Dec 18, 2013 11:34 AM ET
Nigerian President Goodluck Jonathan is facing the biggest test of his three years in office after the central bank questioned the lack of accounting for $50 billion in oil revenue and a former leader criticized him for failing to tackle corruption.
Former President Olusegun Obasanjo, a stalwart of the ruling People’s Democratic Party, said in a letter to Jonathan this month that he has failed to tackle graft and security threats in Africa’s biggest oil producer. He also accused him of widening a split between the mainly Muslim north and largely Christian south in a bid to retain power.
Obasanjo’s criticism came after Central Bank of Nigeria Governor Lamido Sanusi wrote Jonathan a letter alleging that the Nigerian National Petroleum Corp. is withholding more than three-quarters of oil revenue earned from January 2012 to July this year. The cumulative effect has been to dim Jonathan’s chances of winning Nigeria’s election scheduled for 2015.
“If the vote was tomorrow, the PDP would lose, which would be unprecedented for a ruling party in Nigeria,” Manji Cheto, vice president at consultancy Teneo Intelligence in London, said in a Dec. 16 phone interview. “The prevailing narrative about the advantages of incumbency doesn’t seem to be working in Jonathan’s favor.”
Nigeria can account for the $49.8 billion alleged to be missing, Finance Minister Ngozi Okonjo-Iweala told reporters today in Abuja, saying the number was a product of “misconceptions and misunderstandings.”
A southern Christian who won elections in 2011, Jonathan, 56, hasn’t said if he will run in next vote. His administration is battling Islamist militants of the Boko Haram group in the north, rampant oil theft, falling revenue from crude oil exports and piracy off Nigeria’s coast.
All this has strengthened the opposition All Progressives Congress party. Five governors formerly with the ruling PDP defected last month to the APC, which has called for the president’s impeachment, a demand presidential spokesman Reuben Abati said was “reckless and irresponsible.”
In the House of Representatives, 37 members elected under the PDP defected to the APC, Speaker Aminu Tambuwal said during today’s session.
Were the election to be held immediately, “there is a strong likelihood the APC might win, not because they represent a better option, but because people are tired of this administration,” Idayat Hassan, director of Abuja-based Centre for Democracy and Development research group said in a phone interview. “With corruption they see nothing is being done, with security, they see nothing is happening.”
Since May 1,224 civilians, troops and insurgents have been killed in fighting with Boko Haram, the United Nations said on Dec. 16.
The charges in Sanusi’s letter underline concern about the opacity of Nigeria’s public finances, according to analysts including Samir Gadio, strategist at Standard Bank Group Ltd.’s London unit.
“The CBN expressed similar concerns about the marginal level of fiscal savings and the NNPC’s alleged failure to remit crude oil sale proceeds to the Federation Account,” he said in e-mailed comments. “Even though NNPC officials denied the accusation, the debate about possible systemic leakages in the oil sector is likely to gain momentum.”
The Excess Crude Account, which the government uses to save oil revenue that comes in above the benchmark crude price set in the budget, stood at under $5 billion on Oct. 31, down from about $9 billion at the beginning of the year, the finance minister said that day.
Minister of State for Finance Yerima Ngama was reported on Dec. 13 in ThisDay as saying the balance had fallen to $3.18 billion.
The spot price of Nigeria’s benchmark Qua Iboe crude has exceeded $100 a barrel for most of the year, above the 2013 budget benchmark of $79. It dipped to $99.50 in April, and was trading at $113.81 a barrel as of 2:06 p.m. in London today.
Foreign-exchange reserves, which the central bank has been selling to support the naira, are at $44.4 billion, according to central bank data, down from $48.4 billion in June.
“The foreign-exchange reserves position in Nigeria is not as robust as one would expect it to be given they are generating more than $90 billion per year in oil revenue,” Angus Downie, head of economic research at Ecobank in London, said in a phone interview. “The allegation of the unaccounted $50 billion highlights insufficient transparency in public finances.”
Sanusi, who was appointed by Jonathan’s predecessor and plans to step down from his post when his term expires in June, has said the central bank is bracing for public spending “shocks” in the approach to the election.
While Jonathan has not yet presented his 2014 budget, in an interim plan released on Sept. 18 he proposed cutting spending by 10 percent to 4.5 trillion naira ($28.3 billion). Even if that number is passed by parliament, it may not be the final figure for government outlay.
“One thing we’ve noticed in the fiscal account is that when the federal government comes up with an estimate for the budget deficit, we make allowances for deterioration, as there is a trend towards off-budget expenditure,” said Gaimin Nonyane, senior macroeconomics specialist at Ecobank.
To try to reassert his authority and bolster his election chances, Jonathan may try to force PDP chairman Bamanga Tukur to resign. That could help ease the schism between his presidency and party members who say he should respect a convention to alternate the presidency between northern and southern politicians by vowing not to run in 2015, Cheto said.
“January could become his last window of opportunity either to sack Tukur or, if the party decides that’s not good enough, Jonathan will have to go, because there’ll be no way he’ll win the nomination at the party primary, and if that happens then his political future is over,” she said.
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