FG needs $96bn income, $60bn reserves for economic recovery

Sopuruchi Onwuka

The new administration if President Bola Tinubu must look beyond oil income to revive the country’s economy which was driven downhill by the past administration of former President Muhammadu Buhari.

President Tinubu who has inherited huge official debts came into office at the end of May with seeming anxiety to activate a set of economic reforms required to steer the economy back into the tracks of sustainable growth. On ground is the outcome of diagnostics as well as recommendations on cutting the cost of running the government and strategies on reviving the nation’s income sources.

According to the strategy document prepared by a team of renowned economists including Udoma Udo Udoma, the new government would need a monthly income of $8.0 billion or some N6.0 trillion to arrest the prevailing decline and recurrent debts.

Besides, it was also recommended that the new government must rebuild the country’s external reserves from current $35 billion to over $60 billion in order to meet demands in the foreign exchange market and thus prevent the Naira from further slide.

To meet the income targets means that the country must quickly diversify from oil dependent economy and boost exports of other services and commodities.  Petroleum resources including crude oil, condensate and natural gas account for over 90 percent of total foreign exchange income and nearly 95 percent of the country’s balance of payment.

Accounting crisis in the petroleum sector in the past four years led to acute foreign exchange deficit in the economy affecting international business transactions in the country including airlines and other service providers who could not receive their proceeds in foreign exchange.

The Nigerian National Petroleum Company (NNPC) Limited which declared huge oil production losses and insufficient income from exports in the last tenure of former President Buhari, has in the past month stated that production losses in the industry have been plugged and that export has improved to significant 1.6 million barrels per day.

The Oracle Today quotes market sources who calculate the market value of Nigeria’s grade of crude oil in the international market put the country’s expected total income from oil export at 58.4 billion, or only 60.833 percent of the required $96 billion.

Also, Nigeria’s external reserves is officially placed at $35.25 billion at the time President Tinubu stepped into office. The amount is only 58.75 percent of the recommended $60 billion required to stabilize the foreign exchange market and save the Naira from further loss of value.

If the dollar revenue targets are met, the strategy document stated, it would be possible for the Naira to stabilize at average of N550 to a dollar across the deregulated domestic forex markets.

However, generating increased foreign exchange revenue would necessarily require a shift from mainly petroleum export to enhanced export of commodities from the country. This would also require manufacturers to produce export quality products at low cost in order to be competitive at the export the market.

According the policy document prepared for the government, doubling of exports to support growth ambitions entails rebuilding the country’s oil and gas output, enhancing manufacturing of products and production of petrochemical products ancillary to oil and gas industry, including fertilizers.

The economic policy document also recommended deliberate efforts at attracting investment in light electronics assembly, agriculture including sugar and palm oil.

To close accounting gaps and consolidate revenue authorities in the country in a manner that would be cost efficient, the economic advisory team also recommended merging of three key revenue agencies of government: the Federal Inland Revenue Service (FIRS), the Nigerian Customs Service (NCS) and the Nigerian Maritime Administration and Safety Agency (NIMASA). The emerging Nigerian Revenue Service (NRS), according to the document, would be made to improve tax and revenue collection to enable government increase capital expenditure from 4.1% to 25% of gross domestic product and narrow the estimated budget deficit down from 4.78% to 3% of GDP for 2023.

For all the economic revamp targets in the strategy document to be met, the new administration must essentially work to improve export revenue from 2022 level of $42.4 billion to $96 billion; and also significantly boost foreign reserves from current $35.25 billion to $60 billion.