• Sunday, December 03, 2023
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How will campaign programmes and promises be paid for?

Expect borrowing cost to remain high in Nigeria, businesses told

The times truly call for a spirited debate on issues that will define the future of Nigeria. Recent articles by former CBN governor, Charles Soludo, a professor, have sparked issue-based polemics across the political divide. That, in my view, is what election should be all about, rather than argue about school certificates of a former head of state like General Muhammadu Buhari, or throwing stones and fireballs at political opponents. As a keen player in the political terrain, albeit from a front-row seat this time around, I am constrained to lend my voice in the ongoing discussions on what direction our country is heading. My interest is in our Fiscal Policies and Public Finance System in general, amidst prevailing global economic circumstances. Having been involved in this space here in Rivers State, the prospect of our financial predicament in Nigeria post-election and beyond is keeping me awake and really of major concern to me, because that defines everything else.

Over the past decade and half that Nigeria has made some strides in the global arena is without question, but who was instrumental to what and to which degree remains an object of ongoing banter between the Soludo and the minister, Ngozi Okonjo-Iweala. My only wish is that they should de-personalise this hot exchange of words and face the facts. Moving forward in this election season, with the plethora of promises, how it will be paid for is my immediate worry.

Frankly speaking, some of my observations at close range during the years here, have left me wondering how Nigeria is strutting along despite the seeming intractable challenges it faces. Are we working smart enough to reposition our country and improve life in general? The answer is No. In my view, the most critical question to ask is how the financial system has remained badly structured. How on earth, Nigerian is able to carry on with what I consider a disjointed, bloated and skewed fiscal structure. For starters, the system may have come a long way from the military era, yet, inadequate to meet the demands of a 21st Century leading emerging market economy.

Read also: Inter-bank rates rise 15.78% as naira loses against dollar at forex market

Some remarkable actions in 2003 – 2007 have helped reposition Nigeria like; the debt buy-back deal, monetisation policy and creation of Excess Crude Account (ECA) and efforts to build financial buffers as well as curbing excessive operating expenses (that provides for employees in the federal apparatus who may account for less than two per cent of the total population).

Most of these achievements clearly were attained before in the current democratic experience of Nigeria. By now one might have expected that successive administrations will capitalise on these advances to make further shifts and far- reaching structural transformation that can address unemployment and social progress of the majority of citizens. That has not happened; rather we have been experiencing cosmetic changes that are unable to ad- dress the fundamental causes of youth unemployment, wide- spread poverty and underdevelopment.

Notwithstanding the recent rebasing of Nigeria’s GDP that makes our economy the largest in Africa and emergence of new billionaires listed on Forbes Magazine, Nigeria remains a perennial under-performer and serious work-in-progress. Ironically, the calibre of financial management and policy framework at the federal level determines what happens nationwide and at the sub-structure.

The current revenue formula for instance that allocates 52 per cent of all proceeds to the central government needs urgent attention. Such an arrangement is totally inimical to long-term grassroots development that can address unemployment and social inequity of the populace. This method of revenue sharing has turned the states to typical “sandwich entities”, where they are caught in between shouldering extra responsibilities and subsidising the federal and local governments.

As an illustration, Rivers State has spent over N100bil- lion on federal roads within its territory; it expended over N1 billion to curb the Ebola out-break before receiving a refund of N200million from the Federal Government. The state has spent substantial sum of money helping to fund security infra- structure that should other- wise be a Federal Government exclusive responsibility and shoulders the cost of paying primary school teachers’ salary that otherwise is the job of local government councils. This is not how a true federation ac- count system should operate.

The Hydrocarbon Dependency Syndrome (HDS), as I choose to call it, has created a faulty foundation whereby rather than showing exemplary leadership in managing its own finances, there has been little knowledge or best practices to borrow from the Federal Government by the states and local governments. This leaves you pondering how long Nigeria will thrive with the sort of “fiscal centralism” we witness today.

As annual budget data shows, averages of over 70 percent of federal funds are allocated to operating/recurrent expenses, while nearly quarters (20-25 percent) are earmarked for capital expenses. This compares to some states where the reverse is the case. The trend presents a truly fiscal dilemma that stifles long-term capital investment in vital infrastructure back-bone that can drive the economy. Essentially, the Federal Government operates on a budget deficit that it is able to pad up through issuing bonds in the capital market, but shuts out the states from the same capital market that might have provided long- term funds for infrastructure investments. This is utterly unfair. The Federal Government has continued to boast with 5 to 7 percent annual growth rate over the last half decade, something that ought to be a double-digit growth given the quantum of resources at Nigeria’s disposal.

As Nigeria faces current oil price crash, it is instructive to note that we experienced a similar scenario in 2008. However, Nigeria was able to weather the financial storm; thanks to the cushion created by previous administrations. Prior to 2011 with ECA at over $20billion during its peak and foreign reserves beyond $45bil- lion, while petroleum subsidy hovered around N300billion it didn’t take rocket science to know how we survived the global economic turmoil, when western European and Asian countries were grappling with financial bailouts. Unfortunately since then we have missed the chance of truly diversifying our economy in the face of historical high oil price at over $100 per barrel between 2009 and 2014. The oil/gas sector has remained dominant while subsidy ballooned beyond N2tril- lion at its peak.

The proposed Petroleum-Industry Bill (PIB) languishes, with accusations of un-remitted oil proceeds still hanging since 2013. Efforts to un-bundle the NNPC and wean the country from prolonged hydro-carbon-dependency has not materialised. By this outcome we lost the chance of preparing adequately for the rainy day. The question is who will bail Nigeria if things get worse? How will lofty campaign promises be paid for? After all said and done, when the chips are down the essence of governance is to improve life rather than giving into unnecessary squabbling.

Any well-meaning candidate ought to focus on the fundamentals of the national economy. The times demand for total commitment to action, discipline, and strong leadership to tackle the problems facing Nigeria. With Naira versus dollar exchange rate currently at N210, there is no saying how low it may fall after the elections before things stabilise. So the issues are abundant just as the challenges are very clear to the ordinary eyes. Let people therefore, be allowed the free choice to voice their opinions without intimidation at the ballot boxes and live with the consequences thereafter. If change is what they crave, so be it.