:
Crying foul...Cos it didn't favour them..

Bloomberg was founded by Michael Bloomberg, an Igbo man from Ohafia and a notorious IPOD financier. He is a wailer as is firms like the Ashmore Group and JP Morgan.

Sai Buhari!

All they need is to pay a few thousand people, perhaps party loyalists, and they can proclaim success! It's difficult enough to pay Govt workers, never mind the unemployed.