Covid-19 pandemic: Fact-checking former Nigeria VP Abubakar’s claims about the economy
Former Nigeria vice president Atiku Abubakar recently criticised the current administration’s plan to borrow nearly US$6.9 billion, saying the country should instead seek debt relief and push for higher oil prices.
Nigeria is looking for $6.9 billion from three multilateral lenders. Finance minister Zainab Ahmed has said this is to cushion the country from “existential threats” due to the Covid-19 pandemic and falling prices of oil, its top foreign exchange earner.
Writing in the daily Vanguard newspaper in April 2020, Abubakar, who has vied for the presidency four times, made a number of statements to support his position. We fact-checked six.
We asked the former vice president to provide evidence for his claims and for clarifications where necessary. We will update this report when he responds.
The first cases of the novel coronavirus outside mainland China were reported in January 2020, according to the World Health Organization.
Nigeria spent N2.1 trillion (about US$6.9 billion at the current official exchange rate) to service its debt in 2019, according to the country’s debt management office. Of this, N1.69 trillion ($5.5 billion) was for domestic debt, and N408 billion ($1.3 billion) for foreign debt.
Nigeria’s revenue in 2019 was N4.77 trillion, according to the country’s central bank. This came from sources such as oil and gas, value added tax, corporate tax and custom duty.
Taken as a proportion of this revenue, about 44% was spent servicing debt. We therefore rate Abubakar’s figure of 42% as mostly correct.
Economist warns debt servicing level ‘unsound’
Economics professor Philip Olomola told Africa Check that while there are “valid reasons” for the debt owed by the government, using nearly half of the country’s earnings to repay it was unsound in the long run.
“In the face of dwindling revenue, governments take loans for projects and to keep the country running. However, debt servicing taking over 40% of the country’s earnings is not sustainable,” Olomola, who teaches at the Obafemi Awolowo University, Ife, said.
The UN’s Economic Commission for Africa focuses on the economic and social development of the continent.
Abubakar said it was inevitable that Africa would take an economic hit from the pandemic, and said the agency had already revised growth projections for the region.
A spokesperson for the commission, Privat Akochaye, directed Africa Check to a French-language report published in April 2020. This showed that the agency had pared back its growth forecast for the region for 2020, from 3.2% to between 1.8% and 2% in a best-case scenario. But this could shrink to 0.1% or, in a worst-case scenario, to as low as -2.6%.
The commission therefore did revise its projections, though these forecasts tend to often change as more information becomes available.
The former VP’s point was that a crash in the price of oil should not automatically “trigger a crisis”.
Abubakar took office as president Olusegun Obasanjo’s deputy on 29 May 1999, serving two terms until 2007.
In May 1999, the price of Nigeria’s main crude oil export, Bonny Light, was US$16.94 per barrel, according to historical data from the Organization of the Petroleum Exporting Countries.
On 8 April 2020, the day Abubakar’s article was published, Bonny Light crude sold at $25.89 per barrel. Strictly interpreted, Abubaka was accurate that the price of oil was lower in 1999.
Be cautious when comparing oil prices, says economist
But comparing the prices of oil in 1999 and in 2020 should be done with caution, economics professor Philip Olomola told Africa Check.
“There is a need to consider economic fundamentals such as the changes in the demand for the commodity,” he said.
“The US for instance was buying more crude oil from Nigeria in 1999 than it is buying today. It’s not just about the price. Even if it rises to $100 per barrel, if there are no buyers, it would make no difference,” he said.
Returning to a familiar 2019 presidential campaign talking point, Abubakar compared debt levels during his time as VP with those of the current administration of president Muhammadu Buhari.
When he exited office in 2007, Nigeria’s foreign debt had been “paid off”, Abubakar said. Is this accurate?
A highlight of the Obasanjo administration was a debt cancellation deal it negotiated with the “Paris Club”, an informal group of 22 creditor countries.
In 2005 the creditors wrote off $18 billion of the roughly $30 billion Nigeria had owed them at the end of 2004. This was 84% of the country’s foreign debt as at December 2004.
Nigeria still had to pay $12.4 billion, according to the public announcement by the group, which was made in April 2006.
Nigeria also paid its debt to private banks known as the “London Club” in a similar deal. The country’s debt office showed this was done in 2007. But this statement of accounts showed Nigeria’s foreign debt was $3.54 billion at the end of 2006 and $3.65 billion at the end of 2007.
The data shows the Obasanjo government did not settle Nigeria’s foreign debt as the VP claimed. They handed over to a new government in May 2007. That year, Nigeria still spent more than $1 billion to service foreign debts.
Abubakar also faulted the recent approval of a reported N37 billion to renovate the national assembly, which he said was “built from scratch” for less than a fifth of this.
Nigeria’s plan to spend this amount, approved in December 2019, is the subject of public debate.
The contract to initially build the national assembly was awarded in February 1996, with construction lasting two and a half years. The company that built it has given the value of the contract as N7 billion.
But the value of Nigeria’s currency has depreciated significantly over the years, economics professor Philip Olomola told Africa Check.
When comparing the two figures, one “should consider factors such as changes in exchange rate and in the cost of construction equipment and material”, the economist said.
Difficult to do a direct comparison
In 1996 the exchange rate was N21.9 to the US dollar. This means about $320 million was devoted to the construction of the complex.
In December 2019, when the renovation budget was approved, the official exchange rate was N306 to the dollar, or $121 million.
Olomola said the purchasing power of N7 billion in 1996 is likely to be more valuable than that of N37 billion today.
Building costs higher in 2020 than 1996, says quantity surveying expert
The cost of building equipment and material has also generally increased over the years, King Nyenke, a professor of quantity surveying at the Rivers State University, told Africa Check.
Nyenke said that if he were provided with the same bill of quantity as in 1996, the cost of building it now “would be higher” than N7 billion.
Because of the changes in these fundamentals, it is difficult to know for certain if the repair bill for the national assembly would be less than 20% what it cost to construct it.
So we rate this claim as unproven.
The hospital at the president’s official residence is often reported as being ill-equipped and barely functional despite being allocated a large budget every year.
“It is virtually useless as we face the most significant public health challenge of our national life,” Abubakar wrote, claiming that N13 billion was allocated to the hospital in the five years to 2020. A similar claim was published by the Daily Trust newspaper on 6 April.
Budget documents of 2016 to 2020 differ
The budget allocation to the facility in the 2016 budget – the first of Buhari’s administration – was N2.83 billion. It dropped to N331.7 million in the 2017 budget before rising to N1.03 billion in the 2018 budget.
In 2019 N799 million was budgeted for the hospital, and N723 million for 2020. The total is about N5.7 billion – less than half Abubakar’s claim. (Note: The amounts released are sometimes less than what’s budgeted, but a lack of historical data on budget implementation makes it difficult to know the exact amount that reached the hospital over the period.)
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