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How bankrupt is Nigeria?

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The recent claim that the current administration of President Bola Tinubu inherited a “bankrupt” economy, has continued to generate controversy, with many observing that while the ongoing reforms of the administration portends positive steps, they may plunge citizens into greater poverty.

Since the inauguration on May 29, 2023 of the current administration, there has been a rash of comments suggesting that the immediate past administration was indeed profligate and ran the country aground.

President Bola Ahmed Tinubu was quoted as saying: “I inherited serious liabilities, but also assets.”

The Vice President, Kashim Shettima quipped: “We are facing challenges.”

Shortly after his appointment as Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso announced at a gathering, “CBN does not have a magic wand to solve current economic challenges.”

The latest disclosure of the level of rot left behind by Buhari was made a few days ago by Nuhu Ribadu, National Security Adviser (NSA) to the President, when he said that “Tinubu inherited a bankrupt country.”

He reeled out a damning assessment of the eight years of the former President Buhari’s administration, an All Progressive Congress (‘APC) government that handed over to the President Tinubu.

“Yes, we’re facing budgetary constraints. It is okay for me to tell you. Fine, it is important for you to know that we have inherited a very difficult situation, literally a bankrupt country, no money, to a point where we can say that all the money we’re getting now; we’re paying back what was taken. It is serious.

“But this administration is doing its best to meet our requirements, particularly the armed forces, and I believe that you leaders will be able to testify to that,” he said.

Read also: For Nigeria’s bankrupt states, it’s business as usual

Although Nigerians are feeling the harsh reality of the “bankruptcy”, the major concern seems to border on the continued squandermania of the current administration despite the nation’s economic woes.

Tinubu had, in his less than three months in office, introduced other drastic reforms, including fuel subsidy removal and foreign exchange unification.

Tackling bankruptcy with tax reforms

To address the challenges of poor revenue, the President, on August 8, inaugurated the presidential committee on Fiscal Policy and Tax Reforms, headed by Taiwo Oyedele, with a mandate to achieve an 18 percent tax-to-GDP (tax to gross domestic product) ratio within three years.

They were mandated to amend Nigeria’s tax laws and fiscal policy to improve government revenue.

“The Committee is expected to achieve its mandate within a period of one year. They are, in the first instance, expected to deliver a schedule of quick reforms which can be implemented within thirty days.

“Critical reform measures should be recommended within six months and full implementation will take place within one calendar year,” Tinubu said.

The committee is mandated to address three broad fiscal challenges facing the economy: fiscal governance, tax reforms, and growth facilitation.

“We should no longer tax investment or production; but focus on returns, income and consumption. This government will tax fruits, not seeds,” Tinubu added.

Their report will also cover tax reform, fiscal policy design and coordination, and harmonisation of taxes and revenue administrations.

“Within the scope of this mandate, the Committee shall have as its objective the advancement of viable and cost-effective solutions to issues such as the multiplicity of revenue collection agencies, the high cost of revenue administration, the excessive burden of compliance on ordinary taxpayers, the lack of effective coordination between fiscal and other economic policies within and across levels of government and poor accountability in the utilisation of tax revenues.”

Read also: Tinubu targets 18% tax to GDP ratio with Oyedele’s tax reforms committee

Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy, Tax Reforms, also recently announced that the federal government will soon send an ” Emergency Economic Intervention Bill for consideration and passage to the National Assembly

Oyedele speaking in Abuja, said the Tinubu administration is currently working on a bill that will stimulate recovery of the critical sectors of the economy.

“As we speak now, we have a draft of the ” Emergency, Economic Intervention Bill, to amend different laws, including the laws that allow for payment of taxes and levies in Dollars.

“When we were speaking to the CBN on the issue, we discovered that these numbers are not even small, they are in the regions of $3b to $3.5b, annually.

He also revealed that Nigeria’s Constitution is being amended to ensure that shared revenues are tied to responsibilities the various tiers of government perform, “for which we all have to hold to account.”

Responding to questions on unclaimed dividends, he advised the government to use the unclaimed dividend funds to promote the capital market and by extension, economic development. But added that “the issue is still being debated.”

For the MSMEs to grow, he said investors should ask government to remove disincentives to investment, adding that “The good thing about removing disincentives is that it does not cost government money, but it saves the private sector loads of headaches, and gives them lots of money as well.

“When you are asking for incentives, you are asking the wrong questions. What you need to do is, ask government to remove disincentives. So, a small business owner will not have to pay as many as 43 different taxes.”

Oyedele, who also spoke on the quick wins embedded in the ongoing tax reform, assured that the President is already implementing part of the reforms, based on the interim reports submitted about three weeks ago.

“According to him, “The presidential tax reforms team will be engaging with members of the Federal Executive Council (FEC), tomorrow (Monday), to discuss with cabinet, as part of measures to fast track implementation

“In fact, we were supposed to do that last Monday but Mr. President is out of the country, so we rescheduled it for Monday.

“Mr. President is already implementing some of our recommendations, some will be implemented by the Ministry of Finance, some by Mr. President through an Executive Order, while some will be through the National Assembly.

Blame corruption for economic stagnation

Nigeria has no reason to be poor
Segun Adeniyi, of Baze University, Abuja, reacting to whether or not Nigeria is bankrupt, said that Nigeria has no reason to find itself in such tight corner, but for “several years of consistent poor management of resources and corruption.”

According to him, “It is about management and absence of transparency. All that the Tinubu administration need to do is focus on tackling corruption and economic diversification

“We should look away from oil and concentrate on the abundant natural resources such as gas and solid minerals sector.

Adeniyi who said that the government must demonstrate that it is ready to do things differently, wondered why Tinubu will approve N13.5b for renovation at the presidency

The State House alone is spending over N28b to purchase official vehicles for the First Lady’s office at a cost of N1.5 billion.

“We also saw that renovation of residential quarters for the President is gulping as much as N4 billion, Aguda House, N2.5 billion, Dodan Barracks residence of the President in Lagos, N4 billion, official quarters of the vice president in Lagos to gulp N3billion, all to be funded from supplementary budget, under an economy said to be broke

“They also want to purchase high calibre bullet proof SUVs at N2.9 billion and Computerisation and digitalisation of the State House was allocated N200 million,” he said.

Read also: Tinubu’s squandermania: ‘Family that has no use for Nigeria’s wealth’ plans to gut it

Ken Ife, a professor of Economics, reacting to the claims that Nigeria is facing “bankruptcy” dismissed the claims, adding that the nation has failed to explore its abundant natural resources.

He blamed some of the challenges facing the nation on “corruption and policy inconsistencies.”

He said that the country had no reason to reverse the ban on the importation of 43 items recently listed by the Central Bank of Nigeria.

“Now, somebody will start importing cheap cement, after the gains we have recorded with the Dangote and BUA investments in local cement production,” he said.

Ife advised the Federal Government to sell off non-productive companies, adding that Nigeria is an asset-rich country.

He also urged the government to explore the abundance solid minerals sector, which is currently contributing about 3% to the GDP.

“Solid minerals contributes over 40% to the GDP of other African countries, but less than 3% in Nigeria.

“The same land formation is what we have with Ghana. We have gas in abundance, yet we have been issuing promissory notes, we must change to asset-base financing.”

He also advised the government to channel “funds recovered from current subsidy removal to subsidise the production sector of the economy, rather than subsidising consumption.
Ife, while urging Nigerians to support Tinubu’s reforms, described the President as “a very experienced administrator who understands the system and knows the true nature of the economic condition the nation is facing.

“He ran the system successfully as governor of Lagos state and with majority of members of his team still intact.”

He noted that the recent commitment of the international economic institutions to backing Tinubu’s reforms is an indication of strong confidence in the program of President Bola Tinubu.

“I had stated before now that there is nothing like unification of the foreign exchange system, you do not subsidise consumption, but rather, you need to subsidise production

Ife, while citing examples of how China and India are subsidising their textile industry, noted that such act goes to weaken Nigeria’s textile production system and turn the nation to a dumping ground for textile products.

“Let us target subsidy at the production sector, rather than subsidise consumption.

The European are targeting 80% of the African import market. They will not allow you to produce anything, because they want to continue sell their goods in Africa.

Any nation that subsidise consumption is on the transmissions belt of every global shocks. You do not subsidise consumption.

Read also: Fuel subsidy is gone, says Tinubu

We cannot continue to borrow…

As at September, 2023, Nigeria’s total debt profile had hit about N87.38 trilkion , representing an increase of 75.29%, or N37.53%, compared to N49.85 trillion, recorded as at March, 2023.

The debt, according to the Debt Management Office (DMO), includes the N22.71tn Ways and Means Advances of the Central Bank of Nigeria to the Federal Government.

“Nigeria’s total public debt stock as at June 30, 2023, was N87.38tn ($113.42bn). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory.

“The major addition to the Public Debt Stock was the inclusion of the N22.712tn securitized FGN’s Ways and Means Advances

This is in addition to the approval granted federal government by the National Assembly to securitise the CBN loan in May 2023.

CBN’s ways and means advances is a loan extended to the federal government for short-term financial emergencies.

Under the Buhari administration, Nigeria witnessed the lowest Foreign direct investment (FDI) as it fell from $2.2 billion in 2014 to $0.47 billion in 2022.

The budget deficit also rose by 370.54% from 2016 to 2023, cost of debt servicing exceeded public revenues as public debt grew tenfold in a decade.

Total public debt as of June 2013 was N7.93 trillion.

During this period, external debt grew by 473% and domestic debt by 7 029%. The Central Bank of Nigeria’s (CBN) undisciplined lending to the federal government is argued to have contributed to high inflation rates – 22.41% this May.

These pressures, as well as insecurity, have contributed to higher food prices, while 63% of the country live in multidimensional poverty. The unemployment rate was 33.3% in 2020, but it is now estimated at about 40.6%, currently.

Nigeria’s annual Gross Domestic Product (GDP) growth rate in 2022 fell to 310 percent from the 3.40 percent reported in 2021. The performance of agriculture and industry reduced in 2022 relative to 2021, while the performance of the services sector improved in 2022.
The nation’s Gross Domestic Product GDP, performance in the fourth quarter of 2022 was driven mainly by the services sector, which recorded a growth of 5 69 percent and contributed 56.3 percent to the aggregate GDP.

The country has consistently neglected the agriculture sector which recorded a growth of 2.05 per cent in the fourth quarter as its performance was significantly hampered by severe incidences of flood and insecurity experienced across the country.

Further look at the economy indicates that by December 2022, the headline inflation rate had eased to 21.34% compared to November 2022 headline inflation rate which was 21.47%. Looking at the trend, December 2022 inflation rate showed a decline of 013% when compared to November 2022 inflation rate.

But on year-on-year basis, the headline inflation rate was 5 72% points higher compared to the rate recorded in December 202), which was (15 63%). This shows that the headiine inflation rate increased in the month of December 2022 when compared to the same month in the preceding year.

Tinubu’s aide reacts

But Tope Ajayi, the Senior Special Assistant to the President on Media and Publicity, in his reaction to criticisms on expenses at the Presidency, noted that “the N6 billion budget provision is not to buy vehicles for the President and Vice President alone.”

According to him, ” President Tinubu and Vice President Shettima are not using any new vehicles in their fleet. They are using inherited vehicles. There are hundreds of civil servants and political aides working at the State House who need operational vehicles.

Read also: Murati steps in as board sacks OpenAI CEO, Sam Altman

“I am a senior aide of the President. I am using my personal car and at my own expense since I resumed work more than five months ago. Like me, virtually all the appointees of the President are using their personal vehicles at their own expense for official duties.”

He explained that most of the vehicles in the pool for various departments are not functional, adding that “Even members of the State House Press Corps do not have a functional bus to ease their movement. I know for a fact that a request for a new bus for the State House Press Corps is captured in the supplementary budget for vehicles.

“It is necessary to add that none of the political appointees has drawn any benefit and perks from the public treasury. I must add that in five months, we have not even received a kobo as salary because of procedural issues involved in capturing new appointees on the payroll via IPPIS.

“The Presidency is a huge bureaucracy with hundreds of staff. Any budget head for the State House is to run the system, not for an epicurean fantasy of a sitting President and Vice President,” he said.