The Central Bank of Nigeria (CBN) last week released the personal statements of the 11 members who attended its monetary policy committee (MPC) meeting on November 25 and 26, 2019. The statement of Obadan Idia a member of the committee sent shock waves down the spines of impoverished Nigerians. Idia in his personal statement observed that the federal government chalked up a deficit of N3.4 trillion in its operations in the first three quarters of 2019. He noted that government issued bonds for N670 billion of the deficit while the balance of N2.79 trillion might have been financed through “inflationary sources”.
The federal government deficit for 2019 budget was estimated at N1.9 trillion. At the pace government is chalking up debts from its operations, fiscal deficit for 2019 would be in excess of N4 trillion. That is perilously close to 60 per cent of the revenue estimate for 2019. It is a fiscal calamity.
Idia warned that government’s move to beef up revenue through 50 per cent increase in value added tax (VAT) was inadequate to cope with its ballooning expenditures.
He called on government to restructure its recurrent expenditures to fit its dwindling income. Idia’s warning though seemingly belated is the only way out of the debt trap government has set for itself through reckless spending spree.
Nigeria is a rich country of poor people. About 80 per cent of the people wallow in abject poverty while government officials relish in lewd ostentation.
Nigeria runs an economy of $375 billion in gross domestic product (GDP) with a cabinet of 43 members. Donald Trump, America’s president manages an economy of $19.5 trillion with a cabinet of 15 members. Nigeria’s ministers behave like the sultan of Brunei. Each of them hit the street with a convoy of not less than seven cars. Each minister rides in two cars at any given time. He is physically present in one while he is in the back-up car in spirit. The redundant car follows him unproductively until its life span is spent.
Nigerian lawmakers are among the best paid in the world. Their N13 million monthly overhead cost borders on extortion.
Nigeria is broke, but the federal government operates a presidential fleet with more aircraft than the country’s largest commercial airline.
The ostentatious life style of government officials contrasts sharply with Nigeria’s decaying infrastructure. The east-west road which links the south-west with the oil-rich Niger Delta has been under construction for 15 years now. No one knows when it would be completed.
Last week AIT showed the suffering of commuters on the dilapidated road. The conductor of one of the trucks stranded in a traffic bottleneck at one of the failed sections of the road screamed into AIT camera: “Road no dey for Nigeria again ooh” (there are no roads in Nigeria again). The frustrated conductor was speaking the minds of millions of his compatriots. Nigerian roads are deplorable. The Federal Roads Maintenance Agency (FERMA) is deep in financial asphyxiation. Sometime last month it was alleged in the National Assembly that the Petroleum Products Pricing Regulatory Agency (PPPRA), a redundant parastatal that supervised the swindling of the federal government to the tune of N2.3 trillion in petrol subsidy in 2011, withheld the N800 billion allocated to FERMA for road maintenance.
No one knows how PPPRA suddenly became the Federal Ministry of Finance with powers to withhold FERMA‘s allocation. The deplorable roads are probably the consequence of the fraudulent tight-fistedness of the men in PPPRA.
Nigeria has no money to invest in its human capital. A king-size cabinet, outrageous and unproductive civil service and over-paid lawmakers consume 80 per cent of the nation’s annual income. That explains why 13.5 million children of school age cannot find seats in public schools. It is responsible for the unacceptably high maternal and child mortality rates.
The World Health Organization (WHO), recently ranked Nigeria 187 among 190 nations in its workable health system placement.
The situation in the healthcare delivery system is so bad that in some isolated communities in Bauchi state, pregnant women in prolonged labour are ferried on the back of donkeys to the nearest maternity some 20 kilometers away. Some die in the process.
The federal government has been stampeded by its worsening revenue crisis into tax reforms that would worsen a bad economic situation. The N50 stamp duty on point of sales (PoS) transactions borders on cutting the nose to spite the face. With an estimated 400 million PoS transactions in a year, the levy would generate a paltry N20 billion in a whole year. Ironically it has the potential of truncating half of the annual transactions valued at nearly N100 trillion. The transactions are devoid of physical cash movement.
If that is truncated by a senseless levy, the CBN would have to spend billions of naira printing more banknotes that would need replacements after a few transactions. Banks would spend billions of naira annually ferrying more cash to different branches and ATM terminals. Individuals would have to contend with armed robbers as they move about with huge cash for daily transactions. PoS has reduced all that risk and it would be futile for a cash-strapped government to cripple such an efficient medium of transaction with an absurd levy.
The federal government must reduce recurrent expenditures to 40 per cent of the nation’s annual budget. Anything short of that is an invitation to anarchy.
Besides, Nigeria has to find a way of funding the rehabilitation of decaying infrastructure through private sector participation. Nigeria can no longer fund its capital projects through borrowing. The mountain of debts is taking a toll on the nation’s credit rating in the international money market.
A country that services its debt with 50 per cent of its annual revenue is a high risk borrower and can only raise loans in the international money market at double digit interest rate. That is where Nigeria is heading to with a fiscal deficit of N4 trillion.
