Mounting concern about a huge outflow of money from Nigeria’s “rainy day” oil fund has prompted some big investors to shun the country’s debut international bond issue on Friday.
Nigerian officials said an investor roadshow to market the $500m bond issue had generated considerable appetite among international investors.
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However, several major funds have told the Financial Times they are not interested in the deal because of Nigeria’s deteriorating fiscal situation and worries about how President Goodluck Jonathan’s government has run the excess crude account, designed to store up windfall oil revenues.
The account was set up under former President Olusegun Obasanjo, who stood down following 2007 elections. At that time there was $20bn in the fund. But as recently as last September there was less than $400m, according to public disclosures, which showed billions flowing out of the account last year.
To deflect questions about the constitutionality of the fund, the federal government struck a deal in 2007 to divide oil windfalls between national, state and local governments.
Since then, more than $30bn of revenues – calculated on the difference between the budgeted and market price of oil – has flowed out of the account, according to donor and government officials. The funds went partly in regular payments to state governors over which there was little subsequent oversight, and partly in federal spending on infrastructure.
“The fact they have run down the excess crude account is very worrying,“ said Antoon de Kler at Investec based in Cape Town, adding that “it is unclear where the money is going”.
“Why does a country that relies for 90 per cent of its income on oil, which has seen a big rise in price, need to run down its foreign exchange reserves? For these reasons we are not buying the bond.”
Other big international investment funds, which invest in Africa, also told the FT they would not participate in the sale. Some Nigerian politicians and officials have questioned why foreign reserves have not risen, and the excess crude account did not grow during the past year of rising oil prices.
Revenues from oil sales go direct to the Nigerian National Petroleum Corporation, the state oil company, before reaching the central bank.
Technocrats in Mr Jonathan’s administration say Nigeria would have earned nearly $16bn in windfall revenues in 2010, based on production of 750m barrels of oil with average oil prices $21 higher than the $60 budgeted.
Not all of that would have returned to government because of its joint ventures with international oil companies. Olusegun Aganga, finance minister, told the FT that Nigeria spent heavily on oil production last year and on clearing arrears to oil companies.on top of these costs. The government had also partly financed the budget deficit out of the excess crude account to reduce domestic borrowing, he said