This is from a friend, direct from a leading investment banking firm in New York.
Nigerian generates about 60% of its revenue from Oil and 90% of foreign exchange. Nigeria is generating massive losses for every barrel it produces. Nigeria spends 4X as much money subsidizing fuel as it spends on schools, healthcare, etc. Nigeria’s breakeven is at $133 per barrel! Cost to produce is about $17 per barrel. Millions of barrels are sitting around unsold. Nigeria is losing $35M a day in unsold inventory. Country debt stands at $84B, and 2/3 of its revenue goes towards servicing it, and China holds the majority of it through bilateral agreements.
Nigeria keeps borrowing to pay its obligation. Leading bankers are betting on Nigeria going bankrupt and following the likes of Venezuela.
Investors are turning Nigeria down as the country works to raise capital.
With Debt piling up, and massive devaluation coming, President Buhari needs Plan B.
This is not really new. As I told our members in the Tekedia Mini-MBA, I ran this playbook thus:
- In early February with the reserves going, I moved all our company naira cash into USD dorm account in Nigeria
- We went to debtors with 10% reduction if they could pay within a week. We received and changed to USD immediately.
- We also asked clients working on new contracts with us to sign to pay on USD for 15% discount on the then-naira exchange rate. I was certain that Naira would crash.
Our leaders need to be straight to Nigerians, we are on the most challenging economic paralysis since the founding of the nation. This time is different. NIGERIA needs to TAKE ACTION NOW.