Nigeria need not be broke

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PRESIDENT Muhammadu Buhari’s recent declaration that Nigeria is broke appeared to be saying the obvious. Many states cannot pay workers’ salaries, while abandoned projects litter the national landscape. That the country is facing financial difficulty is not in doubt. Opinions are however divided on the country’s true financial health. There is a way to go: the urgent task before the government is to tidy up public finances, kill corruption and restructure the economy.

We assert that though Nigeria is witnessing fiscal turbulence, it need not be broke, to the point of 27 states being unable at a stage to pay their employees. With a rebased and diversified economy now estimated by the World Bank at $568 billion, abundant mineral and agricultural resources, a large population and many revenue-generating agencies, fiscal discipline, sound management and low tolerance for corruption will cancel out the fiscal squeeze.

Buhari had declared, “Of course, Nigeria is broke,” just as he agonised over corruption and the size of government. His anxiety is understandable. Oil prices crashed from over $100 per barrel in the first half of 2014 to $43 per barrel on Tuesday. Since crude oil and gas revenues account for over 75 per cent of government revenues, funds available for the three tiers of government had plummeted by over 40 per cent by the third quarter of this year. The sobering truth is that the cash flow crisis may get messier. The African Development Bank said other macroeconomic challenges, such as the exchange rate volatility, fiscal leakages and low investment, have forced even sharper declines in fiscal revenues. In the first four months of this year, the government had to borrow N473 billion to fund recurrent expenditure, according to the then Minister of Finance, Ngozi Okonjo-Iweala. This is 53 per cent of the N882 billion it planned to borrow to finance the 2015 budget. In March, the then Accountant-General of the Federation, Jonah Otunla, had warned of tough times ahead as he reported a 21.5 per cent drop in gross government revenues to N315.04 billion.

The situation in the states is worse. Nineteen of the 27 states that recently received the N713 billion bailout are still unable to fully meet their wage bills, according to the Nigeria Labour Congress. For all tiers, the infrastructure challenges are enormous as are the immediate recurrent needs of schools, health facilities, water supply and other basics.

The cash flow problem is, however, self-inflicted. First, we are paying for years of economic mismanagement, obscene corruption, rampant cronyism and failure to reduce the country’s dependence on exports of oil and gas, especially in recent years when crude oil prices averaged $100pb. Now, the repercussions are becoming obvious. Unlike the desert kingdoms of Saudi Arabia, Kuwait and Qatar, Nigeria is blessed with 34 ready-to-mine minerals; agricultural land interspersed with rivers and streams, as well as an energetic human capital pool.

Buhari should not fritter his tenure like his predecessors who promoted gangsterish economic management to an art of statecraft. Most importantly, the government should identify and recover all its revenues generated by the MDAs. Many believe it is corruption and the prevailing culture of impunity that are draining the nation’s lifeblood. As Buhari said, he inherited a country that had been “vandalised materially and morally.”

Unofficial sources quoted in the mass media indicate that about N850 billion has come into government’s coffers through the Treasury Single Account ordered by the President three months ago. Several banks have recently been fined by the Central Bank of Nigeria for delaying remittance, indicating the magnitude of leakages in our revenue collection and monitoring process. A report by the Fiscal Responsibility Commission in December 2014 detailed how the MDAs failed to remit revenues to the Federation Account or understated revenues collected.

It alleged that money that should have been remitted was hidden or diverted as the MDAs failed to declare their earnings or sent contradictory financial statements to different regulatory agencies. “(The) FRC is finding it difficult to enforce compliance with the Fiscal Responsibility Act,” said Charles Abana, head of the FRC’s legal department. The agency cited the Ministry of Finance, the Nigerian National Petroleum Corporation and the Securities and Exchange Commission as examples. The government should block all loopholes. This requires streamlining all government accounts: never again should the MDAs be allowed to subvert the constitution by unilaterally converting revenues collected on behalf of government. All accounts should be transparent and available online and in real time to the AGF, parliament and public auditors. The era of unregulated multiple and secret accounts should end.

A former CBN governor insists that the NNPC has not accounted for $20 billion; but for Buhari’s coming, $2.1 billion dividends accruing recently from the LNG would have vanished as usual, while a tribunal has just heard how N18.7 billion meant for teachers’ salaries in Benue State was diverted into private accounts, a common practice at the federal, state and local government levels. The US Commerce Department estimates that 40 per cent of all Nigerian government contract sums is stolen, while in the decade to 2010, about $40.9 billion in illegal transfers moved out of Nigeria, according to the African Union Panel on Illicit Financial Flows from Africa. Shell also estimates that $5 billion is lost to crude oil theft annually. These are huge revenue leakages that must be addressed.

Getting out of the fiscal travails may not be easy, but it is possible. There is an urgent need for economic reforms to boost productivity and competition. When Spain plunged into recession, its government took hard decisions, exerted strong fiscal controls, took €100 billion bailout from the European Union, cut public sector wages and benefits and leveraged its assets to post its strongest quarterly growth in August, according to a Bloomberg report. Besides slaying corruption, government should ramp up the privatisation and liberalisation of the power, railways, oil and gas, steel and mining sectors to attract investment, diversify exports, create jobs and improve public revenues.

Buhari should set an example for the fiscally reckless states by streamlining government, building strong institutions, increasing revenue, stimulating growth, reducing the bureaucracy, fighting corruption with uncommon vigour and adopting job-creation strategies as the ultimate goal of all economic policies.