Covid-19 pandemic: Fact-checking former Nigeria VP Abubakar’s claims about the economy

Comments 2

Claims

Six claims about the Nigerian economy.

Source: Former Nigerian vice president Atiku Abubakar (8 April 2020)

checked

Verdict

Three correct or mostly correct, two incorrect, one unproven.

  • Writing in a national newspaper, Abubakar made a number of claims about the Nigerian economy, comparing the current administration’s actions to Olusegun Obasanjo’s and his own.
  • The former VP was largely correct about the worrying amount Nigeria spends on repaying foreign debt and that the United Nations has predicted lower growth for Africa because of the coronavirus pandemic. 
  • While he was also right about the price of oil when he took office, compared to today, he bungled facts about the repayment of debts under his watch, and economists warn it is difficult to directly compare government expenditure today to that of the 1990s.


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.

Claim

Before the novel coronavirus pandemic hit the globe, Nigeria spent 42% of its earnings on debt servicing.

Verdict

mostly-correct

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.

Claim

The United Nations Economic Commission for Africa is projecting that Africa’s growth will drop to 1.8%, and perhaps lower.

Verdict

correct

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. 

Claim

The price of oil was lower when president Obasanjo and Abubakar assumed office on 29 May 1999 than it is today …

Verdict

mostly-correct

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. 

Claim

… yet they paid off Nigeria’s entire foreign debt.

Verdict

incorrect

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.

Claim

Nigeria has devoted N37 billion to renovating the national assembly complex, which was built from the scratch for less than 20% of that amount.

Verdict

unproven

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.  

Claim

N13 billion was devoted to the State House clinic in the last five years.

Verdict

incorrect

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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Comment on this report

Comments 2
  1. By Iloghalu D

    I disagree with Africa Check on the point of exchange rate comparison. I live in Nigeria and I know why they exchange rate became so bad.

    The government policy by the current president was what destroyed the Nigerian Economy.

    1. The government just enforces some important policies without thinking of how it would affect the economy. For instance, without thinking they blocked all Naira MasterCards for foriegn transaction without thinking of businesses that needs to pay foreign vendors outside the country, (eg Co location hosting and domain registration, etc). You might say that it will help us start our own but the enabling environment for the private sector to kick off these thing was never developed. For instance, data is very expensive in Nigeria. I pay a US company $6 for hosting plus 3TB monthly data. This is not possible in Nigeria, so it will be difficult to compete globally and that business will not progress. In addition to this we have a big issue of corruption in the power industry which will make businesses fail. That action will also have negative effect on other businesses as well.
    The government is also not showing good example. They force the poor to use made in Nigeria products while Mr President uses made in UK doctors. Who do they think they are fooling.
    Because the current government do not have great thinkers, they have no clue on how to drive the nation. The problem of Nigeria is easy to solve but the people with genuine solution to it will never be given the chance.

    2. The brute force approach of Mr. President destroyed the economy. Rather than study the docs handed over to him they started experimenting with fuel and it resulted in the disaster of great scarcity. That initial scarcity the country experienced brought down the economy and it never came back to normal till today

    3. The Nigerian president rather than tackle the economy was playing the games of blaming previous administrations for its economic woes

    With this few points of mine, you have to agree that the current Nigerian president is responsible for the current state of Nigerian Economy.

    It is important to note that demand and supply you talked about did not matter because this administration enjoyed high crude oil price but did not translate into the economy.

    The economic melt down did not start with the current president. There was economic meltdown during the era of Goodluck Ebele Jonathan but the economy was stable. Nigeria economic meltdown started immediately after the current president took over power.

    You do not rule a country with brute force but you rule a country with your intellect to get good result by creating policies that will make the private sector do almost everything for you.

    The United State was not just built by its people but its policy gave the private sector hope and brought in a lot of intellectuals into the country to make it what it is today. If Mr. President will allow the private sector, he will only need to do very little work.

    Nigerians are extremely hardworking people and are capable to change Africa if the correct president comes into power. I am not a politician but I know how to solve most of the problem in Nigeria.

    The bitter truth is that there are some powerful people that are benefiting from the suffering of the masses and they will not allow good governance since it will destroy the source of their money

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  2. By Mobolaji Windapo

    Just more silly free market nonsense. If Buhari had not put currency controls in place the Naira would have been destroyed and you would be less “competitive”. The people in Nigerian need to use what wealth we have to build up production, Nigeria is to weak (poor infrastructure and uneducated populace) to “compete” globally. The problem of Nigeria is NOT easy and it will take a multi pronged approach and the reality of brute force is one of them. All these “intelligent” ideas seam to fall apart when it comes to dealing with a place like Nigeria where information is so poor (especially when you consider that Benin is intentionally trying to smuggle goods into the country and undermining the efforts to restructure the economy). The USA got its wealth by exploiting black slave labour and the slave trade. China got it’s wealth by FIRST building infrastructure, educating it’s people and ensuring they have a nuitritional base. Then the private companies came.

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