By Omoh Gabriel
Nigeria is fast becoming a laughing stock. No thanks to the Peoples Democratic Party members who have held top political positions in the past and now. They have a way of passing the buck to pull the wool over the eyes of Nigerians to divert attention from the way and manner they pillage the resources of the country. Last week, (former Minister of Education and former Vice-President, Africa, World Bank), Oby Ezekwesili stirred the hornet’s nest. The former minister accused the Yar’Adua and Jonathan administrations of squandering Nigeria’s foreign reserves. She said that both governments misapplied about $45 billion external reserves left by the Obasanjo administration and another $22 billion from the excess crude account. My concern as a Nigerian is not how much was squandered but which of the PDP-led government has not illegally spent the excess crude account money which is part of the external reserve that can be spent by government.
To the curious minded Nigerian, the first question to ask is, what is foreign reserve? Going by international practice, foreign-exchange reserves (also called Forex reserves) in a strict sense are the foreign currency deposits held by central banks and monetary authorities. If this is what Oby is referring to, it is not being spent by government in any guise. But the term foreign-exchange reserves in popular usage as it is known in the World Bank circle, commonly includes foreign exchange and gold, special drawing rights (SDRs) and International Monetary Fund (IMF) reserve position of member-countries as this total figure is more readily available. It is accurately deemed as official reserves or international reserves. The special drawing rights and the IMF position of the reserve are accessible to government but under the strict supervision of the IMF.
Nigeria during this period, did not take any IMF facilities, so it could not have spent this much from the reserve. Foreign Exchange reserves in what ever forms are assets of the central banks which are held in different reserve currencies such as the U.S. dollar, euro, yen and pound and in recent time, in yuan. These foreign currencies held by central banks are used to back its liabilities, e.g., the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions.
In Nigeria, because 90 per cent of its foreign exchange earnings is from crude sales, whenever crude is sold, the dollar proceed that is within the budget bench mark is converted into naira and shared monthly by the Federal Revenue Allocation Committee to the three tiers of government. Once the money is converted into naira and shared, the CBN takes possession of the dollar in trust for the nation. The CBN holds this dollar as foreign reserves. This aspect of the reserves cannot be spent the second time. It is only when either the government or the individual wants to buy foreign goods that he or she now approaches the CBN with naira equivalent of the foreign exchange he wants before he can have access to the money kept in the reserve. This is why the CBN conducts a bi-weekly foreign exchange auction. However, there is a component of the reserve that can be spent, the excess crude revenue account. That is where the dollar earned from oil above the budget bench mark is saved. The curious thing about this storm in a tea cup (the current forex debate) is that both Oby and the Federal Government are running away from the truth. The excess crude account from which the Federal Government has been drawing from, under what condition was money to be withdrawn from it? It is when the prices of crude oil fall below the bench mark? The withdrawal is meant to cushion the price differential. All the PDP-led Federal Governments, for which Oby was a principal advocate of due process, never respected the provisions of the guideline setting up the excess crude account.
Oby was in government when President Obasanjo withdrew $12 billion to pay Nigeria’s creditors in the name of seeking debt relief. It was not squandering in her time to have done that. Up to this moment, civil society groups still believe that if $12 billion was invested in infrastructure at that time, the multiplier effect would have impacted positively on the economy. Yar’adua and Jonathan have followed the same pattern of unilaterally withdrawing from the account without prices of crude falling below the budget bench mark. These PDP personalities just want to confuse Nigerians and take their attention away from the real thing – non-performance. Prices of crude have been favourable to Nigeria right from the days of Obasanjo, but each of these governments led by PDP’s political actors has spent Nigerians’ money saved in the excess crude account irresponsibly. PDP is the culprit because they have no idea of what to do with the economy. Oby and the president’s spokepersons should stop disturbing our peace. Nigerians will one day realise their mistake and throw this bunch of economic pillagers out of the corridors of power.