By Dele Sobowale

Nigerian leaders in Abuja and at state levels are desperate; even if most Nigerians are not aware of it. The federal and state governments are going broke with each passing day. Meanwhile, ignorance is bliss.

Most Nigerians go to bed without the vaguest idea about how their economy is being gradually demolished by the glut in the global crude oil market. Last week, I pointed to the danger of listening to the Group Managing Director, GMD, of the Nigerian National Petroleum Corporation Limited, NNPCL, who  proclaimed that Nigeria will be producing 2mbpd of crude before the end of this year and 3mbpd by 2030. Ojulari would not be the first or the last GMD-NNPCL who would choose to tell the President of Nigeria what he wants to hear instead of what he needs to know for good governance.

Certainly, Tinubu knows now that his government has been deceived by those he relied upon to tell him the truth about crude prospects.

The FG is in deep trouble right now.

FANTASY OF 2MBPD UNRAVELLED

“80m barrels of Nigerian crude unsold in global glut.”

BUSINESSDAY, APRIL 25, 2025.

All of us, Presidents included, have had dreams about coming upon fabulous wealth – which eventually end when we suddenly wake up and it all vanishes. Right now the FG is stuck between political slogans and fiscal realities. The fantasy of 2mbpd crude production – on which the 2025 budget was based — has unravelled with 80 million barrels of unsold crude; and the prospects that the inventory might rise – if we continue to produce. The economic outlook for 2025 is totally bleak. Nothing can save the budget now; nothing can save the economy.Let me context the situation which might have got worse by the time this article is published. Start with the basic assumption in the budget; according to which 2mbpd of crude were expected to be produced. Unsold 80m barrels means 40 days, a month and ten days, crude production has not been sold. That also means $6 billion revenue has not been earned. If instead of 2mbpd we use the more realistic 1.6mbpd, then Nigeria is sitting on 50 days of unsold crude oil – just ten days short of two months production. In the first quarter of 2025, the country managed to produce 1.6mbpd on the average. Cumulatively, the negative variance amounted to 36m barrels or 18 days under-supply; or $2.7 billion unearned revenue. In total, the lost revenue from crude alone for the first five months could be close to $8.7 billion or N14 trillion. And the end is not in sight.  

The implications of these revelations are so grave, that it is understandable why President Tinubu, who must address the nation on May 29 or June 12, had to go abroad to recharge his batteries. To begin with 80m barrels unsold crude would inhibit further production; thereby exposing the folly of basing the budget on 2mbpd. It certainly renders Ojulari’s promise of 3mbpd as a most un-amusing joke. Secondly, it will trigger a higher exchange rate as well as higher inflation. The latter has been predicted by the International Monetary Fund, IMF. Deficit estimates will be surpassed by a wide margin; forcing more government borrowing and increasing debt-to-earning ratio. Thirdly, the federally allocated revenue in the next months will drop drastically. March allocation has already started the downward trend in allocations. April subventions will certainly be lower – unless exchange rates are allowed to go up. Fourthly, the reforms, just starting to work might be savaged by the external shocks which have followed in the wake of Trumpism. Finally, the FG and states will find it difficult to pay salaries and to fund capital expenditure this year.

CLOSER TO THE TIPPING POINT WITH CRUDE DEPENDENCE

“You can’t pour from an empty cup.”  Kahlil Gibran in The PROPHET

The nation’s over-dependence on crude oil production and export has finally led us close to the tipping point in the Nigerian economy. What we are facing in the next eight months is not just another economic downturn. We are back to the era of debt-rescheduling in order to avert debt default on the one hand; and another plea for debt-forgiveness on the other. Not since 1999 have we had to bring out another begging bowl to seek debt-relief. Put strongly and simply, the prospects for crude oil revenue for the rest of 2025 are so bleak, we might be spending virtually all of our oil revenue on debt repayment alone. The reasons for our economic decline are not difficult to discover.

Global crude oil glut has become a permanent feature of life for now and the near future. None of the signals on crude production and export are good. The aggregate demand that drives global crude production is shrinking rapidly worldwide.

Simultaneously, suppliers are increasing in number; as several former oil-importing nations are discovering crude in their territories which they are eager to exploit. Furthermore, the share of the Organisation of Petroleum Exporting Countries, OPEC, of global oil trade keeps declining steadily. The organisation, to which Nigeria belongs, once the driver of world crude trade, is now almost totally irrelevant and might even disintegrate with each member going its own way. Nigeria is the weakest member of OPEC and stands to suffer most in the coming turbulence. 

All the budget projections of revenue, aggregate deficit and debt-financing for this year are significantly off their targets. Lower revenue, higher deficits and more debts to shore up sagging income call for drastic review of the budget by June. Capital expenditure will be drastically reduced; so much that several projects will have to be scrapped altogether. Education, health and even security votes will have to be slashed as income continues to nosedive monthly. Altogether, the expectations for the short term, defined as six months, are so dreadful as to call for fresh ideas.

WHY NOT TRY THE TRUTH?

“Every government is run by liars and nothing they say should be believed.I F Stone, 1907-1989.

To be quite candid, President Tinubu is faced with a test of his leadership qualities which no other Head of State, military or civilian, was ever forced to address. The cardinal cause of all previous budget failures, for the past 13 years, had been over-optimism regarding the potential for crude production and export.

Budgeting for 2mbpd of crude is the single most important cause of our economic distress. It has invariably led the FG  to promise more than it can possibly deliver; to take on more debt than it should; to under-fund capital appropriations; to achieve low GDP growth and to deepen poverty. The Nigerian economy is being under-developed, not by any external forces or the World Bank/IMF – as most of us like to believe.

Our problems are mostly self-inflicted. When a government plans to spend $8.7bn, which it is not likely to earn, and actually goes about spending as if the revenue had been earned, increased debt follows. Tinubu should have the courage to be the first President to reject 2mbpd of crude oil as basis for annual budget henceforth. Follow me on Facebook @ J Israel Biola