JP Morgan, the American investment bank, has alleged that Nigeria’s net reserve is estimated to be $3.7 billion.
And it has decided to ridicule our country in the public arena, by squealing to the world that the largest country by population and economy in Africa is broke.
Apart from JP Morgan, the CBN is indebted to the tune of $7 billion, it also owes Goldman Sachs, another US investment bank, $500 million, just as it is also leveraged to the tune of $6.3 billion in Foreign Exchange, FX forwards to a number of European creditors.
Although CBN’s Dr Hassan Mahmud, who is the Director of the Monetary Policy Department, has debunked the unwholesome claim by JP Morgan, the damage has been done to the already sagging image of Nigeria:
“We also read the JP Morgan numbers in-house and we didn’t panic over that. That’s not the first time we are seeing people, institutions reeling out numbers; they must have their intentions to do that, whether to rouse market sentiments or to mislead the public.
“But, the central bank has as much as possible tried to be transparent. What I will say about those numbers is that it is just funny in the sense that number one, reserves like any account balance, is a flow; there are changes that go within it at any particular time.
“Two, even if you have outstanding liabilities, you don’t mark the outstanding liabilities to market on a day and say this is your net balance.
“I can have $20 million in my account and I am owing someone maybe $13 million that is supposed to be paid in 2027; you can’t come in 2023 and say if I remove that $13 million, your money is $7 million or you are having $7 million.”
Apparently, the CBN had borrowed the funds to defend the naira, which of course, is part of its responsibilities as the apex bank.
It is incidental that Singapore had also passed through the dire straits of the foreign exchange reserve debacle that Nigeria is currently contending with.
According to a top Singaporean official, charged with the responsibility of maintaining the Integrity of the country’s FX reserve is strategically important.
He emphasised that a country’s reserve is its financial defence, like military defence and social defence.
So you do not tell your enemies how much you have in your reserve. He concluded that it is what they did in Singapore that enabled her to move from third to first world.
Incidentally, the incumbent administration of President Bola Ahmed Tinubu which avers that it has zero tolerance for borrowing is poised to repair the damage through Tinubunomics which is a gamut of reform policies that the administration has been unfolding right from 29 May when the new government was inaugurated.
At the Nigerian Bar Administration, NBA 63rd conference, recently held in Abuja, President Tinubu bared his mind on the extraordinary debt situation in our country:
“Can we continue to service external debts with 90 percent of our revenue? It is a path to destruction. It is not sustainable. We must make the very difficult changes that are necessary for our country to get up from slumber and be respected among the great nations of the world.”
In the calculation of JPMorgan, which actually is a banker to the CBN that has gone rogue, when Nigeria’s liabilities are backed out front her assets, only a scintilla sum of $3.7 billion would be left in our country’s reserve.
If that paltry sum that JP Morgan claims is all Nigeria has in its reserve is the correct figure, then our country may not have enough FX to fund one month’s import of goods and services into our country.
That is frightening because a country’s economy can not be in worse dire straits and there cannot be a better characterisation of a broke country if it does not have enough in its reserve to cover one month’s import of goods and services.
Nevertheless, the embarrassment that the revelation by JP Morgan has caused our country, notwithstanding and as someone who often sees opportunities in problems, the exposure that a mere $3.7 billion is all that is left in our foreign reserve in the CBN, can also be turned into a positive force of action.
That is because it is expected that it would dawn on all those making incredible demands from the federal government, such as the Nigerian Labor Congress, NLC and Trade Union Congress, TUC, clamouring for N300,000 minimum wage for workers that Nigeria is broke, so she can not afford such luxury at this point in the life of the nation.
That reality would also attenuate the clamour by the other workers agitating for a pay rise such as doctors and university lecturers, who would be struck by the reality that the government is indeed broke and, therefore, moderate their expectations.
To be clear, one is not by any means making the case that workers do not deserve wage increases to cushion the ravaging effects of the current runaway inflation, and sundry challenges besetting workers.
But what l am articulating is that Nigerians now have a clear idea of how broke our country is so they would put on their thinking caps and join in the quest to figure out how we can collectively get out of the fix, instead of seeing the impasse as solely the government’s headache.
At best they may come up with great ideas to complement the government’s efforts, but at worst they would empathise and be less bellicose.
Already, the international community, particularly the business savvy ones and those inclined towards doing business in or with Nigeria, (the so-called foreign direct investors) would consult bankers to the CBN such as Goldman Sachs and JP Morgan before staking funds in the Nigerian market, are well aware of the parlous and debt-ridden state of our economy, even before Nigerians.
Apart from Nigerians, others who may be shocked by the claim by JP Morgan that Nigeria is broke are fellow Africans who are led to believe that our country has remained the giant of Africa in terms of wealth. That is because they are likely still reminiscing about Nigeria under the regime of Gen. Yakubu Gowon as military head of state that hosted the Festival of Black Arts and Civilisation, FESTAC that caused blacks all over the world to converge in Nigeria for a lavish carnival.
About 45 years after that display of opulence, Nigeria is a shadow of its old self, as the country’s population has grown in geometric proportions along with an unbridled consumption attitude, while her oil/gas resources that were spinning petrol dollars for her have been dipping dramatically.
If our country’s resources were even growing at arithmetic progression, that is assuming the management of the resources had been responsibly carried out via diversification of the production base, the current crisis situation would not have arisen.
But our country has been on a sort of roller coaster of binging. Hence it is currently in hot water, which is what Tinubunomics has come to halt and reverse.
As it may be recalled, the late Nelson Mandela, iconic ex-president of South Africa, once stated that Africa is waiting for Nigeria to lead the leapfrogging of Africa out of colonial oppression, neo-colonialism and imperialism into prosperity.
Perhaps, Mandela’s optimistic projection may come to fruition through Tinubunomics if diligently implemented so that Nigeria can return to its pre-eminent position of being the giant of Africa.
Candidly, what needs to be done now to remedy the blithe on our nation’s image caused by JP Morgan’s exposition about alleged Nigeria’s insolvency, is to support the introduction and implementation of fundamental socio-economic reforms such as petrol subsidy removal and the effort to unify the multiple exchange rates via a managed float of the naira that president Tinubu has embarked upon.
Both policies were introduced within the first two weeks of the ascension of the incumbent president to the throne in Aso Rock Villa’s presidential seat of power on 29 May which is still a few days shy of 100 years.
And they have been constituting chokeholds, which no past leaders, except the current president Tinubu, had the guts to remove.
Simply put, it is the haemorrhaging of the treasury caused by the infliction of holes on the treasury of Nigeria by the twin monsters of petrol subsidy and inflated naira value which had become entrenched for the better part of five (5) decades that Tinubunomics has come to put an end to in order to give Nigeria and Nigerians breathing space or chance to exhale.
The goal may sound utopian because the two (2) earth-shaking policy planks introduced by the Tinubu economic reform policies otherwise already have negative spinoffs such as the present high cost of living, particularly food inflation which is currently at an all-time high of 24%, an astronomical spike in the cost of transportation which has been tripled and the prohibitive price of other essential commodities and services that are inflicting excruciating pains on the masses, especially the more vulnerable.
But the dire consequences of the reforms on the critical mass of Nigerians are expected to be temporary, until modalities for salary increases for workers and direct cash transfer to the poorest of the poor, which is currently being processed, are perfected.
In the interim, initiatives to soften the pains are being unfurled in the form of palliatives that would be more encompassing and are being targeted at mitigating food inflation and a spike in the cost of transportation.
That is being pursued through the federal government’s directive for the relevant authorities to dispatch large tons of grains from strategic grains reserves to all the 36 states of the federation and the FCT, while the sum of N5 billion each is also being released as loans to state governments nationwide to provide succour that is relevant and suitable for citizens in their respective jurisdictions with the objective of stabilising the polity.
Admittedly, the grains and cash palliatives are minuscule compared to the Herculean nature of the suffering being endured by the masses, but as the popular aphorism goes: half bread is better than none.
However, given the dicey circumstances in which the current administration finds itself, especially since its predecessor did not make adequate arrangements beyond the end of June for the post-petrol subsidy remedy regime, governance seems to be in chaos even as the masses appear to be in quandary.
That is why Senator Adams Oshiomole, former national chairman of the ruling party, APC remarked that “the government inherited a terrible economic situation, everybody knows it. The government inherited an economy in which the total national revenue was barely enough to service our debt burden. Spending 96 percent; which is to say every one hundred naira Nigeria earns, ninety-six kobo is to pay debt.”
As an optimist, l believe in the dictum: after the rain comes sunshine. Hence l am ready to cut the new regime a slack by endorsing Tinubunomics which is its flagship.
Of course, the federal government is not under any illusion that the measures that it has put in place so far can turn the ugly poverty and crushing debt situation around overnight.
Rather, my intuition is that the FGN is quite aware that the preliminary measures being taken are like applying first aid treatment or putting a bandage on a wound to stop the bleeding of a victim of an accident by paramedics.
The bandage, which can be equated to the current palliatives being distributed, for instance, would not stop, but reduce the bleeding and enable the paramedics to take the person to the hospital for proper medical care by doctors etc., who can be likened to the various ministers of ministries and agency of government (Tinubunomics brand ambassadors) who have just resumed at their duty posts.
Due to the fact that our country is going through an unprecedented socioeconomic crisis, perhaps of the hue of the Great Depression experienced in the United States of America, USA in the mid-1930s, under the leadership of Franklin Delano Roosevelt, FDR, who immediately after World War ll had to think out of the box on how to rescue the war-weary Americans from galloping inflation, massive unemployment and extreme hunger adopted revolutionary measures.
Most of us are familiar with the innovative approach that FDR adopted to pull America back from the brink, such as the New Deal package, so there is no need belabouring or detaining readers with the details.
With respect to Nigeria, in my assessment, President Tinubu and Tinubunomics champions may be looking for quick wins and low-hanging fruits, hence they started by putting bandages on the gaping wounds of Nigerians who are literally bleeding while they look for effective medicines to heal the wounds.
It is a no-brainer to realise that to fix our country requires a massive injection of funds.
Unfortunately, our country is currently broke due to the unbridled appetite of the immediate past administration to borrow funds both locally and internationally to sustain consumption (subsidies on petrol and naira). When the cost of the two subsidies are aggregated, they amount to over eighty trillion naira (N80t) debt overhang.
Being an accountant, and former treasurer with Mobil oil producing company, President Tinubu is acutely aware of the gaps in the tax collection process in our country.
Conscious of the difference in the revenue of Lagos state, which is a mini Nigeria, from when he took over to the time that tax collection became more efficient after it was taken off public servants and handed over to private tax consultants, he knows there are enough funds in Nigeria to turn the economy around than to go a-borrowing.
That explains his setting up of the Tax and Fiscal Policy Reform Committee, headed by Mr Taiwo Oyedele, who he headhunted from PriceWaterhouseCoopers, PwC, where he was the leader of the tax team for the African tax team.
To allay the fears in some segments of society that Nigerians would be overburdened by a new tax regime, Mr Oyedele has assured that it would not be the case while averring that the tax bracket would only be expanded to capture those currently outside the loop.
But before targeted revenue from tax starts flowing in as envisaged, the two key policy reforms of ending petrol and naira subsidy removals are already yielding dividends.
As evidence of the efficacy of the policies that have had profound and disruptive effects on the economy, President Tinubu informed Nigerians that about one trillion naira was saved in the first month of petrol subsidy removal.
That was quite a cherry and remarkable news.
However, Nigerians seem to have given the otherwise cheery news about the savings from petrol subsidy a cold reception.
That is perhaps due to the unpleasant fallouts, such as the hardships crushing Nigerians, as such, the government in power may not be keen on briefing Nigerians about the savings for the current month, which is boosted by naira revaluation or multiple FX rate unification.
Rather, the authorities may just let the money speak for itself by a significant rise in the size of the amount of naira that the 36 state governments and Federal Capital Territory, FCT have received into the Federation Account, FAC and which they have shared in last two (2)months which is currently in trillions.
The truth is that it is not everything about subsidy withdrawal that has been gloom and doom.
The good news is that the funds that used to be literally flushed down the drain in the name of subsidy are currently being distributed to state governments in the form of five billion naira loan (N5 billion) authorised as loan advance to provide palliatives for the masses facing intense hardships arising from the withdrawal of subsidy from petrol and the naira, which hopefully would be temporary.
As of the 20th of August, most of the thirty (36) states have received at least two billion naira each to provide succour to the long-suffering seventy-one million (71) Nigerians, whom a recent Ministry of Finance, MoF, under the immediate past administration, revealed are living below the poverty line.
Since the bane of Nigeria’s economy has been the shortage of FX income due mainly to the stealing of our country’s crude oil which is its mainstay by organised international crime syndicates, President Tinubu has turned attention to the oil sector with a view to ending the stealing via concerted efforts, so that we can produce and sell more to generate the highly needed FX.
The National Security Adviser, NSA, Mr Nuhu Ribadu, on the directive of Mr President, has just completed a tour of the crude oil producing locations to gain first-hand information about the alarming level of theft of our crude oil and vandalisation of the infrastructure.
Information in the public space indicates that an estimated 1.9 million barrels are still being stolen weekly and that amounts to about N64 billion weekly. It was worse about one year ago and prior to the appointment of a private security firm, Tantita, to curtail or possibly end the activities of the thieves.
Imagine the volume of FX that could have been fetched into the FGN coffers had our crude oil not been stolen on a massive scale.
Hopefully, the measure being taken to protect our oil/gas assets and earn more FX would reduce the pressure on the naira which has returned to the race-to-the-top at an outrageously high rate of N900-N1000/$1 range simply because supply is not meeting demand.
Besides, stemming from the stealing of our crude oil that has been denying our country critical FX income, the process of adopting import substitution and backward integration policy of consuming mainly what we produce needs to also get into gear.
And the sequence of activities by President Tinubu aimed at reversing the race to the bottom which our beloved country has been going through in the past half a century, reflects the fact that the new leader in Aso Rock Villa has been juggling the balls of multiple challenges facing our dear country.
As a result, one or two balls are bound to drop. But the commendable thing is that whenever any ball was dropped by President Tinubu, it was quickly picked up.
That is reflected by the fact that he had to rejig his cabinet list in response to the advocacy of citizens from certain sections of our country whose interest was deemed to have been ignored. In like manner, Mr President also yielded to the position of members of the upper legislative chamber that three (3) of his 48 ministerial nominees had to be stepped down as they failed to scale through the screening hurdle.
While some commentators deem such flexibility as a flaw, l would argue that the trait is a powerful and positive leadership strength and asset. And l have no doubt that management experts would affirm that assertion.
It may be recalled that ex-military head of state, Gen. Murtala Muhamed, during his reign had authorised the announcement of Alh. Adamu Ciroma, a journalist, as the Central Bank of Nigeria, CBN governor, when indeed it was Alh. Liman Ciroma, who is an economist, was the actual nominee, but whose surname is the same as that of the man who got announced in error.
Having made the mistake, the head of state Mohamed, as a dictator, insisted that the order cannot be reversed.
Thus, Adamu Ciroma went on to have an illustrious career as CBN governor.
Conversely, as a democrat and a man steep in leadership, but who believes he is not all-knowing and infallible, President Tinubu did not hesitate to reverse himself after a few mistakes.
That is quite a laudable gesture by a leader.
In the final analysis, the concern of those criticising Tinubu, by alleging that he is ‘losing the plot’, is valid because the administration initially faced high turbulence associated with start-up hiccups, springing from multiple directions.
But the critics are also right when they reasoned that it is too soon to judge him since the administration is still in its infancy, less than 100 days.
In my view, the new team on the saddle should be allowed to make their minor mistakes which can be corrected along the line.
If the rumours making the rounds that the Chief of Staff to the president, Hon Femi Gbajabiamila and those around him, are collecting bribes from those seeking appointments into lucrative posts as being alleged, is proven to be true, he should be cautioned by his principal because everyone makes mistakes, but the crime must stop forthwith.
So, I disagree with those literally baying for his blood by demanding that he should be fired.
That is because, although the allegations of being baited by nefarious ambassadors with filthy lucre are tacky, axing him for what can be considered a misdemeanour of having sticky fingers presumably, would constitute an unnecessary distraction to the administration, if it gets into such an unproductive mode of purging officials at the drop of a hat, in the dawn of the new administration and nascent stage of Tinubunomics
However, if the alleged perfidy is not nipped in the bud, as was the case with the former secretary to the Federal Government, Mr Babachar Lawal, who was alleged to have been involved in contract racketeering, also known as ‘grass cutting scandal’, it has the capacity of tarring with a black brush, whatever sterling accomplishments the administration garners.
The protocol faux pas making the presidency and bureaucracy look inelegant is part of the usual teething challenges that dog new administrations, which need to be addressed quickly.
But it is worth pointing out that oftentimes, such muddling up of officialdom can be self-correcting.
In any case, given the enormity of the work at hand, strict observations of protocol are obviously not a priority of President Tinubu at this critical point in time.
What appears, and justifiably so, to be the urgent task for President Tinubu and his team is how to ameliorate the hardships being suffered by the masses arising from the inevitable economic reforms that l have dubbed Tinubunomics.
Commendably, the administration is getting on with that task as it has now fully formed a functional government, a few days shy of the first 100 days since its inauguration.
So, going forward, Nigerians can expect a faster pace of governance as more measures to cushion the declining standard of living of the masses are entrenched.
By Magnus Onyibe
Magnus Onyibe is an entrepreneur, public policy analyst, author, democracy advocate, development strategist, an alumnus of Fletcher School of Law and Diplomacy, Tufts University, Massachusetts, USA and a former commissioner in Delta state government, from Lagos, Nigeria.
