The evidence that Nigeria is broke lies somewhere in the admission by the Minister of Finance, Budget and National Planning, Zainab Ahmed: “What (Nigeria has) is a revenue problem. Our revenue (projection was) by (mid-2019 only) 58 per cent (realised).” Government’s piling up debts is just stating the obvious.
Nigeria’s debt is now $81.27bn, or N24.947tn. Between 2002 and 2019, EXIM Bank of China alone loaned $6.5bn, or N1.9tn, to Nigeria, for rail, road, airport, gas power plants, security and ICT projects. Nigeria is about to take another $3bn, or N918tn, loan from the World Bank.
The dip in Nigeria’s foreign reserves, from $41.70bn at the beginning of October, to $40.50bn, at the end, is a result of outflows exceeding inflows. The Excess Crude Account that was $20bn by January 2009, took an inglorious dip to a measly $324m by October 2019 ending.
Nigeria, with an expected Gross Domestic Product of $500bn by 2019 ending, and sometimes disputed 200 million population, has a disgraceful per capita income of $2,208. Nigerians, from the richest country in Africa, are amongst the poorest in Africa.
The usually honest National Bureau of Statistics has taken the trouble to inform the world that contrary to the 70 million hitherto announced by ActionAid, it is actually 90 million Nigerians that are living in poverty.
Economists define poverty as the absence of comfort, and inadequate supply of necessities of life. It is sometimes defined as the point where deprivation makes it impossible to maintain bodily and physical efficiency. In numerate terms, it has been variously put at living below $1.50, $2, or $2.50, per day.
Now, the reason for having poor citizens in Nigeria, a relatively rich country, is that state actors continuously design flawed macroeconomic, fiscal and monetary policies that deliver only an inefficient economy.
That explains why government would choose to import petroleum products, rather than run the local refineries effectively, or speed up private sector participation in the refinery sub-sector of the downstream oil sector.
It explains the leakages in policy execution regarding Nigeria’s food production and security architecture. Also, government-owned enterprises, which are required by the Fiscal Responsibility Act to remit 80 per cent of their operational income to the Federation Account, do so in breach.
This is accompanied by the nonsense envelope budgeting process, which arbitrarily allocates funds to expense heads based on the history of what was allocated in the previous budget period. The envelope budget is the opposite of zero-based budgeting procedure which requires verifiable rationale for budget allocations.
The macroeconomic policies, for example, fail to deliver the required physical infrastructure, but channel planning funds to support Big Government, which ministers to the needs of state actors only.
If you interrogate Nigeria’s 2020 Budget Bill, you will discover that while N2.45tn, or 24. 20 per cent is devoted to debt servicing, and N2.46tn, or 23.8 per cent, is allocated to capital projects, a whopping N5.42tn, or 52. 46 per cent, is given to public servants of all categories, for salaries, travel allowances, training, and sundry other overheads. Incidentally, N8.18tn is the projected revenue for 2020.
Monetary policies, which should manage inflation, bank interest rates, and currency exchange rates, have become mere administrative chores. Today’s Central Bank of Nigeria has become another branch of government bureaucracy whose pastime is spewing governnentese.
The ill-thought-out Second-Tier Foreign Exchange Market that accompanied the pernicious Structural Adjustment Programme, inspired by the “witch” International Monetary Fund, crippled the naira from 70 kobo to the American dollar to a gargantuan N360! Those who anointed themselves SAP Apostles now know that the Bretten Woods institutions merely wanted to make the Nigerian economy prostrate.
Nowadays, you need tonnes of naira to obtain the dollars that you need to purchase consumer goods that the West subtly imposed on Nigeria. As long as you need so much naira to import essential consumer goods, it will be real difficult to get out of the bind.
If you don’t quite get this, you can ask The PUNCH columnist, Henry Boyo, who has shouted himself almost hoarse concerning the suicidal, wilful, and voluntary downward slide that the monetarist policy managers imposed on Nigeria.
And of course, the fiscal policies, which are essentially taxation policies, are directed almost solely at raising funds for government. That is why Hameed Ali, Comptroller-General of the Nigeria Customs Service, justifies closure of borders with increase in customs duty.
Fiscal policies hardly seek to regulate the effectiveness and efficiency of macroeconomic policies: they serve only the interest and purpose of lazy state actors who feed fat on the system. The planned increase of the Value Added Tax is one such act.
As you can guess, mountains of inefficient and ineffective economic policies will result in a poor economy, which appears to be the lot of Nigeria. And no one should be too surprised that the state and the citizens are broke in the midst of plenty. To borrow a phrase from the Reggae icon, Robert Nesta Marley, “In the abundance of water the bull is thirsty.”
Nigeria is broke only because there is no cash flow to support the huge and inordinate cost of governance: Colonial economic grace notes suggested that governments should provide employment for citizens.
This is probably taking the Keynesian thinking, that public service (and public works) can be used to revive an economy, too far. The idea of paying some workmen to dig a whole, and paying another set of workers to refill it, explains the wobbly government employment policy that led to the bloated bureaucracy.
Following is what seems to be an approximation of why John Maynard Keynes advocates increase in public spending: If you do not want a capitalistic economy to become stagnant, and you want to assure full employment, government must stimulate the economy by creating investments or increasing spending.
Unfortunately, Nigeria’s policymakers emphasise the aspect of high employment of bureaucrats over increase in capital assets that can raise the Gross Domestic Product, and thus increase public revenue through taxation.
The situation is compounded by the reality that most of the rentier revenue received from oil and gas exploration, which is carried out by foreign International Oil Companies, by the way, is applied to the importation of consumer goods.
If you spend your income almost solely on administrative overheads and consumer goods, with pretty little on acquisition of assets, you are going to go broke, as soon as the rate of recharge of your revenue begins to attenuate.
Assets, in the book of accountants, are holdings that assure the owner of future incomes. Nigeria’s inadequate, inefficient, and ineffective infrastructure or capital assets cannot guarantee increase in revenue.
Put in another way, the loss of productive power, a consequence of the dysfunctional infrastructure, has greatly reduced the rank of the middle class, who should have been a source of personal income tax revenue for government.
This should have been an addition to the middle class providing disposable income to be converted into investments, where the Federal Government can realise company tax. The obverse of an observation by Keynes is that when income decreases, the percentage spent on basic goods becomes proportionately higher.
If this continues, Nigeria may remain forever broke! That’s a bad idea.