Buharinomism (President Buhari’s style of economic management) is inconsistent with logic of economic science. It is basically predicated on excessive borrowing and increase in taxes to generate money, which is neither being invested to attract return nor judiciously used to improve the living conditions of the toiling Nigerians. When Nigerians expressed dissatisfaction with the way the economy was being managed and called for the constitution of economic team, the government bowed to their pressure. Sometime last year, the Presidential Economic Advisory Council was formed. But it is now obvious that the Council was constituted just to garner legitimacy for the government’s economic policies. Put in another way, the formation of the Council has not significantly changed anything!
Nigerian government brags of recovering looted funds, blocking leakages and saving money therefrom. It has also imposed new tax regimes and hiked the existing ones. As if these are not enough, the government has engaged in persistent borrowing and is also massively depleting the Excess Crude Account (ECA). Worse still, despite all these, investments in social services, such as education, health have declined and poverty, unemployment and wealth inequality have worsened.
On blocking leakages, in spite of the government’s much posturing, the Nigeria Extractive Industry Transparency Initiative’s (NEITI) audit report indicates that $21 billion was not remitted to the federation account from 2015 to 2018 by the Nigerian National Petroleum Cooperation (NNPC). According to the Daily Trust’s editorial of December 21, 2018, about N20 trillion generated from stamp duty was also not remitted to the government’s coffers despite the operation of the Treasury Single Account (TSA).
The Auditor General’s report also revealed that the operators of the Integrated Payroll and Personnel Information System – a platform created to check leakages in the personnel costs of ministries, departments and agencies – do fraudulently manipulate it. Above all, the Office of the Accountant General of the Federation (OAGF) could not still provide records on the operation of the IPPIS three years after being queried for its failure to do so. It is, therefore, apparent that the strategies deployed to block leakages are a ruse.
It is no longer news that Nigeria’s debt profile is worrisomely accumulating and that the country is increasingly being entangled in another round of debt trap, having “existed” one less than two decades ago. There have been growing concerns over the long-term effects of this on the economy. However, to justify the excessive borrowing, the government has repeatedly assured us that our debt profile is not bad enough to warrant the public outrage. The GDP-debt ratio, they insist, is within the acceptable limits. Consequently, the government maintains that there is no cause for alarm!
In my opinion, as someone with elementary knowledge of economics, if increase in debt surpasses increase in revenue, and servicing the debt adversely affects government’s ability to carry out other fundamental obligations, it does not make sense to continue borrowing even if the GDP-debt ratio is below five percent. For instance, what was allocated to debt servicing (N2.5 trillion) in the 2020 budget is about 10 times more than what went to education (N48 billion), health (46 billion), agriculture (N83 billion) and water resources (N82 billion) put together! Plus, over 50% of our revenue goes to debt servicing. I am not completely averse to taking loans and I am not unaware that no country is impervious to this. However, its quantum, what it is used for, ability to repay always matter.
The ECA is being depleted. According to a newspaper report, it shrank from $324.968 million to $71. 814 in just one month. This represents 79% decline! It should be remembered that in 2018, $1.68bn was withdrawn from the ECA in one month, even when the crude oil was selling above the benchmark. My fear is that the current government will bequeath to its successor huge debts and nearly an empty buffer to absorb future economic shocks.
The outbreak and global spread of the dreaded coronavirus has caused the price of crude oil to fall below our benchmark. If it keeps falling or remains as it now is, not a single dime will be added to the ECA. The failure of the Organization of Petroleum Exporting Countries (OPEC) to convince Russia on production cut during their meeting held in Vienna is the last straw. With this serious setback, oil price may crash further! It seems that the only immediately available option to the government is to use the remaining money in the ECA and obtain more loans to carry out its financial obligations. If the government could devour the ECA when it had no strong justification to do so (as in the 2018 case), why shouldn’t it do so now that it has? I invite the reader to reflect on the following questions: If the ECA could be depleted from $324.968 million to $71.814 in just a month, how long would it take the government to finish the remaining money? If we exhaust the money in the ECA, what is the next option? Should we borrow more? Would the toiling Nigerians still be asked to make more sacrifice? Or would our leaders bear the brunt by forgoing their profligate lifestyle?
The option being mulled by the Nigerian government (depleting ECA and more borrowing) will only deepen our crisis in the long run. It is high time we cut the unsustainable cost of governance and genuinely block leakages. We should also consider negotiating the terms/conditions of our foreign loans or, to be more specific, we should seek debt relief from our creditors. This may take the form of debt servicing holiday (suspending the repayment of, and further accumulation of interest on, the loans for say three years). We should learn to fill our buffers for a rainy day, so that short term instability may not cause a terrible financial shock. I pray that the price of crude oil will improve before we plunge into another round of economic crisis.
Aminu Ali wrote from the Department of Sociology, Bayero University, Kano. He can be reached via email: aminuali@yahoo.com.
