How Economy Works Series: How $40billion or N30trillion or both got missing; or not.
How Economy Works Series by Ike Okwuobi
Lots of folks wonder about the technical & economic argument in the two pieces written by ex-CBN Gov and professor of economics, Mr. Soludo, as to whether N30-trillion ($150-billion) is missing or not; as well the $40-billion whistle-blown by his successor, ex-CBN Gov, Emir Sanusi.
Hang on folks, cause this a zig-zag-zinger of a piece.
Ok, Abu, Amos, Abby and Attah are explorers. They land on an island which has a few hundred inhabitants. They’ve got the grace and the smarts. They find ~ water. It is flowing from a rock. Theirs is also the only island with water. So they decide to band together to harvest it in this manner:
Abu will use buckets to fill the water.
Amos will take the buckets and put in a drum of predetermined size which will be set on a flatbed truck for haulage to the market of which he will keep count.
Attah will drive the truck. He has the permission to throw off a few drums if he feels the truck is overloaded especially during a storm and pick up some drums which he previously dumped if he feels the truck is underloaded. And because he is mobile, he stores the cash.
Abby will coordinate. Find out which islands are lacking water. Find out how Abu is doing. Make sure the Attah’s trucks are fine. Make sure all folks on their Island are happy and that the receipts from all sales of water are well managed.
Abu is NNPC
Amos is the Accountant General
Attah is the CBN Gov
Abby is the Minister for Finance.
Just as on the Island, there are are a few loopholes by which money gets missing in the Nigerian oil industry-consumption system.
Abu could say he fetched 10 buckets of water, whereas he fetched 12 buckets (akin to NNPC declaring it’s daily oil lifting).
Abu could have buyers ‘pad’ their water buckets so that each bucket can take twice the quantity of water recorded (akin to oil barges loading higher quantities than paid for at NNPC).
Abu could fetch buckets of water and – while the truck driver is away – put them on someone else’s truck (akin to vessels loading oil without records by NNPC and shipping away).
For all these loopholes there is some form of solution in place – the efficacy of which one doesn’t know.
All in all what we do know is that the financial value of 100% of oil lifted from the oil wells is not remitted to the national coffers. This is where the 400,000 barrels missing each day is purported to have been lost. No one knows if it is 4,000, 40,000 or 400,000 barrels missing daily. So one will not be wrong if they said the claim by Soludo in this respect is an offhand, unverifiable projection.
Soludo says this accounts for N12.5-trillion naira of his purportedly missing N30-trillion:
«On the average of 400,000 per day …. comes to about $60 billion ‘stolen’ in just four years… In today’s exchange rate, that is about N12.6 trillion.»
More ahead as to the balance of the N30-trillion, but first – what of Sanusi’s $40-billion claim?
Sanusi was talking about something else.
Ok, let’s revisit the Island.
Abu has Amos, as his first level accounting guy. So Amos, for all intents and purposes should actually know what Abu sells.
Now Abu started something unconstitutional and hitherto unseen:
Instead of Abu handing the cash to Attah, who then makes it available to Abby, who would then offer accounts to the leader of the Island, and who (leader of lsland) then would create a budget to take care of all expenses – Abu started taking his expenses from source. Saying, since I’m with the money from the water sales, I will pay for new buckets, service my pipes and miscellaneous, then I will send the balance to Aby and she can reconcile and take away whatever I spent from what the leader of the Island was going to give me.
This is what NNPC did that meant all revenues where – as the French would call it – disparu (disappeared); Hence Sanusi blowing the whistle:
“Where is the whole money for 1year…?” Was Sanusi’s actual query.
So is it technically the same thing accounting-wise? (i.e what NNPC did)
Constitutional what NNPC did?
So Sanusi when blew the whistle, was $40billion missing.
Yes ~ in that it wasn’t where it should be.
Was Jonathan correct to say that the system couldn’t survive with a $40billion shortfall for one year?
Absolutely! Nigeria spends $6billion monthly to run the economy. After 6 months the economy would collapse.
Was Soludo then correct when he changed the figure to $20billion?
Absolutely! At that second of reconciliation, it was also correct.
Is PriceWaterHouseCoopers (PwC), now correct when it says only $1.4-billion is unaccounted for?
But who do you punish in such an unconstitutional behaviour?
That is for the Houses of Reps and Senate to decide. But one thing we know is the NNPC has far too much leverage which may need fixing with laws and technology.
And that is the story of the $40-billion.
But what else added up to give Soludo’s N30trillion ($150-billion)?
Let’s add them:
1. The 400k barrels calculated over 4yrs = 12.5 trillion. ($62.5-billion)
2. The Sanusi $20billion (which is now said to be $1.4-billion)
3. Then there is a $60billion difference between what he (Soludo) claims his stability to CBN saved Nigeria by way of having foreign reserves as against what his two successors tenures of Sanusi and Emefiele who he says have saved $60-billion less in foreign reserves.
4. N5.7-trillion fund Sanusi says was made available by the FGN to buy failed banks to which Soludo says is not true (though in the same breath he admits is technically true, however it is tallied as missing or mismanaged).
“S/he claims that N5.7 trillion of AMCON funds was used to rescue banks and the ‘bond issued’ as ‘cost to taxpayers’. Really? I will deal with the AMCON issue later but.. The fact is that the Federal Government has not put a penny in the AMCON fund… Did you intend to deceive the readers by refusing to tell them that much of the AMCON fund is ‘investment’ and not ‘expense’
That totals your N30-trillion.
And there you have your $40billion and N30-trillion ($150-billion).
Hope I didn’t lose you on the truck! Lol!
If you enjoyed this one, more are coming your way. Let’s understand together How Economy Works; chatter out of the way and get the solutions in place.
Ike Charles Okwuobi
Ike is a Business Systems Analyst Consultant to major banks in North America, helping them build Information Systems Platforms that bring them into compliance with new and evolving US & Canadian laws.
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