Muhammadu Sanusi II, former Emir of Kano, described Nigeria as an oil economy with no oil revenues, lamenting the country’s economic difficulties.
Sanusi spoke this weekend at the 7th Kaduna Economy and Investment Summit (KadInvest 7.0) held in the state.
Also a former Governor of the Central Bank of Nigeria (CBN), Sanusi decried the downward trend in crude oil revenues over the past decade.
“Beyond the difficult global context, Nigeria has problems entirely own manufacture,” he said.
“Oil revenues, once the lifeblood of the federal government, have been secular decline for more than a decade. This happened regardless of tThe oil price environment.
“Annualizing revenue earned in the first half of 22, the Federal Government of Nigeria (FGN) is expected to collect only $2.9 billion in oil revenue this year, compared to nearly $60 billion in 2011.
“This is one of the biggest oversights in public financial management in emerging markets (EM).
“The result of this PFM failure is that budgeting has become progressively less realistic, borrowing needs have become bigger and bigger, the means to finance the deficits less and less orthodox.”
Sanusi said that every year higher goals are set and then duly missed, adding that each year, record deficits are recorded.
“In some ways, Nigeria’s problems are not a failure of the system (it works as you might expect) but a design failure and an implementation failure,” he said.
“In the absence of targeted revenues – both oil and non-oil – the federal government’s crutch has become means and min advances by the CBN.
“These have now reached an unprecedented 19.9 trillion naira, over four ttime income earned last year.
“As a share of the CBN’s balance sheet, these now account for more than a third. The cost of servicing these debts – as well as all conventional debts – pushed FGN’s debt service to N2.597 billion in H1 22 against FGN revenue of N2.402 billion (108%)”.
Meanwhile, in the current environment, Sanusi said the first and most obvious problem is the existence of the fuel subsidy and the opportunities for fraud it creates.
“The average daily fuel consumption in Nigeria (by NNPC admission) is 66 million litres/day, and on some days as high as 100 million liters,” he said.
“This is roughly equivalent to Indonesia (2019), a country with nearly three times the GDP/capita of Nigeria, twice the number of vehicles and two and a half times the size of the road network.
“And it’s not just the impact of the subsidies. In Iran, the official fuel price is 5 US cents per litre, less than 15 percent of the pump price in Nigeria.