Thread by @FinPlanKaluAja1

One measure of any economy is the GDP. The GDP is simply the value of output the nation produces.

A bakery in Agege, makes 500 loaves of bread a day, and sell them for N10. The GDP of that bakery in Agege is N5,000 i.e. 500 loaves of bread multiplied by N10.

Now assume the bakery makes 600 loaves of bread at same price, then the GDP growth rate is increasing from 500 to 600 or 20%.what if the volume of bread falls from 500 to 400? Same thing, GDP growth has reduced by 20%.

When the bread sales reduces, it’s a slowdown, if the bread sales is negative for 6 months, it’s a Recession, if that Recession lasts for a year, it’s becomes a Depression. In Nigeria, the GDP growth has slowed down,

Why is GDP slowing? Simple, the Nigerian economy is a derivative of crude oil, if crude oil price is up, Nigeria economy is up, Crude oil price is down, and Nigeria economy is down. Today crude oil is below $70, so this has slowed the economy.

In actual terms the Federal Government revenues are reduced, its ability to spend is limited, but why is it limited?

The FGN get the bulk of its foreign exchange revenues in US Dollars USD from the sale of crude oil. The CBN converts that USD to Naira. So if crude oil is $100, the federation get more Naira, same way, if oil price falls $50,the FGN get less Naira.

The fall in crude oil prices has caused macroeconomic instability…GDP growth has slowed, inflation up a tiny bit. Google "stagflation"

The Vice President rightly said “you spend your way of a recession, you don’t cut back”…true, but you spend on simulative job creating activities i.e. capital projects roads, rails etc.
So Nigeria has to spend, agreed.

if Nigeria want to spend on building a 10 lane expressway, either

1. Sell more oil
2. borrow

Let’s explore option 1. Sell more oil, the problem is oil prices have fallen and the US has slowed down oil imports.

Option 2, wborrow. Nigerians have an aversion to their government borrowing which is understandable. However there is nothing wrong with responsible borrowing to build projects that will generate cash and pay back the loans.

Still borrowing when oil prices are low carries a repayment risk, should oil crash.

Still borrowing which oil process are falling carries a repayment risk, should oil crash.

Which then bring me to a third option, selling majority stakes in the NNPC JVs

Nigeria wanted to create a $25b fund for infrastructure to fight the recession, we should fund this not by borrow but by offloading the NNPC JV to investors, Nigeria thus becomes minority shareholders and with powers to tax

In 2009, the CNOOC, of China's sought to acquire 6bn barrels of oil, equivalent to one in every six barrels of the proven reserves in Nigeria.

The Chinese wrote to President YarAdua offering then as reported between $30bn to $50bn cash for the 6bn barrels of crude oil. In essence China wanted to get strategic oil reserves, and was paying cash today for it.

Events moved ahead and that offer was not taken, but I suggest President Buhari reaches out to China again. Sell to China 51% of NNPC JVs, take the cash, and invest in Infrastructure.

Nigeria own 60% of the JV agreement with the IOC, (55% of Shell JVs) out of that 60%, let Nigeria sell to China/ USA 30%, get cash in advance.

In essence let Nigeria stop being majority shareholders in the JVs. It’s important not just to sell for cash, but to sell for cash and technical expertise. Technical partners of the JV can also be technical partners to build and repair the existing refineries.

Why should we sell NNPC JVs, because NNPC fiscally is a liability to Nigeria, not an asset. For Example, According to the NNPC, it was supposed to make a profit of N311b as at August 2015, however the NNPC is reported a loss of N378b.

All NNPC refineries are performing below par..Take the cash from the JV sale, invest in the $25b infrastructure fund, and build roads, rails and ports….

No debt added, technical partners inserted, JV output increased.