Nigeria's Debt Balloons as Price of Oil Falls
LESS than two weeks before Nigeria's new military regime is due to present its 1994 budget, Gen. Sani Abacha still has two opposing camps in his government.
While most of the new head of state's attention has been on securing his hold on power, Nigeria faces its most acute balance of payments crisis since the early 1980s. The plunge in the oil price below $14 a barrel is pushing the budget deficit in 1993 to around $3.7 billion. External debt exceeds 100 percent of gross domestic product (GDP).
Economic mismanagement has brought real GDP growth to 2 percent, well below population growth. Inflation stands near 100 percent. The budget deficit is two-thirds of government revenue. Since its 1991 resched- uling, Nigeria has failed to service the more than $16 billion owed to bilateral creditors. Arrears have reached $6 billion.
THREE changes of government in 12 months have damaged external confidence in Nigeria. Arrears to foreign oil-production partners of the state-owned Nigerian National Petroleum Corporation (NNPC) have passed the $500 million limit beyond which the international oil companies are entitled to recover the funds in allocations of crude oil. NNPC's failure to maintain refineries has forced up fuel imports. The company has used nearly $2 billion of petroleum tax revenue to cover losses from selling domestic fuel at heavily subsidized prices.
Every day that the oil price is at $14 a barrel, Nigeria earns $6.3 million less than it had budgeted. The 1993 oil revenue will fall at least $800 million short of the $6.3 billion forecast.
Supporters of free-market policies have had an ally since November in the new finance minister, K. I. Kalu. His plan involves a realistic exchange rate for the naira, low inflation, and balanced budgets through cuts in spending, fuel price increases, and tax reform.
But the Cabinet contains opponents who favor the status quo. Distortions in the foreign exchange and domestic fuel markets deprive the state of about $60 million at the weekly foreign currency auctions. Much of the 300,000 barrels a day of refined products is lost to smugglers.
Bankers and industrialists here warn that if Mr. Kalu does not win the economic policy argument, Nigeria will continue along the path that has made OPEC's fifth-largest exporter one of the world's debtor nations.