As Nigeria prepares for general elections next year that promise to be one of the most keenly contested in its history, evidence is emerging that the economy faces a double whammy: an empty treasury and rapid decline, PremiumTimes writes.
Government officials and business leaders knowledgeable about the situation say there have been concerns in Abuja and Lagos after an elected official drew the attention of the Central Bank of Nigeria governor, Godwin Emefiele, to the fact that Nigeria’s external reserves amount to only $15 billion, well below the $36 billion balance on the gross external reserves claimed by the bank.
With the country spending N5.9 trillion on imports in the first quarter of the year, irrespective of the preferred exchange rate, reserves of $15 billion would barely cover four months of import.
Financial analysts claim this would not have mattered much but for recent difficulties in different sectors of the economy, especially the export constraints that have seen the nation’s petroleum monopoly unable to add to the reserves in the last six months.
The NNPC’s inability to remit oil sales receipts to the CBN, despite elevated crude oil prices, is seen as one reason why the naira has nose-dived recently in the parallel market.
A banker who spoke on the understanding that her name would not be included in this report, said the reported balance on the gross external reserves has long concealed problems.
Not only is the gross balance on the external reserves not an accounting one (according to the CBN, the reserve is a 30-day moving average with effect November 2011), by not excluding the apex bank’s contingent liabilities, the report flatters the resources available to the central bank to defend the economy’s external position.
The elected official is believed to have briefed President Muhammadu Buhari on the gravity of the economic crisis. The presidency did not respond to a request for comment.
The NNPC’s transformation into a public limited liability company further compounds the problem. By not being able to remit export earnings directly into the federation coffers, it would mean that the apex bank will look to other sources of foreign exchange inflows.
Most of these sources have however been choked off by the direction and trajectory of the CBN’s monetary policy. All these mean that if the external reserves are depleted within four months at the current rate, the country will no longer be able to pay for imports of food, medicines and materials and spare parts required by industries, an economic crisis similar to what Sri Lanka is experiencing.
While continued export of crude oil by the NNPC may enable the continued import of refined fuel, experts do not expect this to stem the economic collapse caused by the end of the import of consumer and capital goods.
Widespread shortages will become readily evident as shops’ shelves will become empty while the prices of the few items available will keep increasing, putting them out of the reach of most citizens. CBN spokesperson Osita Nwasinobi did not respond to calls and a message seeking comments.