Contrary to widespread belief that Nigeria is rich in earnings from the sale of crude oil, Nigeria earns 35 per cent of oil sale on average in recent years, roughly $16 billion (about N6.5 trillion). The other 65 percent goes to the international oil companies (IOCs). This point was made over the weekend by an economist and CEO of Global Analytics Consulting Limited, Dr. Tope Fasua. He made the revelation while delivering a lecture at a forum organized by The Alvin Report in collaboration with Nairametrics.
The theme of the lecture was, The Hemorrhaging Naira: What Hope? Fasua stated that much of the amount earned in the form of revenue goes back to the importation of machinery and other production inputs.
According to Fasua, in 2020 Nigeria spent $10 billion on the importation of machinery, including computers, $8.2 billion importing mineral fuel, $5.3 billion on vehicles, $3.7 billion on electrical machineries.
On the other hand, according to him, Nigeria exported $46 billion worth of crude oil, of which 35 per cent, $16.1 billion accrued to her as revenue, $7.2 billion worth of gas and $715 million worth of cocoa beans.
He said that bodes trouble for the economy because Nigeria imports in multiple terms what is exported. He stated that almost the entire export in crude oil gets imported back in refined products. He said the Dangote refinery might stop the hemorrhage of the naira depending on the terms of agreement with the government.
Fasua said the security issue is also having a run on the economy because the situation stalls investments. He stated that the government has been investing a lot of money to support the people in the form of palliatives but that has not translated to productivity, which also has a toll on the naira. He added that all that money is in the system and chasing the dollar, which is also contributing to the naira hemorrhage.
He said the CBN has to expand the eligible transactions for forex eligibility.
Fasua stated that Nigeria’s problem is also linked to perception. He said there are different exchange rates everywhere depending on individuals’ negotiations, adding that a unified exchange rate is never going to happen.
He said leaving the value of the naira to the forces of demand and supply is an action that would lead downhill. Stressing that the issue of the value of the naira is based on perception, he alluded that Ghanaians value their currency more than the dollar, which is different from what obtains in Nigeria.
He said 50 per cent of the value of any currency, especially for developing countries like Nigeria, is based on perception, which is shorting the naira.
Fasua said if the Nigerian and the US economies should be compared based on productivity the value then the naira may lose value up to $1.00 to N5,000.
Ascribing the hemorrhaging of the naira to the entire Nigerian project, Fasua advised that the naira not be fixed to any currency as that would be a recipe to short the local currency.
He also said Nigerians should stop the self-fulfilling prophecy that the naira is worth nothing. He said with that attitude the naira would lose value.
He also queried the idea of over-borrowing and devoting 95 per cent of the revenues accruing the government going to the servicing of debt, warning that it would be dire if multiple creditors have the payments due at the same time.