TheCable

Just as Mr Babatunde Fashola wrote his take away on President Muhammadu Buhari’s numerous foreign trips, Garba Shehu, senior special assistant to Buhari, wrote his on the President’s trips to Saudi Arabia and Qatar. In Garba Shehu’s piece on Buhari’s trip, he enumerated many benefits of the President’s visit to the Gulf nations. Well, if Buhari was actually promised those goodies, I doubt if those promises would be redeemed.

The senior special assistant told us that Buhari obtained commitments from the Gulf nations to invest massively in Nigeria. The presidential spokesman even went on to tell us that the President was planning on setting up a committee to identify priorities projects, which would be sent to the Gulf nations for funding.

Part of the reason these goodies were announced was to justify the President’s trip to Qatar and Saudi Arabia, and probably, by extension, other foreign trips. With the President, being the chief spokesman of Nigeria, no sane person should ask him not to travel. The question should be whether some of these trips are justified? Let’s see if the Gulf trip is.

Now, let’s examine this trip. Saudi Arabia is at the verge of concluding agreements for a loan of $10 billion from international banks. This would be the first time the Kingdom of Saudi Arabia would be asking for international assistance in the past 25 years. In fact, Saudi Arabia initial wanted to go for $8 billion loan, but pressure from home caused the country’s finance minister to increase the loan to $10 billion.

To show how bad it is for the Kingdom, their budget deficit soared to $98 billion last year. The present oil price and massive infrastructural projects in the Kingdom is placing huge demands on its revenue and savings – their Sovereign Wealth Fund. And here we are, as a nation, embarking on a trip, asking them to invest in Nigeria. Maybe we might be able to convince them that investments in Nigeria are very profitable and should be given priority over the ones in their country.

Saudi Arabia is not alone. Early this year, Qatar secured a $5.5 billion loan, while Oman got a $ 1 billion loan from overseas. These are countries that didn’t know what to do with money 5 years ago, at the peak of the oil boom. They were busy buying choice properties in London and America. In going to Qatar, Nigeria was probably assuming the cash was still flowing in Qatar.

Did I hear you say that Buhari was not only asking the governments of these Gulf States to invest, that he was also asking businessmen from the region. Really? The proposed loan from international lenders will help the Saudis reduce pressure on their local banks. The government had been relying on local debts. These had squeezed capital from the system. I am sure you might be wondering where businesses, form Saudi Arabia, will get the capital to pump into Nigeria.

The Saudis are smart. They know that oil prices will remain low for a long time. Consequently, they are diversifying. The implication of this is that their debt profile will likely go up in the coming years. The bond issuance by the Kingdom generated great interest from Asian banks and from other big lenders. From my analysis, they are looking at something around the neighborhood of 2.8 % interest – unconfirmed reports have it that they are getting the loans at an interest of about 120 basis points over the US dollar Libor. There would be inflow of cash into Saudi Arabia in the coming months.

Now, the big question is this: will a country in a haste to diversify from oil be willing to use its scares resources to help another country diversify from oil.

Businesses in Saudi Arabia also need cash. The oil giant, Saudi Aramco, is planning on organizing a floatation to raise money.

There were other issues the President discussed in Saudi Arabia. One of which was on how to stabilize oil price. One wonders the reason for this discussion. The shale gas in America has changed the politics of oil – thus OPEC might not have the kind of powers it had. Besides, the Saudis knew that if they froze production, they might lose market share to Iran and other producers. Remember America now exports oil.  Everyone in the market knew Iran would never agree to freezing production. So, what happened last week wasn’t really a surprise.

I won’t want to join the crowd of people who believe that Buhari shouldn’t travel. But, I don’t think the cost- benefit analysis of some his trips are positive.

It is good to rub minds with other leaders to promote your country, but some visits might not yield any economic benefits because the host countries are also looking for what Nigeria is looking for.

If we keep our house in order, capital will flow. There are some investment bankers in London looking for where to push their money to. They won’t bring their money to Nigeria because you asked them to, they will bring it when their calculations tell them to do so.