A few days ago, the Vice President, Yemi Osinbajo, in response to remarks by the former Emir of Kano, Sanusi Lamido Sanusi on the cost of governance, agreed that there is a need to reduce the cost of governance, but then said that it might be difficult considering the structure of Nigeria’s constitution, and then called for a national debate on the issue.
Now, Prof Osinbajo is a very brilliant man, one whose views came across as considered and thoughtful whenever I interacted with him. I agree with Prof about Decree 24 of 1998, Nigeria’s fake constitution which does not once talk about productivity but alludes to sharing of resources no less than 26 times. On these other issues raised, I disagree with him, and very strongly. Prof Osinbajo is the chairman of a government committee that just produced a plan to print and spend trillions of naira, which will lead to even more inflation than the present, well above the central bank’s own target. Why was there no national debate for that?
Now let us consider Nigeria’s financial situation. Since the price of the global benchmark Brent crude breached the psychological $40 mark, we have stopped hearing noises from government types about implementing the Oronsaye Report and cutting down waste. The APC governor of Osun state last week made it clear that were it not for the pandemic, an official within his government who passed away would have been sent abroad for treatment. We have begun, again, the quixotic search for oil in Northern Nigeria, this time in Kogi, Kwara and Niger States. This despite spending more than $3 billion in what has been a fruitless search for oil in Borno (that included violent incidents such as Boko Haram attacks on NNPC staff).
Over the period of the COVID-19 pandemic, we have been inundated with tales of how the Legislature has approved all sorts of borrowing for the Executive, which Osinbajo is a major part of. Early this month, the Senate approved President Buhari’s request for $5.51 billion in external borrowing from the IMF, the AfDB, the World Bank and Islamic Development Bank, all as part of a revised budget for 2020. All of this borrowing was deemed necessary because of the precipitous drop in oil prices due to the pandemic. The House of Representatives soon followed suit in approving more borrowing. In the latest budget document, as of Q1 2020, revenue was 52 percent below the budget target but expenditure was only 2 percent down.
When the budget was reviewed, education and health received reduced allocations of 54percent and 43percent respectively, while the National Assembly’s was cut by only 10percent and lawmakers were even able to get allocations for the renovation of their building. Essentially, we have returned to business as usual, with government types simply looking to collect and spend oil rents. These are the people that Prof Osinbajo should be speaking to, not the country. The government, which he is a part of, has failed to cut its coat according to its cloth.
It is important to point out that despite campaign promises made back in 2014 and 2015, many of which I heard first hand, oil sales still make up to 90 percent of Nigeria’s foreign exchange earnings, despite the oil sector contributing less than 10 percent of Nigeria’s GDP.
Even before this pandemic, Nigeria’s finances have been showing signs of distress. In Q1, before the effects of the pandemic began to kick in, debt servicing costs jumped 30percent compared to budget and stood at 99.2percent of actual revenue. Anaemic external reserves for a country of our size, a declining balance of trade, crashing foreign investment inflows, falling revenues, rising debt to income ratios, rising inflation rate, amongst others, should make anyone panic. However, as a chart by SBM Intelligence showed last week, Nigeria’s budget has despite all the rhetoric about its increasing size, remained stuck somewhere between $20 billion and $30 billion – more or less since 2008. It is only in 2012 and 2013 that the budget exceeded the $30 billion mark. Despite this, one constant is that the government’s spending on itself has continued rising.
For a modest economy with a GDP of over $376 billion, this inability to raise a decent budget, and depressed oil prices have meant reduced revenues and should cause anyone to worry. For context, South Africa, with a GDP of $349 billion, has a budget of about $103 billion, with expected revenues of $92 billion. The UAE with a GDP of $399 billion has a budget of $112 billion with revenues expected at $83 billion, and away from countries with similar GDP profiles, Ghana with a GDP of $59 billion, has a budget of around $12 billion, with expected revenues of $9 billion. Nigeria, for context, expects to raise roughly $14 billion, and well, our performance over the last five years says a lot about where that will end up. To my mind, this shows where the problem is.
There is no clearer indicator of the priority of the APC-led government – even in a time of dwindling revenue and when the country is struggling, their own spending not only remains untouched but actually increases. Prof should speak with his compadres, and not be suggesting a national debate, because we all know where whatever document is produced from that will end up.
