Presentation on theme: "A PRESENTATION TO THE NIGERIA CIVIL SOCIETY SITUATION ROOM MEETING ON THE STATE OF THE NATION. A Quest for Accountability."— Presentation transcript:
A PRESENTATION TO THE NIGERIA CIVIL SOCIETY SITUATION ROOM MEETING ON THE STATE OF THE NATION. A Quest for Accountability
Content Understanding the Context The Squandering of Opportunity: The Story of Another Wasted Oil Boom It is all about Human Development: Using the “State of Education” to tell our story of underperformance Conclusion: It is all about Citizens’ Demand for Good Governance and accountability Key Demand: For our Centenary; Constitute a National Dialogue: A Citizens-Led National Assembly Legitimized Dialogue on the Future of Nigeria
Understanding the Context Weak Global Economy Vulnerable Emerging Economies Relative Macroeconomic Stability and Higher than Global Average Economic Growth but Higher Poverty Numbers (NBS) Heightened Insecurity and Violence Political Instability Deficit of Delivery of Basic Services to Citizens
4.3% Opportunity to University Education (2013) 37.5% 33.7% 28.2% 16.5% Nigeria Chile Singapore Malaysia Brazil “ Our lag in tertiary education enrollment is quite revealing and could be interpreted as the basis of the competitiveness gap between the same set of countries and Nigeria” “Economic growth rate and ultimate development of nations are determined by a number of factors that range from sound policies, effective and efficient public and private investments and strong institutions “ GDP & Population South Korea 28m $1.12tn 196m $2.48tn 55m $318.7bn BrazilMalaysia $278.6bn 5m Singapore 170m $235.9bn Nigeria Understanding The Context
50,000 22,000 10,000 13,000 14,000 1,500 Nigeria Poverty Figures (m) “Our own paltry $1,500 income per capita helps drive home the point that we have been left behind many times over by every one of those other countries…. How did these nations steer and stir their people to achieve such economic performance over the last five years? ” “ The Nigeria is a paradox of the kind of wealth the breeds penury is widely known as the fact that the world considers us a poster nation for poor governance wealth from natural resources”. “What happened to Nigeria? Why did we get left behind? Why did we get left behind? How did these nations become productively wealth over the last fifty years while Nigeria stagnated” Income per capita, 2011 ($) Understanding The Context
Life expectancy (years ) Understanding The Context 80% 95% 18% Percentage of our National Budget contributed by oil Percentage of foreign exchange contributed by oil Percentage of Manufacturing in Nigeria’s GDP Matrix 5 Cycles of boom in the 70s, 80s, 90s, 2000s &2010s “ The common wonderment of these poor citizens – whether east, west, north and south- is “why would more than half the population of a country that earned nearly one trillion dollars in oil revenue since the Oloibori discovery of crude oil; continue to wallow in poverty?” “Well, economic evidence shows that the answer which we must all ponder deeply is that oil wealth entrenched corruption and mismanagement of resources in government and warped the incentive for value added work, creativity and innovation in our public, private sectors and wider society.”
5 Cycles of Boom Understanding The Context Source:
The 5th Oil Boom: The Case for Squandering of Opportunity “My observation in January was a PUBLIC CALL to account for the 5th oil boom revenues because I am grossly disappointed that we are failing once again to learn anything from the failures of the previous booms”
The 2007 significant sum of $45bn in foreign reserve account including $22bn of Excess Crude Account Foreign reserve account as May 2007 CBN Foreign Reserves : $31.5bn *Federation Reserves : $9.43bn FGN Reserves : $2.18bn *In August 2007, Nigeria’s foreign reserves rose to $45bn. Note that Federation Reserves also stands as Excess Crude Account which belongs to all tiers of government. The 5 th Oil Boom Nigeria had an external reserves position of $5.6bn as at After paying $12 billion to write-off our external debt and withdrawals for power infrastructure investment, President Obasanjo still left $43bn in the foreign reserves $5.6bn $43.13bn Source: World Bank, CBN
The 5 th Oil Boom When former CBN Governor, Professor Chukwuma Soludo left office in 2009, a total of $45 billion was still left as foreign reserves despite having used more than $15 billion to stabilize the economy/currency during the global crisis. The external reserves continued on a downward spiral despite oil prices taking a lift in mid Almost four years after his departure and in a season of unprecedented (sustained) boom in our oil exports, we have neither savings in reserves, excess crude account, nor tangible amount in Sovereign Wealth Fund or impact on ground. Source: CBN Annual Reports
5 th Oil Boom : Foreign Reserves of OPEC African Countries Source: World Bank Comparing our external reserves position with other African countries in OPEC after recovery of oil prices in the 2009, clearly reveals that our foreign reserves dipped. While others either stabilized or went to grow their external position, our fiscal choices has declined our foreign reserves. What are those choices that increased our domestic debt, declined our reserves and depleted our excess crude savings in a swoop? This is my call for accountability. Our sovereign credit rating is just where it was at the first rating in Economic 'growth' is less than what it was under until 2007 and certainly poverty has worsened.
With oil prices steadily on the rise and above Nigeria’s budget benchmark price since May 2009, it is expected that our reserves should have doubled by now. If we maintained a 2.2m bpd oil production over the years, we should have doubled our reserves by now. I mean if a hypothetical zero reserves was left by the Obasanjo Administration, we should be stating $80bn to $100bn in reserves not even $67bn. We neither have a huge stock in reserve nor do we have major human/infrastructure accumulation to show for 5 th boom Annual Oil Basket Price Source: OPEC Annual Oil Basket Price Source: OPEC The 5 th Oil Boom:
Budget Benchmark Oil Price 2008 : $ : $45 Source: FT Brent Crude Oil Price 2008 – 2012 Brent Crude Price 31/10/ 2008 : $ /5/2009 : $52.65 Oil Price was on a decline below our budget benchmark price from November 2008 to February While we adjusted to the fall through a reduction in our benchmark price to $45 in 2009 budget, oil price crawled from March 2009 and firmly rose beyond our benchmark price from May 2009 till date. The 5 th Oil Boom: The Case for Squandering
The 5 th Oil Boom: The Case for Squandering CBN Acknowledgment Similarly, the (Monetary Policy) Committee expressed concerns about the genuineness of demand for petroleum imports. This year alone, oil importers have bought over US$7.0 billion from wDAS, thereby, depleting the Nation’s external reserves. This demand, in the Committee’s view, might have been fuelled by rent-seeking and subsidies. - CBN MPC Decisions, October 2011.
Excess Crude Account/Savings: On several international media and also through government officials, it has been reiterated by government officials that in 2007, Nigeria had excess crude savings account of $20bn, adding the FGN savings of $2.18bn as at the time brought my figure up to $22bn The excess crude account stood at over $20 billion when Yar’Adua, who remains too sick to govern, took over in 2007 but his administration regularly dipped into the account, raising questions about Nigeria’s commitment to fiscal discipline – AFP ‘Since 2008 Nigeria has spent $27.5 billion from the Excess Crude Account, and there is now $5 billion in the account from a 2007 high of $20 billion, according to Segun Aganga, the Nigerian Minister of Finance…. With oil prices up again, withdrawals are not justified to stabilize the economy” - Wall Street Journal, 24 February “The only time we had some semblance of fiscal balance in our economy was from 2003 to 2007, and that was when we developed excess crude and started saving up to about $20 billion worth of savings …. In the excess crude account today there is left only about $3.6 billion. - Ngozi Okonjo-Iweala The 5 th Oil Boom: The Case for Squandering
“ You would not normally for example expect foreign reserves to be going down, and oil savings to be depleted, while debt levels are rising too, all in a year when oil production has recovered and prices are soaring” William Wallis, Financial Times Africa Editor “With oil production at its most favourable level since 2006, and with oil prices back above $90 per barrel, the issue is why reserves have not risen further, not why they have 'fallen‘”.- Razia Khan, Head Research Africa Region, Standard Chartered Bank The 5 th Oil Boom: The Case for Squandering
“The only time we had some semblance of fiscal balance in our economy was from 2003 to 2007, and that was when we developed excess crude and started saving up to about $20 billion worth of savings …. In the excess crude account today there is left only about $3.6 billion. - Ngozi Okonjo-Iweala The depletion of the Excess Crude Account and continued gradual fall in international reserves at a time of high oil prices and record high oil production is a major concern- Fitch Report on cut of Nigeria Credit rating outlook At the inception of his government, President Jonathan Goodluck inherited about $7 billion in the ECA Account. $3billion and later another $1billion was shared among the State and Federal Government immediately Jonathan got into office as part of the agreement reached with the governors for them to allow him become Acting President leaving a balance of $3billion. And now, in preparation for the 2011 election, the balance has been squandered! - Daniel Elombah, December 2010 Acknowledging the Depletion The 5 th Oil Boom: The Case for Squandering
Acknowledging the Depletion ‘ Since 2008 Nigeria has spent $27.5 billion from the Excess Crude Account, and there is now $5 billion in the account from a 2007 high of $20 billion, according to Segun Aganga, the Nigerian Minister of Finance…. With oil prices up again, withdrawals are not justified to stabilize the economy” - Wall Street Journal, 24 February “Nigeria’s excess crude account had increased by per cent, reaching $17.3 billion in 2007 from $5.1 billion recorded in The account peaked at about $32 billion before the spending binge set in. No doubt, ECA became handy for the country to weather the stormy global financial crisis. But, subsequently, the three levels of government have continued to abuse the savings by insisting on their right to share the excess oil revenue at anytime.” Editorial, Nigeria Best Forum The 5 th Oil Boom: The Case for Squandering
‘"Political motivations provide a more compelling rationale for the drawdown on the ECA, It demonstrates the grip of state governors on fiscal management in the country and spending pressures to influence the outcomes of the upcoming elections. The lack of transparency regarding the size of the withdrawals and the allocation of the funds fuels corruption and the mismanagement of public resources.“ Mr. Antoine Heuty, Revenue Watch Institute The excess crude account stood at over $20 billion when Yar’Adua, who remains too sick to govern, took over in 2007 but his administration regularly dipped into the account, raising questions about Nigeria’s commitment to fiscal discipline – AFP “He (Scott Rogers, IMF Resident Representative) also cautioned against indiscriminate depletion of the Excess Crude Account (ECA) given that revenue shortfalls do not occur on a regular basis to warrant regular withdrawals from it.” – ThisDay Newspapers Acknowledging the Depletion The 5 th Oil Boom: The Case for Squandering
“ Federal Government has released the sum of N138.64bn from the Excess Crude Account to the Petroleum Products Pricing Regulatory Agency as subsidies for products that had been imported into the country” Minister of State for Finance, Mr. Remi Babalola, had told newsmen in Abuja last Friday at the end of the monthly meeting of the Federal Account Allocation Committee (FAAC), that $5.375 billion would be deducted from the Excess Crude Account (jointly owned by the three tiers of government), which stood at $18 billion as at May. "The administration met over $20 billion in the excess crude proceeds account, which has now declined to about $6.2 billion due to its utilisation by all three tiers of government as a result of the impact of the economic recession," Babalola's office said in a statement. Lingering Posers on Use of Savings The 5 th Oil Boom: The Case for Squandering
2012 SWF of Oil Producing Countries, $bn Source: Sovereign Wealth Institute With the Excess Crude Account not backed by a statutory legislation, it has been prone to impulsive distribution especially in period when Nigeria’s oil prices were high between 2010 & Understanding the diminishing value of oil and its volatility, most oil producing countries have combined it efficient use of revenue for infrastructure development or huge savings tucked in sovereign wealth funds. Nigeria after a protracted political struggle finally settled for a $1bn Sovereign Wealth Fund. How do this compare to other countries with bigger oil reserves. The 5 th Oil Boom: The Case for Squandering
Threats to a Vanishing Resource “Resource wealth has tragically reduced your nation- my nation- to a mere parable of prodigality. Nothing undignifies nations and their citizens like self-inflicted failure. Our abundance of oil, people and geography should have worked favourably and placed us on the top echelons of the global economic ladder by now.”
US Monthly Average Oil Import from Nigeria ( ‘000 barrels per day) Source: US Energy Information Administration Nigeria oil export to the US has recently dipped from a recent of 1.13m barrels per day in The US is embarking on the path of energy independence and sustainable technologies and it is expected to be a net oil exporter by Threats to a Vanishing Resource
World proven crude oil reserves ( ‘000 barrels) Source: OPEC With new discoveries globally, the world’s proven oil reserves has consistently rose with demand especially in developing economies. However, this advantage that has sustained high oil prices is under threat with the rise of shale gas, improved technologies & new discoveries dotting the globe. Our reserves stands low relative to production by other top oil exporters. Proven Crude oil reserves, 2011 ( m barrels) Threats to a Vanishing Resource
Top 11 Shale Gas Reserves (cubic trillion feet) Source: US Energy Information Administration According to data from the US Energy and Information Administration, the total shale gas reserves is put at 6, 662 trillion cubic feet. This is even higher than the global proven natural gas reserves (6,609). It is worthy to note that none of the current top 10 oil producers in the top countries to have discovered huge shale gas reserves. Hence throwing the space for increased participation for countries with high consumption especially China. Worsening incidents of Oil Theft deepen vulnerability: Is the State so weak against Oil Thieves? Threats to a Vanishing Resource
OUR ANSWER TO OUR VARNISHING ENDOWMENT ADVANTAGE? AN URGENT POLICY OF DELIBERATION IN RAPIDLY TRANSLATING OIL REVENUE TO HUMAN AND PHYSICAL CAPITAL GOOD GOVERNANCE IS SINE QUA NON!
STRUCTURAL TRANSFORMATION IS THE ANTIDOTE TO OUR OIL ECONOMY ENTRAPMENT. HUMAN DEVELOPMENT PHYSICAL INFRASTRUCTURE RULES POLICIES INSTITUTIONS INVESTMENTS (The sad story of our public budgets)
YET OUR EDUCATION IS PRESENTLY OUR WEAKEST LINK The result of the diagnostics that we produced on the state of our education system and sector was so heart wrenching that I was filled with angst at how low we had sunk educationally. Deciding to channel the angst positively, we built a strong team that articulated some three hundred and sixty eight ‘root and branch’ reforms measures across the six levels and aspects of education
THE AMARTYA SEN COUNSEL Why is China ahead of India? One answer is that India has paid inadequate attention to the lessons of Asian economic development, which gives a crucial role to the rapid expansion of human capability as a part of pursuing fast economic growth. A critical part of that strategy has been the use of public revenue, itself expanded by economic growth, to remove huge deficiencies in social, educational and health services, and to meet the growing demands of social and physical infrastructure, while making public services more accountable and efficiently organized.
THE AMARTYA SEN COUNSEL You should not dig holes and fill them up, you should build schools! You can't skip public health care & education to focus on growth. That's main lesson for India to learn! (Even more so a lesson for Nigeria to learn!!)
AVERAGE GDP GROWTH RATE OF 7% OVER A DECADE-OVER 24% UNEMPLOYMENT RATE AND ABOUT 40% UNEMPLOYMENT RATE AMONG THE YOUTHFUL POPULATION THE HIGH ECONOMIC GROWTH-HIGH JOBLESSNESS DICHOTOMY IS ALL ABOUT INEQUALITY OF OPPORTUNITIES RESULTING FROM A FAILED EDUCATION SYSTEM.
AS EDUCATION GOES, A NATION’S ECONOMY GOES. The dysfunctional state of the education sector over the last 2 decades is a major cause of our socio-economic problems. This is exemplified by what I call ‘funnel syndrome’. But first, let us consider the following statistics.
2006 Education Budget Main Ministry Budget N7.6bn Other Independent Agencies and Institutions Budget N159.07bn 2006 Education Budget: N166.67bn The Education ministry during my tenure which started in June 2006 and ended in April 2007 had over 70 agencies, parastatals and institutions. These institutions are autonomous in terms of their operation, budgetary preparation and spending. Hence, my only direct oversight is on the 2006 budget of the Ministry put at N7.6bn not the famous N352bn that they said “I collected”. Yet the right question is what does this budget and that of the 36 states plus Abuja “buy” citizens in terms of improvement in human capability? RADICAL REFORM CANVASSED “
THE STATE OF THE NATION (ECONOMY) THROUGH THE LENSE OF EDUCATION ***Migrate to Education Slides.
Lies We Feed Ourselves Land Mass Tropical Geography Colonial Masters Multi- ethnic Culture The Right Choice “China and India are bigger, yet in the last thirty and twenty years have grown double digit and continue to out- grow the rest of the world at this time of global economic crisis.” “Economic research shows it has not prevented other countries with similar conditions from breaking through” “China and India are bigger, yet in the last thirty and twenty years have grown double digit and continue to out- grow the rest of the world at this time of global economic crisis.” “The appropriate response to the revenue extracted from our oil over the period 1959 to date would have been to use it in accumulating productive investment in the form of globally competitive human capital and physical asset of all types of infrastructure and institutions.”
Conclusion “What you must seek to do is to create a new political context in which citizens’ demand for good governance and accountability, begins to compel those who govern to persistently make choices that will more likely improve the outcomes of economic management for the larger number of Nigerians”
WHAT CIVIL SOCIETY MUST DEMAND NOW! CENTENENARY CELEBRATION SHOULD BE USED FOR DIALOGUE ON THE FUTURE OF NIGERIA