October 11, 2012
(PIX) IMF Managing Director Lagarde holds joint news conference with Nigeria’s Sanusi and Okonjo-Iweala in Lagos 20/12/2011. (Stephen Jaffe-IMF/Courtesy Reuters)
Africa Confidential published on October 5, a clear-eyed analysis of the challenges facing Nigeria’s economic reformers and concludes that those blocking reform “are winning hands down.” Central Bank Governor Lamido Sanusi states publicly that oil theft is massive and organized. He also questions whether, in fact, the Nigeria National Petroleum Corporation (NNPC) actually knows how much oil is produced–NNPC says 2.7 million barrels a day.
The article cites Lagos bankers as saying that the current financial status quo is “not sustainable.” In addition to revenue lost through oil theft, they note the insurgency in the north which has resulted in a security vote of over U.S.$5 billion in the2012 budget, reducing the amount available for health, education and infrastructure. They also argue that the popular “fuel subsidy” has “spiraled out of control”–the backlog owed to oil traders from 2011 could be as much as U.S.$18 billion.
The country is also once again falling into debt. The Director General of the Central Bank’s Debt Management Office is quoted as forecasting that Nigeria could own U.S.$25 billion by 2015, with U.S.$16.75 billion to foreign creditors.
On the other hand, semi-privatization of the power sector is on track, and the article states that the electric grid has produced 4,000 megawatts for the past month–“one of the longest periods of semi-continuous power in the southwest for several decades.” It concludes that if President Goodluck Jonathan can fix power generation, “then almost any other sins may be quickly forgiven.”
This conclusion strikes me as optimistic. The immediate improvement in power generation affects only one part of the country—the area around Lagos—not elsewhere. The financial issues are mostly short-term; the payoff from a revitalized power industry–if it happens–is longer term. The more existential issue facing Jonathan’s government is how to get through the next year with Boko Haram in the north, oil theft in the Delta, and, possibly, rising unemployment that could result in strikes.