“Mice are mice; that is why mouse traps work.”

President Bola Tinubu’s fresh request to the National Assembly to approve external loans totalling $24.14 billion is tiresome. 

Once again, it raises concerns that Nigeria is hurtling towards a fiscal precipice, with public debt increasing at an alarming rate even as government revenues show signs of recovery.”  Editorialof a national newspaper, June 1, 2025. The Editorial was right about the likely repercussions of the new loan request, but, wrong in the assertion that “government revenues show signs of recovery”. Quite the contrary; when government revenues are measured in dollars, rather than Naira, the picture of dismal performance will be revealed. It is because the government’s dollar revenues, have declined relative to budget, that the FG is once again going cap in hand again in search of loans. In fact, VANGUARD had anticipated the loan request in articles published earlier this year. 

BUDGETARY ILLUSION

“The most obstinate illusions are ultimately broken by facts.”

Trevor Roper, 1914-2003, in The Last Days of Hitler.

Nothing is more dangerous than a positive and convincing illusion. Most government leaders, in times of social and economic stress, dispense them liberally. Jonathan, Buhari and now, Tinubu have led us into a greater debt trap for the same reason. The major cause is budgetary illusion. The three Presidents fell into the same trap which is now creating a swelling tide of fiscal gloom threatening the nation’s future. The $24.14 billion loan request might not even be the last in 2025. The most unfortunate fact about the loan lies in the fact that no realistic revenue projections can reassure Nigerians that it can be repaid without more borrowing.

At the heart of our perpetual fiscal gloom is the refusal of every President to admit that Nigeria cannot now, if ever, produce 2 million barrels per day, 2mbpd, of fuel and export that quantity. May 2025 production figures will soon be available; and if it follows the pattern from January to April, the real output would be about 1.5mbpd. The shortfall of 500,000 barrels per day or 14 million barrels for the month will result in a negative revenue variance of $1.125 billion for the month alone or $5.625 billion cumulatively for five months.

 Additionally, at the risk of sounding like a broken record, the budget for 2025 was more of a political document than an economic projection. My personal experience on the budget committee of a US multinational taught me that the success or failure of every budget, given foreseeable occurrences, depends on no more than five factors whose forecasts must be as accurate as possible. For Nigeria, the most important are: crude oil exports; average crude prices, exchange rates and internally generated revenue. The disparity, especially negative, between the actual and the projected figures should not be too wide; otherwise the budget is in trouble. Deficits will exceed what was budgeted and fresh loans will be needed. That has been the national experience since 2013. On the last Saturday of December 2024, I made a forecast in the WEEKEND VANGUARD; stating emphatically that “crude oil exports will probably not exceed 1.5mbpd in 2025”. The FG budgeted 2.06mbpd. As we start June, five months are already behind us. The results explain why Tinubu is asking for $24.14bn loans. Instead of 2mbpd, Nigeria has produced just about 1.5mbpd; 42 million barrels a month and 210 million barrels in five months and about $8.6bn negative variance has occurred. That is bad enough. Every single barrel produced had been sold for less than the $75 budget benchmark by at least $10; that has created another $2.1bn shortfall. The request for $24.14bn must have included anticipated negative variances in the last seven months.

“Global oil demand growth is projected to slow from 990kb/d in Q125 to 650kb/d for the remainder of the year as economic headwinds and record EV sales curb use.” Google Report.

Nigerian governments, even when Dr Ngozi Okonjo-Iweala was Co-ordinating Minister for the Economy, under President Jonathan, had been behaving as if the nation is an island existing by itself without regard to global economic events and our obligations to organisations worldwide which restrain our freedom to act – particularly with respect to crude oil production and export. This particular illusion has resulted each year in unintended consequences. Okonjo-Iweala started it in 2013 when she presented the Medium Term Expenditure Framework, MTEF, which projected 2mbpd of crude to be produced by Nigeria for 2013 to 2015. This projection was made against the background of the quota approved for Nigeria by the Organisation of Petroleum Exporting Countries, OPEC – which was 1.7mbpd. Everybody in government, then and now, knows that Nigeria could not unilaterally exceed its production quota without serious repercussions.

 Furthermore, Nigeria’s Minister for Petroleum Resources who attended the meeting at which the quotas were determined for each country, was aware of the major reason. High crude prices were threatening a global recession; demand was declining; and the only way to keep prices up was to reduce supply. Why the FG proposed 2mbpd in the 2014 Budget remains a mystery given Okonjo-Iweala’s grasp of economics. The target was missed in 2014; yet, the FG went ahead and projected the same figure in the 2015 Budget – with OPEC quota remaining the same. Again, Nigeria failed to produce 2mbpd of crude.”Most of the problems a President has to face have their roots in the past.”US President Harry Truman, 1884-1972.

Buhari inherited a budget designed to fail from Jonathan. He compounded the calamity by taking three steps which have paved the way for the hell in which Nigerians are living now. One, he delayed the appointment of Ministers; he appointed an Accountant as Finance Minister; and, above all, he accepted the 2mbpd fiction as the basis of the eight budgets he presented to the National Assembly, NASS. Tinubu received the 2023 Budget which was doomed to fail right from the start and followed Buhari down the familiar road of basing budgets on wishful thinking instead of the hard rock of reality. Predictably, Tinubu, has presented two straight budgets based on 2mbpd. The 2024 Budget failed woefully. The 2025 is now getting unravelled by the global factors which all our Presidents and their economic advisers choose to ignore.

THE RISE OF EV; THE DEATH OF PETROL FUELLED CARS

“Everything comes to an end.” That was wisdom drilled into my head by my parents; which had been reinforced by studies and personal experience. The rise and enduring reign of fossil fuels were made possible by vehicles driven by their products.

The Age of Oil is over. China, the USA, Europe and now India, account for almost 75 per cent of global consumption of fuel. All of them are moving away from fossil fuel. Even Saudi is building hydrogen fuel capacity. Very few new cars requiring petrol are now being produced. Who will consume 2mbpd of crude – assuming we can produce it?

Tinubu urgently needs people who can write realistic financial budgets.