Boom Time?

This will be the high point of my day, it’s all downhill from here” – Lester Burnham, American Beauty


Given that when it comes to government revenues, we are an oil based economy, what kind of times do we live in? The numbers suggest we are in an economic boom, regardless of what the reality ‘on ground’ might be.

I thought to do a comparison of Obasanjo’s first term in office and GEJ’s first 4 years in office viz oil prices and government revenues:

1999 – 2003


The dates I used are from May 29th, 1999 to May 28th, 2003. In June ’99, oil prices touched $15.86 while the highest point was September 2000 when prices hit $33.15. As is evident from the chart, prices fluctuated quite a lot in those 4 years – indeed the high and low points happened within almost a year of each other.

Think of it another way – oil prices closed at $21 at the end of 1999 so if legislators were going to budget based on that for 2000, it would have been a bit of a mess because within 5 months (May ’00) prices had dropped below that high point. Perhaps this uncertainty is what caused that government to save money like it did and not really spend on big infrastructure projects.

2010 – 2014

chart (2)

The dates used here are from May 6th, 2010 when GEJ officially took over and July 31st, 2014. The lowest point of the period was in that same May when prices were $70 per barrel i.e. since GEJ came to office, prices have never been lower than he met them. The high point was in March 2012 when they hit $125. Other than that, from the graph you can see that prices have been fairly consistent around the $100/barrel mark.

I am not sure any Nigerian leader has enjoyed this kind of boom before. As an example, the chart below is for the IBB years – August 1985 to August 1993:

1985 – 1993

chart (3)


Can you guess what that sharp rise in 1990 one is? (Hint: Pius Okigbo report). In October 1988, oil prices hit a low of $12 and in October 1990, they hit a high of $36.

Barring a miracle, GEJ will be re-elected as President in February 2015. It’s worth thinking about what his second term might look like just in case his oil price luck runs out changes. It’s possible for things to get even better than they currently are. The chart below is for Obasanjo’s 2nd term as President:

2003 – 2007

chart (4)


The direction of travel is unmistakable – the lowest point of $26 was in May 2003 and the highest point was in July 2006 at $74.

With all that mind, here are some random thoughts:

1. Can you name any major project being carried out by this government that is not being funded by a loan or grant? From 2nd Niger Bridge to all the various airports being built. This is a genuine question as I am sure there are some big projects funded with oil revenues but which aren’t so obvious.

I tried to use a FoI request to work out how much foreign aid and loans were being used to fund the budget but so far there’s been no response.

2. In March 2011, GEJ signed the new minimum wage of N18,000 per month into law, up from N11,000 per month. What is often not understood is that organised labour got the government to maintain the difference between the bands after the new minimum wage came into effect. The effect of this was to almost double all salaries.

This partly explains why the Finance Minister was complaining recently that the FG’s wage bill had risen from N857bn in 2009 to N1.8trn this year – the bulk of that increase would have happened post the new minimum wage. She says the wage bill is for 1.2 million workers but the workers themselves say there are only 870,000 of them in the work force. But note that they do not dispute the N1.8trn being spent only on who it is being spent on. Whatever the truth may be as to the actual number of workers – we are spending around 38% of the budget on less than 1% of the population.

3. Bear in mind that the planned budget deficit for this year is almost N1trn (it could be more, it could be less) and there was only one surplus month between May 2013 and June 2014 i.e. a month where the government spent less than it earned.

4. Given that the bulk of government’s revenues still come from oil revenues and its finances are at full pelt at the moment, what do you think might happen if oil prices were to fall to say, $75 for around 6 months? Or what if we cant sell as much crude as we normally would? Certainly not that far-fetched – it’s getting harder to sell our crude quickly on the international market (partly due to the Americans not buying as much as they used to). By the 3rd week of July, around one-third of the August cargoes remained unsold.

As a business owner, will you be willing to pay more taxes to support the ‘Transformation Agenda’ if oil prices start to drop? Definitely worth thinking about.


A couple of people have taken me to task about comparing 1999 – 2003 dollars with 2014 dollars without using a base year. So I have inflated the 1999 – 2003 numbers to 2014 dollars. For example, $1 in 1999 would be worth $1.42 today, $1 in 2000 would be worth $1.38 today and so on.

So taking that into account to update the numbers, you get a chart like the one below:


Screen Shot 2014-08-07 at 12.21.37

Apologies for the dodgy looking chart but you get the gist – the low point of June 1999 which was $15.86 back then would be worth $23 today, around a quarter of current prices while the high point of September 2000 which was $33.15 back then would be worth $46 today, around half of today’s prices. In other words, comparing the first 4 years of both terms means that the current government is doubling the best revenues that the Obasanjo government ever managed.



16 thoughts on “Boom Time?

  1. Are the dollar prices standardized between the different periods? This is necessary to ensure an objective comparison. Don’t you think?

  2. I am eagerly expecting a riposte from someone who thinks the ‘seven season of plenty’ is not been frittered away.

    @Tolu. I suppose you mean if the oil prices in dollars have been deflated…real value. A quick glance showed that the average price for 2003-2007 was around $60/bbl while from 2011-2014 was about $105.From all evidence, I don’t think inflation growth over the tranche years 2003-2007, 2011-2014 has been as high as 75%.

  3. am eagerly expecting a riposte from someone who thinks the ‘seven season of plenty’ is not been frittered away.

    @Tolu. I suppose you mean if the oil prices in dollars have been deflated…real value. A quick glance showed that the average price for 2003-2007 was around $60/bbl while from 2011-2014 was about $105.From all evidence, I don’t think inflation growth over the tranche years 2003-2007, 2011-2014 has been as high as 75%.

  4. Agreed that GEJ has presided over high crude oil prices corresponding increases in our wage bill (including NASS) and subsidy bill (corruption) has wiped out significantly, the gains from the high oil price.

    Most projects are funded via a combination of govt equity and loans/grants; Lagos-Ibadan, Niger-Bridge etc.. Even the Chinese loans comes with their own contribution clauses. With our infrastructure deficit, I even think we are not aggressive enough.. And this concept is repeated across some states; Lagos, Ogun etc.

    On the N18,000 wage issue, the problem really is the disproportionate rise in salaries of middle and upper level civil-servants and which was the bane of Govt’s resistance to minimum wage increase. What this Govt needs to do (hopefully in its second term) is push for full implementation of IPPIS which would drastically reduce ghost workers and in the long run, our wage bill.

    Crude Production and Sales is a problem- saturation, reduced demand (US)…We are not even meeting our OPEC Quota. The likes of Trafigura, Vitol, Mercuria are our only viable options.. Traders don’t even want to deal with some refineries across West Africa (‘Govt-to-Govt’ contracts) because of default by refineries.. On this matter, there is a clear and present danger.. If oil price drops below $75, we would face serious problems, very serious problems… Increasing our tax base and rate would be inevitable… Truth, I don’t even want to think about what would happen..

  5. I have realised Nigeria is not nearly as rich as I used to think,and even more pathetic is the way we waste the little money we have.Doomsday is not far off if we don’t change methodology,our cup of troubles will soon runneth over.The reality of how poor we are hit me when I read that the NIH in USA which is the institute that funds research(like the research that birthed the Ebola drug)has a budget of 31bn dollars for 2014…!31bn is more or less Nigerias budget for the year.

  6. I don’t think any analysis of revenue is complete without the volumes…What about those? I think that may even make the difference more exaggerated cos OBJ had a full blown Niger Delta crisis if I remember correctly.

    It was only a couple of days ago that I was thinking the same thoughts, you know? How did the government survive when benchmarks were in the 20s and 30s?

    I liked the idea of a Jonathan presidency (reasons around his minority status, “difference”, relative youth)… For about 2 months. And then the wasteful signs started to emerge and I was like “apa leleyi.” We have a particularly wasteful government and that was my only reason for opposing the subsidy removal back then, that this guy will squander any savings. It’s still on..

  7. Useful article and good for putting up a debate about the fiscal space within Nigeria.

    One thing though is that, the current budget is no longer hinged directly on international crude prices since we started using crude oil budget benchmarks. What this does in theory is that it should help prevent shocks to the economy in times of oil downturn (2008 being a good example, downturn in oil prices did not have an immediate effect on the economy and we used the excess crude savings as buffers). The challenge however is that we are not selling as much crude per month as we envisage ( we are lifting but sales have been sluggish).

    You pointed out that this administration has benefitted from the rise in crude prices and rightly mentioned that recurrent expenditure has gone up. The percentage you used (38%) is however confusing. Did you mean personnel cost alone or total recurrent expenditure (personnel + overheads)? I’ve asked this because the percentage of recurrent expenditure to total expenditure for 2014 is closer to 52% (fed budget) with debt servicing taking another 15%. Considering that NASS has decided to lump itself into the select group called statutory transfers, the envelope left for capex becomes thin. The budget integrity has also been really poor hence a budget implementation particularly for capex has been bad. I suspect the MOF has resorted to borrowing not only because of the deficits, but because a good number of the borrowed funds are off budget and generates less attention by the hawks who see capex as money for the boys.

    Per taxes, I’m not averse to them, but it really shouldn’t be about paying more but about expanding the tax net. In addition, this government can be a bit more open with total revenues derived from oil receipts.

    1. We have always used benchmarks. That was how Obj was able to ‘illegaly’ save $20bn or whatever it was he left in the ECA. In theory that still continues till today – I believe this year’s benchmark is around $79, so in theory, anything above that in the price should go into a ‘rainy day’ account. The problem is that it seems to be raining a lot these days so the savings hardly ever accumulate.

      On the 38% I used – I just used a straight N1.8trn out of the total 2014 budget of N4.7trn. In reality it is of course higher as that N1.8trn is just the civil service wages and salaries component.

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  9. 1. Please where are the revenue earnings for the Abacha Period 1993 – 1998?. It roughly equals a single term in office for either Obj of Gej and most estimates agree that between 4 and 5 billion was looted within the period. USD. And this was in a period of low oil revenues. In the transition period alone July 1998 to May 1999, almost 9 Billion was drawn down by Abdusalam Abubakar.

    2. Most of this was traced directly to Abacha and much has been frozen and about 500 million more is about to be returned. Granted that Abacha instituted some major infrastructure like PTF and CCCEC rail projects but they both amounted to little because the busiest ( and therefore the most economically viable) routes like Lagos Ibadan expressway; the 2nd Niger bridge ; the East West road or even the Lagos Calabar coastal road were totally ignored ‘en bloc’ for whatever reasons. It will be interesting to know if and when such similar amounts will be traced to either Obj or Gej.


  10. 3. I agree that much of the increased revenues have been eroded by corruption (subsidy) and wage bill increase. The workers took a cue from a NASS that took advantage of a sick Yar Adua to multiply their own income and put it under statutory transfers.

    All of the above greed has fed into a strong feeling of ‘OUR’ time/ turn in the South South. If you call am boom time or even seven years of plenty, na you sabi. Thus no matter how high the revenues go, it will simply not be enough to go round well enough. Compare 76 billion naira for amnesty versus 2 billion for the entire north east as capital budget by the FG. With anmesty and pipeline protection contracts ( and ironic spike in oil theft!) they have realized their power and will do any thing to protect it. All tricks in the book will be deployed – allowing BH to fester; fostering a Christian Muslim divide; Minority vs Majority tribe; corrupting all the ‘corruptibles’ (iBB drew up the workbook and manual).

    IMO, a major reason that GEJ will win in 2015 ( in spite of poor performance) Is the same reason OBJ, in his God given wisdom, insisted on a ‘clean’ minority Ijaw as VP in 2006- the overriding need to keep the gravy (oil revenues) flowing.

  11. Good Job with the blog feyi. I always enjoy reading the articles….particularly enjoy the sarcasm more. I am however tired of complaining about things here, its just really sad and pathetic.

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