Godwin Obaseki, Edo State Governor, stirred controversy on the state of the economy back in 2021. An economist, the governor vehemently opposed some decisions of the Central Bank of Nigeria in 2021 in the heat of COVID-19.

He had spoken against the apex bank’s decision of printing N60 billion to augment government expenditure in a bid to navigate the economy off the COVID-19 storm. Obaseki took CBN’s leadership under a former governor, Mr. Godwin Emefiele, to the cleaners.

Infuriated by governor’s outburst, Emefiele moved to recover intervention loans extended to state governors. Of the measures considered by the CBN was to deduct the states’ loans from the monthly federal allocations shared between states and Federal Government.

Unfaced Obaseki shrugged off CBN’s threat. Three years later, in 2024, Obaseki again returned to the state of Nigeria’s economy last week as he raised the alarm on Nigeria’s economy, which he described as technically bankrupt. Technical bankruptcy refers to a situation where an individual or entity (such as a corporation) is financially insolvent.

It means the organisation or entity in question is defaulted on debt payments, but neither they nor their creditor(s) have yet moved to file formal bankruptcy.

Obaseki alarm

Featuring as a guest during a one-on-one interview on Channels Television programme, ‘Politics Today’, last week, Obaseki described Nigeria as technically bankrupt. Reviewing the economic affairs of the country, he concluded that the Federal Government was “stuck in the past” and it required restructuring for progress.

His deduction was that the country neither had enough nor earned enough to cover its expenditure. He posited that government’s spending was also not decreasing.

Proposing a way forward, Obaseki urged the government to ensure states took advantage of economic opportunities. He said that the Federal Government could not continue to centrally manage resources.

“Nigeria is technically bankrupt. And I mean it. When you are bankrupt anywhere in the world, like in the United States, you file for what they call Chapter 11. “You restructure your affairs so that you can reorganize and meet your obligations.

Nigeria is not restructuring in that sense; it still behaves as if it had money like it used to. “It (Nigeria) has been in trouble for a while. I won’t say insolvent, but technically so, in the sense that we don’t have enough to cover our expenditure, we are not reducing our expenditure, and we are not earning more.

“First, the Federal Government does not have the capacity to manage the economy at the scale and in the way it is currently doing. You’re producing 1.3 million barrels of oil, right? Because you are trying to do it centrally. We have 147 oil wells in Edo, and only 53 or fewer are producing.

“Unless you create a new design that allows the individual states to take advantage of the economic opportunities they have, stressing the assets of this country and paying what they need to pay to the central government, the federal government cannot sit and try to micromanage the country and its assets.

It has shown that it cannot. It doesn’t have the capacity to do so,” he said. He also expressed his belief that the Federal Government was stuck in the past, stating that the current structure of the country was outdated and that a new structure was needed to effectively manage the economy.

“I think for me, it’s like this federal government is stuck and stuck in the past. Because you cannot resolve a malignant problem using the same tools you have used over the years. It’s not that the people there are not smart; it’s not that they’re stupid.

It’s more that they just don’t have the courage to make the decisions they need to make. “The problem with Nigeria today is structural. The structure we have is expired; it’s outdated. We need a new structure to run the economy of the state.

If it doesn’t happen, we are not going anywhere,” Obaseki stated. A few days after Governor Obaseki’s observations on the state of the economy, Bloomberg, an influential foreign medium outlet, alleged in a report that Nigerian authorities had failed to make timely coupon pay

The reforms faced pushbacks and backlashes partly due to poor reform designs, lack of sequencing, and clash of interests

ments on two savings bonds, citing “system and processing issues” as the cause for the delay. Bloomberg inferred that the delay by Nigeria in paying coupons was the second of such delays in two months, involving coupon payments on two and three-year debt sold in June, totalling N4.2 billion ($2.56 million).

Both the presidency and Debt Management Office (DMO) swiftly countered Bloomberg’s report.

FG counters

Special Adviser on Information and Strategy to President Bola Ahmed Tinubu, Mr. Bayo Onanuga, quoted the Finance Minister and Coordinating Minister of the Economy, Mr. Wale Edun, as confirming that Nigeria had no outstanding debts while he reiterated that the country possessed sufficient liquidity to fulfil all its obligations.

“Bloomberg is not correct with this report. Finance Minister and coordinating minister of the economy, Mr. Wale Edun, says that Nigeria does not owe anyone at the moment. We have enough liquidity to meet all our obligations. “We do not have any outstanding payments.

Director General of the Debt Management Office, Patience Oniha, also confirmed that, as of September 19, the Central Bank of Nigeria has processed all due payments. The payment due today, September 20, is also being processed for payment,” the presidential aide added.

With facts in its custody, the Federal Government is countering narratives portraying the economy as unhealthy. The Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, and senior officials of government, who spoke up on the state of the economy, returned a healthy verdict.

While speaking recently in Lagos at the Access Bank Annual Corporate Forum 2024 with the theme “Nigeria’s Economic Rebirth: Hopes and Implications,” Edun outlined concerted fiscal measures being implemented by the government, saying it recorded a 100 per cent increase in revenues, particularly the domestic components, which, according to him, underlined improving efficiency.

He attributed the feat to the application of technology in government management. Expanding on the sound economic footings of the current government, the coordinating minister said the government no longer depended on the Central Bank of Nigeria (CBN) to fund its emerging obligations.

He said the government terminated the use of Ways and Means advances for meeting emerging financing obligations—a practice that had been rampant.

Edun said President Bola Ahmed Tinubu fully supported the efforts of the financial management team to put in place a world-class treasury management system that ensures that the country’s finances are managed in efficient ways.

He said the government was working to plug all loopholes and optimise Nigeria’s financial potential by ensuring that the country’s sovereign assets are fully harnessed for growth and development. He said the Nigerian government would unlock her stranded assets to boost its financing liquidity.

Edun pointed out that as part of the gains of the government’s macroeconomic reforms, the country now records a monthly net inflow of about $2.35 billion into its foreign exchange (forex) reserves in the past seven months.

According to him, the increase in foreign reserves has contributed significantly to the stability of the naira in the forex market.

“We have relative currency stability, and we’ve seen a gradual elimination of multiple exchange rates. We also have foreign exchange liquidity. The gross reserves are up. There has been a net inflow in the first seven months of this year of about $2.35 billion every month.”

“On the fiscal side as well, government revenues are growing, and the key to government revenue is not so much that the government has revenue to compete with the private sector,” he said.

The Minister reiterated that the government was working to ramp up crude oil production as a buffer for the fiscal revenues, saying that the country is on track to produce the targeted two million crude oil barrels per day (bpd) before the end of 2024.

Finance Expert and Managing Director of Financial Derivatives Company (FDC) Limited, Mr. Bismarck Rewane, in a thematic presentation on the outlook of the economy by 2026, said the country had a generally positive outlook if key economic programmes are followed through.

He said Nigeria was currently confronting structural and transitory economic challenges. According to him, the current reforms are aimed at resetting the economy for industrial take-off. He said the reforms faced pushbacks and backlashes partly due to poor reform designs, lack of sequencing, and clash of interests.

Rewane believes the economy will grow at 3.5 per cent, or approximately $400 billion, by 2026, moving from third position to becoming the second largest economy after South Africa. He said inflation would continue to decline to around 22 per cent while there would be a reduction in interest rate with the monetary policy rate at around 20 per cent.

Rewane said: “In 2026, we would have a proper forex system that is functioning due to intervention funds, diaspora remittances, and exchange rate adjustment policies.

“Dangote refinery and production from modular refineries will guarantee regular petrol supply and will be quoted on the Nigerian Exchange (NGX), while stock market capitalization will be N58 trillion.”

He outlined that NGX’s performance would be supported by the listing of big-cap stocks like Dangote Refinery and NNPCL. From the angle of the capital market, Rewane said blue-chip companies were restoring shareholder value resulting from forex losses, noting that moderation in rising Treasury Bill rates would encourage greater diversification and participation in the NGX.

Last line

Indeed, the economic strains alluded to by Obaseki cannot be dismissed. The ongoing reforms by the Federal Government are expected to return the economy to stronger footing when they run through their full course. The red flag on the economy is visible, nonetheless.