Amidst the recent electioneering, a major national debate sprung up. It was the argument that Nigerians should live within their means. This is a common advice by every sound financial adviser. The reason is simple. Experience has shown over time that those that live beyond their means, especially if they consistently do, will tend towards poverty. Why? Because living beyond your means is tantamount to borrowing from the resources of others in order to fund your appetite for instant gratification. So, to live within your means is a very sound economic advice for the individual.
The source of the advice can be found in the bible – see Philippians 4: 11; and 1 Timothy 6: 6 – 8. Both passages admonish us to be contented with what we have. In life, there is limitation to everything. In economics, the source of this advice can be traced to the notion that human wants are insatiable while the resources to meet those wants are limited (scarce). So, acknowledging that you cannot meet all your wants is a critical recognition that you need to live within your means. Because all human wants has to be satisfied from a limited supply, it means there is not enough to satisfy all. At every point all that we want are much more than we can possibly achieve with existing means.
Now, the President ignited this debate when he encouraged Nigerians to live within their means. But contexts matter. Unfortunately, the comment came in response to worsening poverty indices in the country, suggesting it was Nigerians’ fault that they were poor. Also coming within an electioneering period means that it became an extraordinary debate between strong adherents and opponents of Mr. President. The adherents see in the admonition the wisdom of the father of the nation, admonishing his children to live within their means. The opponents see a characteristic hypocrisy of the President and the generality of Nigerian politicians and public service holder preaching something else, but doing an entirely different thing in private.
For instance, in a Chatham House speech in 2015, President Buhari said, “What is the difference between me and those who elected us to represent them? Absolutely nothing! Why should the Nigerian President not fly with other Nigerian public? Why do I need to go for foreign medical trips if we cannot make our hospital functional? Why do we need to send our children to school abroad if we cannot develop our universities to compete with the foreign ones?” Juxtaposed with the opulence and extravagance of public officers at the time, this statement resonated with Nigerians, and he was elected President. However, it has turned out that it is either the President did not write the speech, nor convinced about it, or simply forgot it. He has not followed any of his admonitions.
But these largely personal omissions mask even greater policy and government failure. Let me provide three contexts we see and or should expect to see.
First, let me provide a caveat. Please note here that the context and the understanding of the statement is that it is static. This means that the President is not referring to a dynamic situation. As we all know, in a dynamic situation, all variables can change. So, without making a judgment of the policy today,
living within your means should not motivate the government to pursue its social programmes such as N Power, Trader Moni etc (Yes, I have criticised trader moni as a pedestrian economic policy in the past). All these policies are motivated by the notion that the poor needs a helping hand.
The second is my expectation for the coming four years. Our patience, both as a collective and as individuals will be tested like never before. Given the current trend in oil prices, there is no doubt in my mind that the government will not be able to borrow like it did in the last three years. Indeed, in 2016, the idea was for the government to borrow US $3.5 billion from development institutions at a rate of 1.5%, but this fell apart because the government could not meet the conditions of the International Monetary Fund (IMF) and the World Bank for critical economic reforms. Consequently, the government decided to approach the international capital markets, where the conditions are rather loose but the yields are higher. But in the coming four years, it will be relatively difficult to borrow extensively as we did in the last three years, so we will be asked to live within our means.
Third, as the new minimum wage is expected to be in place in the coming weeks, I expect that the effect will be similar to that of 2011. The irony will also not be lost on the governors. Just as it was in 2011, the 2019 revision is coming at the back of a weak global oil prices. Indeed, the increase in minimum wage will be a culmination of the fiscal crisis that escalated in the states since the significant decline in oil prices in 2015. Between 2015 and 2018, the states have been preoccupied with servicing basic obligations such as salaries and pensions, with limited funds for infrastructure. During the period also, many states have become major debtors, with unsustainable debt stock and servicing. They have largely survived though bailouts from the federal government, restructured bank loans and budget support facility. They will also be expected to live within their means.
However, in conclusion, experience have shown over time that when the government is asked to live within its means, it does not mean that they reduce nor cut the scale of their own privilege lifestyles. It is this realisation that Mr. President is no different that made the suggestion sound hollow.
I thank you.
Ogho Okiti
