Dollars and Dilemmas: Tinubu’s Fiscal Chess

'Tosin Adeoti
5 min readNov 3, 2023

One of the students in my career coaching class shared his challenging journey through secondary school. His father, despite holding a lowly office position, insisted on sending his only child to one of the state’s best schools. Each term, roughly every three months, the father sought a substantial pay-ahead loan from his boss, amounting to more than half of his monthly salary. This continued for the entire six years of secondary education, until the embrace of a low-tuition fee university relieved his father’s finances. It seemed peculiar that the company allowed this, but given his long service, it appeared to be a form of loyalty being rewarded. Unfortunately, while his colleagues could afford career advancements by changing jobs and, naturally, better pay, his father remained stuck in the same job for many years, with little chance of promotion. Such was the price he paid for ensuring his son received a solid foundation.

In 1989, Nigeria LNG Limited (NLNG) was established, operating as a liquefied natural gas-producing company and having a liquefied natural gas plant on Bonny Island, Nigeria. Interest in LNG emerged in the 1960s when the concept of monetizing flared gas was introduced. Liquefied Petroleum Gas (LPG), commonly known as cooking gas, is a byproduct of refining petroleum (crude oil) or extracting it from natural gas streams.

Over the past 15 years, NLNG has reportedly supplied over 2.4 million tons of liquefied petroleum gas (LPG) to our homes. A ton is about 910 kg. The 25 liters of vegetable oil in your house are roughly equivalent to 25 kg. This gives you an idea of how important NLNG is to our homes. NLNG is considered one of the most important economic projects in Nigeria.

NLNG is owned by several entities, with Nigeria having 49%, while other entities like Shell and TotalEnegies own the rest. It is one of the most finely run organizations in this country. NLNG has also paid dividends of about $18 billion to the Federal Government of Nigeria over the years. Philip Mshelbila, the current MD, was brought from the Atlantic LNG Company of Trinidad & Tobago, where he was CEO. NLNG is a regular case study in international business schools as a fine example of public-private partnerships.

You may be asking how this is related to Forex. Well, the Tinubu administration has decided to securitize about $7 billion of the country’s dividends for five years from the Nigerian Liquefied Natural Gas (NLNG). This is just a complex way of saying the FG wants to do what the dad of my mentee did at his workplace.

It means that the dividend payments, which will accrue to Nigeria from its 49% equity in NLNG over five years, would be sourced and handed to the country by a consortium of banks led by Standard Chartered. The bank expects to be paid a fee for the transaction, and the government will also cover the interest payments for the entire period.

It’s a strange request because, according to the Budget Office, the FG is only due $2.2 Billion over the next 4 years from its investment in the NLNG. How did they arrive at $7 billion? In essence, while the government is telling the public that its securitization is for 5 years, unless a miracle happens in gas production, we are looking at a situation where a government is borrowing future revenue for up to 12 years. And that is without accounting for the interest on this loan.

Why is the government doing this, you ask? Well, you saw how the naira to the dollar jumped from N800 to N1300 within a month; it’s because the country does not have enough dollars to meet the demand. And this is no fault of anyone but the government itself due to its terrible fiscal and monetary policies over the years. If you do not know what ‘fiscal’ and ‘monetary’ mean, they are fancy ways of talking about how the country is being run. Now, to ensure that Nigeria has enough dollars for its duties like exchanging the naira to dollar for manufacturers who want to buy foreign equipment or raw materials, or exchanging naira to dollars for those who want to study abroad, the government is trying to find ways of sourcing dollars by all means.

What the government plans to do with NLNG is being done with NNPC, the country’s oil company. NNPC intends to borrow $3 Billion from the African Export-Import Bank (Afreximbank), implying that repayment will be from future crude oil earnings. According to a Punch report in September last year, oil exports account for 80% total national revenue. We are taking future revenue and deciding to spend them in the present.

Ideally, what other countries do is attract foreign investors who come into the country with their dollars to invest in the local economy (FDI), or even just invest in our stock market (FPI). But that has not been happening for a long time due to the lack of confidence in the government’s ability to provide an enabling environment for businesses (it was the past CBN governor who challenged a businessman to a public fight…(I am not kidding)… over publishing exchange rates).

Just last week, Morgan Stanley Capital International (MSCI) said it will remove several major Nigerian securities from the MSCI Frontier Markets Indexes, including the top nine according to the MSCI’s weights. They include Dangote Cement PLC, MTN Nigeria Communications PLC, and Guaranty Trust Holding.

Forget the big words; what it means for foreign investors is that the Nigerian stock market is a risky place to put their money due to an increased risk of repatriating funds from the Nigerian market. Of course, this will likely erode investor confidence and further dampen foreign investor sentiments towards the country. It was only in September that another organization, FTSE Russell, reclassified Nigeria’s equity country status from frontier markets to unclassified.

Again, don’t worry about the big words. These are signals to foreign investors to look twice before putting their funds into the Nigerian market.

What the government plans to do in the coming weeks is to take the $7 billion loan based on what they plan to get from NLNG, take about $7 billion based on what they plan to get from NNPC, take a $3 billion loan from Afreximbank, and then another $1.5 billion loan from the World Bank.

There is more. Just 2 days ago, President Bola Tinubu urged the National Assembly to approve a request to borrow one $7.8 billion and another €100 million loan.

If you still do not understand, all this means that we have chopped a lot of our future income and then taken some more loans, which would be difficult to pay back because the future income that would have been used to pay the loans would no longer be available.

If you hear an individual do this, what do you think of him? If you see a country do this, what would be your reaction?

Of course, the individual will have a lot of money now, but what happens months down the line, especially if what he is using the loans for, after converting to naira, is to build mansions for himself and his vice, buy cars for his wife, and throw some money for a fine yacht (did I spell that right)?

There will be respite in the forex market for now, but in the next few months, when it rains it pours.