Oil price climbed down to $68 per barrel last week after sailing pretty close to $80 in the frenzy of demand surge. Even as it inched up to $72 on Thursday, the sharp decline sent shivers down the spines of the managers of Nigeria’s one-handed economy. Despite the modest gains in oil prices in the last six months, Nigeria’s economy is in tatters because of devastating revenue leakages. Nigeria loses 200, 000 barrels of crude oil daily to mega thieves and pipelines vandals. The federal government has persistently borrowed to fund its yawning budget deficits while inadvertently ignoring massive leakages impoverishing the country and enriching an infinitesimal fraction of privileged politicians and retired generals.
Successive rulers of Nigeria had over the years paid lip service to the heart-rending oil theft that has made Nigeria notorious in the international community. Nigeria has no good second in the crime of oil theft. No other nation in the whole globe loses oil in six digits to criminals.
Mexico comes a far distant second to Nigeria in oil theft as it loses a scant 10, 000 barrels daily to thieves.
In the last three years the federal government has been recording budget deficits in the range of 60 per cent of revenue while it toils to service the debt raised to fund the budget deficits to the tune of 50 per cent of annual revenue.
Now the situation has taken a precarious nose-dive. In the first five months of 2021, debt service consumed a record 98 per cent of revenue, despite the impressive rally in oil price.
That phenomenon along with endemic corruption and a skewed income distribution system have combined to make Nigeria the world’s headquarters of poverty. Nigeria can balance its budget comfortably by halting oil theft or reducing it drastically even to the level of Mexico.
In a society where corruption is highly decentralized, and the oil producing communities criminally neglected by the federal government and the oil companies, it is extremely difficult to police thousands of miles of oil pipelines and stop vandalisation.
But the pipeline vandals account for an insignificant quantity of crude oil theft. They bore into the pipelines just to steal what they would refine in their primitive refineries in the creeks of Niger Delta.
Nigeria’s major problem is the mega thieves made up of the political paramours of the ruling class and retired generals.
Those ones steal from what is officially meant for the export market. Each of them is allocated thousands of barrels of crude oil which they haul to the international waters where criminals dealing illegally on crude oil buy from them at a discount. Nigeria’s budget deficit would vanish the moment government is bold enough to clip the wings of the mega oil thieves who get thousands of barrels of oil corruptly allocated to them daily.
The next leakage to be blocked if the nation’s looming bankruptcy must be averted is the fat lie about Nigeria’s daily consumption of petrol which is fueled by mounting subsidy as oil price inches up.
Nigeria has been feeding the global community with daily petrol consumption figures that make the country a laughing stock. Watchers of the international oil market are beginning to wonder whether Nigerians cannot even tell credible lies.
The Nigerian National Petroleum Corporation (NNPC) wants the world to believe that Nigeria consumes 102 million liters of petrol daily.
Mele Kyari, NNPC ‘s group managing director claims that Nigeria actually consumes 60 million liters, while the balance of 42 million liters is smuggled daily to Benin, Togo, Ghana, Niger and Chad.
That quantity of petrol smuggled into five impoverished countries daily would require 1, 272 articulated trucks with capacity for 33, 000 liters each to haul.
Those who fabricated the lies on consumption figures probably forgot that the impoverished tiny countries themselves import at least 98 per cent of their petrol needs while smugglers fill the supply deficit.
Besides, some of those countries consume less than one million liters of petrol in a day. What NNPC claims to be smuggled from Nigeria daily cannot be consumed in the whole of the Economic Community of West African States (ECOWAS).
The Department of Petroleum Resource (DPR), NNPC’s regulatory arm knows precisely how much petrol is consumed in Nigeria daily. DPR tells it as it is. It puts Nigeria’s daily petrol consumption at 38.2 million liters.
If the federal government pays subsidy on 38.2 million liters of petrol daily, it would save close to N100 billion monthly on petrol subsidy. That is enough to reduce the annual budget deficit and debt service cost.
Tax is perhaps Nigeria’s biggest point of leakage. At a scant 6.5 per cent, Nigeria has one of the world’s lowest tax-to-gross domestic product (GDP) ratio. The Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) are two large conduits draining government revenue into private pockets and impoverishing the country.
Nigeria can earn N5 trillion from import duties in a year, but NCS officials connive with smugglers and pocket four times what they declare as import duty revenue.
Last month NCS rolled out the drums to celebrate the attainment of N1.2 trillion as import duty revenue in the first half of 2021. The figure for a similar period in 2020 was just about N700 billion. The celebrants forgot to tell the world that the Central Bank of Nigeria (CBN) devalued the naira by well over N40 to the dollar during the period under review and that the NCS massive increase represented revenue calculated on the basis of a devalued naira.
The federal government can drastically reduce the import duty leakages by imposing stiff targets on NCS and hinging the comptroller-general’s job security on attaining the set target. The target should not be less than N4 trillion in a year.
Recent announcement by FIRS that Multi Choice Nigeria (MCN) owes the sum of N1.8 trillion in tax revenue points to the colossal leakages in tax revenue.
If a South African outfit with annual turnover of $3.8 billion is allowed to owe such colossal sums over a period of 26 years, it is obvious that thousands of successful Nigerian firms are not paying tax.
The MCN scandal explains why Nigeria’s tax revenue is a scant 6.5 per cent of GDP while South Africa chalks up 28 per cent. Nigeria can achieve 15 per cent tax to GDP ratio if the leakages are blocked.
Rather than borrowing to fund budget deficit and spending 98 per cent of annual revenue on debt service, the federal government can avert the impending bankruptcy by blocking massive leakages from oil theft, petrol subsidy and tax frauds.