• Thursday, March 28, 2024
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Nigeria’s finances in tatters, government in denial, growth sectors stifled

Nigeria’s finances in tatters, government in denial, growth sectors stifled

The Central Bank of Nigeria (CBN) printed about N60 billion to have enough money for the three tiers of government to share in February. To finance the 2021 budget, Nigeria is going to grovel for N2.34 trillion from foreign sources and is mulling raiding the bank accounts of its citizens, warning signs of an economy staring down at a crisis.

The figures for March 2021 Federal Accounts Allocation Committee (FAAC) are due but many believe the delay in publishing them may be connected to how messy they appear. Half of Nigeria’s 36 states owe salaries. In Imo, civil servants are being demoted to justify lower wages. The things that keep FAAC liquid are eroding.

Nigeria earned N6.4 trillion from the oil and gas sector in 2017, according to Nigerian Extractive Industries Transparency Initiative (NEITI). The figure was a 23 percent increase from the 2016 figures of N4.3 trillion but lower than N4.7 trillion inflows recorded in 2015. By 2018, it has risen to N9.9 trillion.

However, by the fourth quarter of 2019, things have taken a wrong turn. At N2.602.29 billion, federally collected revenue in the fourth quarter of 2019 was lower than the quarterly budget of N3,758.77 billion by 30.8 percent, the CBN said in its economic report of 2019.

“Oil revenue, at N985.57 billion, accounted for 44.6 percent of the total federation receipt and fell below receipts in the fourth quarter of 2019 by 37.0 percent,” the CBN said.

The low contribution was attributed to weakening global crude oil demand due to the COVID-19 pandemic, and low domestic crude oil production, a sequel to the subsisting OPEC+ production cut agreement.

Yet various governments kept splurging on bloated, unproductive bureaucracy and wasteful projects like building airports in states with rickety schools and primary healthcare centres that lacked aspirins.

Nigerians, prodded by labour groups, continue to clamour for subsidies on petrol and power as well as more dominance of government in the economy.

To appease labour groups, the Nigerian National Petroleum Corporation (NNPC) is burning $1.5 billion to rehabilitate a decrepit refinery that has gulped over $25 billion in repairs over two decades without results.

Non-oil revenues are not rising as fast as expected. The CBN says the lull is owing to low economic activity, following the gradual extension of the COVID-19 pandemic mitigating measures.
“At N1,222.53 billion, non-oil revenue constituted 55.4 percent of the gross federation revenue in the fourth quarter of 2020,” the CBN said.

Read Also: Nigerian economy: We are in huge financial trouble – Obaseki

The APC-led government met the inflation rate at 9.0 percent but under its watch, it has risen to 17.33 percent. Nigeria now has the 11th highest food inflation rate in the world, ranking alongside countries at war.

Rather than strategise, Nigeria is preparing against a violent storm by flailing her hands. In the 21st Century, where artificial intelligence systems, blockchains and leaps in medical science are transforming the world, brain matter is devoted to discussing the problem of cows trampling farmlands, ASUU-strikes and Sunday Igboho.

To make matters worse, the president is hibernating in London, while medical workers are on strike.

“We are in trouble – huge financial trouble,” bemoaned Godwin Obaseki, governor of Edo State, recently. Obaseki said Nigeria could be owing up to N16 trillion by the end of 2021.

Crude oil, Nigeria’s key revenue earner, is on the way out but there’s little else to replace it apart from tech, which is suffering from regulations that would be unpopular in the last century. Following the ban on cryptocurrency, the SEC clamping down on tech platforms that offer Nigerians options to buy stocks abroad.

Yet, last year, Tesla’s market value was worth more than ExxonMobil, Chevron, BP, France’s Total, and Italy’s Eni combined. Even big car manufacturers like General Motors, Volkswagen, Ford, and Nissan, Tesla still beat them all.

Countries that used to buy Nigeria’s oil are now producers. An oil sector law is awaiting passage after 20 years but lawmakers prioritise a three-week Easter break over considering it.
Increased agitations in the Niger Delta, Insecurity and vandalism, are making exploration in Nigeria uncompetitive.

Shell is leaving, ExxonMobil is searching for a reason to stay, Chevron is powering towards alternative energy but the NNPC is foraging for oil in Sokoto while betting that its engineers can outrun Boko Haram’s bullets.

“Where are we going to find this money we go to Abuja to share every month?” Obaseki asked. With increased borrowing without a plan to repay, Nigeria risks a sovereign debt default.

While Nigeria has planned a decade of gas, it continues the tradition of unforced errors that have left the gas-rich country, energy poor.

It is unable to develop a competitive fiscal gas regime to unlock investments because the power sector, which consumes over 70 percent of gas sent to the domestic market, lacked tariffs that guarantee commercial returns. Tariffs have been increased, but half of the electricity customers are unmetered, erasing gains from a tariff hike.

After years of failing to reform its tax systems, Nigeria is reeling out taxes like they are going out of fashion, but in a depressed economy, it feels like a shakedown.

“Replicating tax collection structures promotes inefficiency that only makes us poorer as evidenced by our very high cost of collection compared to 1 percent global benchmark,” Taiwo Oyedele, Tax Partner at PwC Nigeria, said in a tweet.

While income is shrinking, costs are rising. Africa’s most populous country is growing at an average rate of 2.6 percent and is projected to be home to over 400 million humans by 2050.
The International Monetary Fund (IMF) only revised upward its growth forecast for the Nigerian economy in 2021 from 1 percent it to 2.5 percent, lower than 3.4 percent forecast for sub-Saharan Africa and expects a decline to 2.3 percent by 2022.

While multilateral agencies fine-tune their forecasts with the frequency a pendulum swings, the reality is that Nigeria is producing more humans than it cater for and is not planning for its future outside oil.

Nigeria churns out half a million graduates yearly but can’t find work for over 33 percent of its people. More than 13 million children are out of school and in the north where literacy rates are already on the floor, terrorist start-ups are making a fortune kidnapping school children.

The World Bank says that over 95 million Nigerians are living below the poverty line, but the poverty line has become a moving target in a country where the middle class is one major disease away from penury.

Government officials are borrowing upon the justification that the country’s debt to GDP ratio is low.

The country’s debt stood at 34.4 percent in 2020 while this is low, it spends more than a third of its revenue servicing debts due to poor tax income.

Interest payments as a proportion of national government revenue is projected to decline to 60.8 percent this year from an estimated 92.6 percent in 2020, according to the IMF.

Analysts say that for the country to get out of this situation, it should run its national oil company commercially.

“There needs to be a clear delineation of regulatory functions from commercial operations for the NNPC. As a national oil company, NNPC needs to be well-positioned to focus solely on commercial oil and gas operations,” said Ayodele Oni, energy lawyer and partner at Bloomfield law firm.

Wolemi Esan, partner at Lawfirm Olaniwon Ajaiyi, said, “While it is the case that some countries have been able to master the art of an efficient civil service, in Nigeria, the civil service is generally plagued with inefficiency and that has impacted on the ability of NNPC to favourably compete.”

With a feeding bottle mentality, most state governments lack the incentive to grow their internally generated revenue.

Their wage bills are rising along with the cost of maintaining the odious opulence of public office in Nigeria, leaving little for roads, schools and hospitals.

States like Lagos and Rivers who have high IGRs fritter it away on wasteful ventures rather than grow their economies.

Analysts say states should learn to be competitive, fight to loosen restrictions placed on exploiting their mineral resources, and cut huge wage bills and needless expenses.