Analysing Buhari’s and Atiku’s Claim on the State of Nigeria’s Economy

 

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General Buhari said investigations by the CPC revealed that the nation’s external reserves “which stood at about $64billion, when Yaradua/Jonathan were sworn in now stands at about $30billion; our foreign debt which was reduced by the OBJ’s regime from $37.5billion to $3.5billion is now back to over $30billion; and our excess crude which stood at about $20billion is now less than $1billion. Also our domestic debt is over N3.5trillion with our local contractors’ at the receiving end.
 
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The former Vice President (Atiku) said the recent release by the Central Bank of Nigeria that the nation’s  foreign reserves fell by a whopping 15 percent  from $40.75billion to $34.57bn within a year confirms his earlier warning that the government needs to devote more attention to the economy….Finally, Atiku expressed fears that the federal government has returned Nigeria into the list of major debtor nations. He said latest report that Nigeria’s external debt has risen to N25.8billion is another evidence that the economy deserves a better manager……
He quoted Veronica Kalema, who signed the statement on behalf of the Sovereign rating agency that “there is no clear legal basis to determine how excess crude account funds should be shared between the federal, state and local governments and the savings have fallen to less than $500 million from $20 billion in 2007 amid political wrangling.”

 

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DOMESTIC DEBT (in Billions of Nigerian Naira)

Source: Debt Management Office (DMO) website  http://dmo.gov.ng/

 

FOREIGN DEBT (in Millions of US Dollars)

Source: Debt Management Office (DMO) website  http://dmo.gov.ng/

 

NIGERIA’S FOREIGN RESERVE MOVEMENT   Selected Dates Between December 31, 2006 and October 1, 2008 and

Source: Miscellaneous news sources

 

NIGERIA’S FOREIGN RESERVE MOVEMENT (US$)

 11/9/2009 – 11/26/2010 (Certain dates and Month ends and/or Beginnings only shown)

 

Source: http://cenbank.org/Intops/Reserve.asp

 

 

FROM THE ARCHIVES

The Global Financial Meltdown: Impact on Nigeria’s Capital Market and Foreign Reserves (Mobolaji E. Aluko, PhD; October 24, 2008)

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Foreign Reserves – Are They Safe?

We now turn our attention to our foreign reserves, and inquire what the impact of the global crisis might be, noting that:

1. at a quantum of about $62 billion as of October 1,  2008, our foreign reserves compares with those of many countries in the world [See Table 5.]
2. At the end of 2006, 87.3% of the naira value of N5.617 trillion ($42.3 billion) was denominated in US Dollars,  8.7% in Euro currency, 1.78% in British Pound Sterlings, 0.95% in Japanese yen and the rest (1.27%) in other currencies. At the end of 2007, these percentages stood at 86.2%, 5.92%, 2.19%, 5.57% and 0.12% respectively, reflecting a significant increase in Yen holdings out of the increased N6.549 trillion ($51.33 billion) for last year. There is some indication that there has since been a re-denomination such that 67% of the foreign reserves are in US dollars,  24% in Euros, 3.7% in British Sterling, 3.6% in Japanese Yen, 0.1% in Swiss Franc, and the rest (1.6%) in a basket of other currencies, but this has not been confirmed. ……  In short, there is almost no where to hide, and it would appear that it would have been better if Nigeria had NOT re-denominated (as rumored) because of the currency hits recently taken by both the Euro and Pound Sterling.
3. On October 3, 2006, some $7 billion (representing some 18.40% of total external reserves at the time) were apportioned to 14 Nigerian banks (out of the 24 consolidated banks as confirmed July 2004) and their 14 global asset management partners. …….  The CBN has traditionally kept the external reserves as deposits with foreign banks. This is the first time that it is appointing foreign assets managers to manage part of its reserves, in line with global best practice.”

…….What the above information shows is that the overwhelming majority of our counterpart asset managers themselves have been having significant trouble managing themselves, and one wonders what kind of “toxic exposures” they have inflicted on our foreign reserves, how safe our piled-up monies are in all of these foreign banks. One hopes that they have not been “eaten” up by the proverbial termites where we thought that they were safe, rather than use them strategically in developing our country as many long-suffering Nigerian citizens have called for.  This is more so when we note that out of the 14 asset managers listed above, 10 of them have either gone bankrupt, been taken over, or have been partially or fully nationalized by their countries within the past one month, with only Cominvest, Crown Agents, Investec and Black Rock seemingly above the fray.

It is of course only the Central Bank of Nigeria that can answer the question of our foreign reserves’ safety.  One therefore first turns to public information that the CBN provides on its website to attempt to ferret the true situation out. 

If one looks at its website www.cenbank.org  – Foreign Reserve Movement page – starting from January 2, 2008, one sees that our gross foreign reserves steadily increased from $51.2 billion to a high of  $63.5 billion on September 10, 2008, before declining to a value of $61.99 billion on October 1, 2008 – the last recorded entry.  That is a decline of $1.5 billion within a two-week period, following which, after three weeks (today is October 23, 2008), there are NO MORE ENTRIES in the table.

One wonders why this lack of further entries is so – is this site updated daily, weekly or monthly, for example? One thinks that the CBN owes the nation further precise explanation to assure us that it is not hiding anything, and that our foreign reserves have been lodged safely and insured against losses.  

In this regard, the recent assurances by Central Bank Governor Soludo and his bank colleagues Messrs Odoko and Imala about the foreign reserves’ safety are welcome, but not sufficiently informative of their precise structuring to allay all fears. For example, it would be necessary to outline precisely not only how they have been diversified in terms of foreign currencies, but their allocations in terms of foreign government bonds and treasury bills, foreign government guaranteed securities, special drawing rights (SDRs), fixed term deposits, call accounts and current accounts  – and precisely what added value the foreign asset managers have provided since their engagement.

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DAILY INDEPENDENT

Mon, 10 Mar 2008 00:53:00

External Reserves Hit US$56.9b – CBN

Oluyinka Akintunde, Asst Business Editor, Abuja

Nigeria’s external reserves rose to US$56.88 billion by February 22, 2008, an increase of $1.04 billion or 1.9 per cent over the preceding week’s level of $55.84 billion. The external reserves were US$54.63 billion as at February 1.

 The Central Bank of Nigeria (CBN), which confirmed this in its Economic Indicators Report for the week-ended February 22, said the current level of reserves could support over 26 months of foreign exchange disbursements.

 The increase in the reserves was mainly influenced by the rise in crude oil price and the level of crude oil production in the country.

 According to the CBN, the average price of Nigeria ’s reference crude, the Bonny Light stood at $100.68 per barrel by Feb 22 as against $97.33 per barrel in the week-ended February 15.

 The bank also noted that the country’s crude oil production rose to 2.2 million barrels pera day from its previous level of 2.13 million barrels per day.

 The CBN reported further decline in the currency in circulation from N880.8 billion in the preceding week to N864.2 billion by February 22.

 The latest decline, according to the bank, is attributable to the decrease observed in currency outside the banking system during the period.

 The currency in circulation had peaked at N951.3 billion by January 4, only to begin a gradual cutback.

It reported mixed development in the banks’ savings and lending rates during the period under review.

 “The average interest rate on savings account was 2.92 percent as at February 22, as against 3.33 percent as at February 15.

“The average prime lending rate of banks was 16.20 percent as at February 22, compared with 16.48 percent as at February 15. The average maximum lending rate of banks stood at 18.53 percent as at February 22,” the bank said.

 The naira maintained its stability against the dollar in the official trading window, the Wholesale Dutch Auction Action (WDAS) during the period.

The naira exchanged for N116.28 to a dollar at the WDAS during the week-ended February 22 as in the preceding week.