The Federal Ministry of Finance has debunked claims that President Goodluck Jonathan has squandered the Nigeria’s reserves, insisting that it was used appropriately in the course of normal transactions required for the development of the Nigerian economy.
In a statement released to clarify the facts of the recent history and status of Nigeria’s Excess Crude Account and foreign reserves, the Ministry said “it is important to restate the true position in the interest of the Nigerian public as well as local and international investors.
“It is absolutely not true that the Administration of President Goodluck Jonathan has squandered the nation’s reserves”, it said, maintaining that “at the end of May 2007, Nigeria’s gross reserves stood at $43.13 billion – comprising the CBN’s external reserves of $31.5 billion, $9.43 billion in the Excess Crude Account, and $2.18 billion in Federal Government’s savings. These figures can be independently verified from the CBN’s records”, insisting that “the figure of $67 billion cited in some recent commentary is therefore factually incorrect”.
The statement further added that “it is a misconception to think that reserves are immutable or cast in stone. The reality is that since May 2007, the reserves have fluctuated in line with developments in the international oil market, rising from $43.13 billion at that time, peaking at $62 billion in September 2008 during the Yar’adua/Jonathan Administration when oil prices reached a peak of $147 per barrel, and falling subsequently to a low of $31.7 billion in September 2011”.
“This fall in reserves was largely a result of the vicissitudes of the global economy and oil market which caused the CBN to intervene, using some of the reserves, to defend the value of the naira.
“The Excess Crude savings, which it should be noted is a component of the reserves, was largely used to cushion the economy at the height of the global financial crisis in 2008-2009. As a result, Nigeria was one of the few countries in the world that did not seek assistance from international financial institutions at that time.
“The fiscal stimulus used to shore up the economy during that period was shared by all 3-tiers of government. Similarly, savings in the ECA were also used to pay for fuel subsidies for the entire nation and that sharing continued after the crisis ended. Starting in 2012, such payments have been published each time they are made”, it said.
The Federal Ministry of Finance also explained that the savings in the ECA would have been higher but for the fact that “a number of Governors, against strong professional advice, actively kicked against continuous building up of the ECA and, indeed, pushed for its sharing” adding that they “took the Federal Government to court on this matter, and the case is still pending at the Supreme Court.
“It is also worth noting that the Jonathan administration built the first ever Sovereign Wealth Fund for the nation in which savings are being made for future generations of Nigerians and important infrastructure investments are being supported.
“It is also a matter of public knowledge that the Fund would have generated more savings and investments if the same sort of opposition that blocked savings in the ECA had also not been at work.
“Furthermore, by common agreement between the FGN and State Governors, in 2009, an amount of about $5.5 billion was drawn from the ECA and used for investment in Independent power projects. Today, various State governments are shareholders in the projects and hold share certificates confirming their stake in the projects” the said.
On the use of reserves, the Ministry maintained that “it is not correct to say that the nation’s external reserves were dipped into or misapplied by the Administration. Anyone familiar with foreign reserves management will be aware that the Federal Government cannot dip its hands into the external reserves.
“Like in other countries, the management of external reserves is one of the statutory mandates of the Central Bank of Nigeria (CBN). Section 2 sub-section (c) of the CBN Act (2007) states that the Bank shall maintain external reserves to safeguard the international value of the legal tender – in other words, to defend the value of the Naira. No President since the democratic dispensation has contravened this Act.
“The reserves are also used to settle both public and private sector foreign currency obligations, including the importation of goods such as equipment for power sector. Whenever an Agency of Government or a private individual/company needs to make a payment in foreign currency (e.g. payment of goods and services, settlement of external debt, etc) it must provide the naira equivalent to the CBN in exchange for the required foreign currency.
“From the above, it is clear that Nigeria’s reserves during the period were not squandered but used appropriately in the course of normal transactions required for the development of the Nigerian economy”.
A former Nigerian President, Mr Olusegun Obasanjo, had blamed the present economic woes facing the nation on the depletion of the Excess Crude Account and the external reserves.
He said that his administration left $25 billion in the excess crude accounts in 2007 which was shored up to about $35 billion by the Yar’Adua’s administration, while he left $45 billion in external reserve.
“Our economy should not have been this bad. When I was leaving office about eight years ago, I left a very huge reserve after we had paid all our debts. Almost $25billion we kept in what they called excess crude. The excess from the budget we were saving as reserve for the rainy days. When we left in May 2007, the reserve was said to have been raised to $35billion,” he said.
“But today, that reserve has been depleted! Today, that reserve has been depleted. The reserve we left when we finished paying all our debts, our debts that was about 40billion dollars, that is including debt forgiveness, the remaining debt was not more than $3billion. Our reserve after we had paid off this debt was about $45billion. As I said, they continued till the end of 2007, I heard that the reserve increased to almost $67billion before the end of the year. Our reserve now, learnt is left with around only $30billion.
“That is why the Naira has been falling against the dollar. What would now happen, I learnt if you want to buy a dollar now, it’s about 192 Naira or 195 Naira. What it means is this, what you have been buying at N150 to a dollar, now you need N192 or N195 to buy it. That is the real situation. Is there any remedy? There is, but it does not come overnight because it means we have to give up all the bad things we have been doing,”Mr Obasanjo said.
These funds, he said, had been mismanaged by the present administration.