An audit report by the Office of the Auditor-General of the Federation (OAuGF) has revealed that $4.5 billion in Nigeria's Foreign Reserves between 2018 and 2019 cannot be accounted for. The report also highlights an 'unsubstantiated' decline of over $8 billion in foreign reserves between 2019 and 2020. These infractions occurred during the COVID-19 pandemic under the leadership of Godwin Emefiele, former governor of the Central Bank of Nigeria (CBN), who is currently facing corruption charges [5a5dcf3a].
The audit report raises concerns about the ability of the CBN to maintain a stable exchange rate and calls on the bank to provide justification for the 'missing funds'. The report also reveals that the CBN failed to account for the total funds recovered from the Economic and Financial Crimes Commission (EFCC) between 2016 and 2019. These findings further highlight the challenges facing Nigeria's economy and the need for transparency and accountability in the management of foreign reserves [5a5dcf3a].
In addition to the audit findings, a recent analysis indicates that Nigeria's borrowing under President Muhammadu Buhari has exceeded the total foreign debts accumulated during the administrations of Obasanjo, Yar’adua, and Jonathan combined. Currently, only 8% of Nigeria's GDP is generated from taxpayers, a stark contrast to 36% in countries like the UK, US, Canada, and Germany. With a population exceeding 220 million, Nigeria is grappling with limited oil revenue, and an entitlement mentality is seen as a barrier to fiscal responsibility. Experts suggest that the government must shift its focus towards enhancing tax compliance and integrating the informal economy into the formal sector to improve fiscal health [8b00890e].
The revelation of the unaccounted foreign reserves comes at a time when Nigerians have spent a significant amount of foreign exchange on Personal Travel Allowances (PTA), healthcare, and education. According to the Governor of the CBN, Olayemi Cardoso, Nigerians spent a total of $58.7 billion on PTA and $40 billion on healthcare between 2010 and 2020. The growing number of Nigerian students studying abroad and the expenses incurred for foreign education and medical treatment have contributed to this significant expenditure. The depreciation of the Naira against the Dollar is also attributed to the increase in the number of Nigerian students studying abroad, medical tourism, and food imports. The decline in oil exports, which constitute over 90% of Nigeria's foreign exchange earnings, has further contributed to the decrease in the supply of US Dollars. The CBN is implementing reforms to address these challenges and improve the economy. Recent reports from international rating agencies and multilateral banks reflect a positive trajectory for Nigeria's economy, with the federal government anticipating a 3.76% real GDP growth in 2024. Inflationary pressures are expected to decline due to the CBN's inflation-targeting policy. The CBN is implementing strategies to enhance liquidity in the FX markets, and the government aims to bring more people into the tax net. However, large-scale reform measures are needed to address Nigeria's economic challenges, and collaboration among the CBN, FIRS, Ministry of Planning, and Ministry of Finance is crucial in addressing these challenges. The CBN governor seeks collaboration with banks and stakeholders to drive financial inclusion and has approved a new service charter. The Naira is considered undervalued, and fiscal collaboration and market stability are sought [d7697a09] [a4d99b1d] [5a5dcf3a].
The International Monetary Fund (IMF) has projected that Nigeria's foreign reserves will drop to $24 billion in 2024 due to low crude oil exports, profit repatriation, and lack of new Eurobond issuances. The decrease in hydrocarbon exports is attributed to theft and a lack of investment in upstream infrastructure. Foreign Direct Investment (FDI) remains low, while portfolio outflows have increased. The IMF's projections indicate potential challenges for Nigeria's economy. As of February 8, 2024, Nigeria's foreign reserves were at $33.12 billion. The IMF anticipates a decline in reserves despite a current account surplus, with a hopeful recovery to $38 billion by 2028. Nigeria is facing challenges with foreign exchange illiquidity, impacting its ability to clear its forex backlog and attracting foreign investment [395b8a56].