A looming fiscal crisis? Holy ghost, fire!

Money, the wag says, gets attention anytime, anywhere. So did it happen that on August 21, this got my instant attention: “Nigeria heading into fiscal crisis – presidency warns.”

Mallam Garba Shehu, the president’s senior special media adviser, gave the warning on behalf of the Federal Government. I cancelled my decision to nap. I was actually jolted out of it. A looming fiscal crisis – personal or governmental – is a sleep killer any day, anytime.

Money. The good book says the love of it is the root of all evil. Since you can neither add to nor subtract from the word of God, I wish to point out that the lack of money must be the tree trunk of evil. We are brought up to work for and get money to live the good life. We do so virtually from the cradle through the turns and the twists of life all the way to the grave. Tells you how awfully powerful and central to our lives money is.

You could do nothing without it. But money is discriminatory. It misses its road and is welcomed into some houses. It also walks past some houses by the roadside and leaves them without money. Money divides the society into haves and have-nots. Those who have no patience to work for money, choose the anti-social option known as stealing or theft or the mother of it all, corruption, to make it. With money, there are always problems. I have a mortal fear of government being broke. It has ramifications beyond your ken, I tell you.

Shehu’s warning could mean that the good days we thought would start rolling after the general elections that put the president back in office and brought in new political players in several state government houses and in the federal and state legislatures might not roll in yet.

Expect, I should say, some delay in project prosecution. And this at the time the new ministers are itching to move mountains. Without money they cannot shake hills. The Nigeria Labour Congress (NLC) might do well to begin the process of making some important adjustments to the minimum wage regime.

When government warns of an impending fiscal crisis it means that it foresees a treasury half empty, not half full. The account-general of the federation might stroll into the vaults and be met with only darkness indicating that dust had gathered where mint fresh bundles of Naira used to be. When the government does not have money, everything heads down the precipice. Government is the owner of money. It mints it; it gives it out to the states and local governments; and it gives it to contractors to give us light, education, roads, health and discharges its other responsibilities it must to keep the murmurs of citizen contentment humming.

What went wrong? I thought we had locked the gates against a fiscal crisis since we weathered the unwelcome storm of recession mid-2016.Perhaps, we only bought time. I recall that the former governor of Zamfara State, Abdulaziz Yari, noticed this and warned earlier in the year that we were walking steadily back into recession. The president’s men said he was a doomsday prophet. I hope he would not have the last laugh. Well, he won’t laugh, given his wahala in the hands of EFCC at the moment.

Here is what is happening. There are, to use Shehu’s technical expression, “negative trends in target setting and realisation in government revenue.” I tried to interpret that and came to this: there is a growing gap between what the Federal Government expects to earn and what actually flows into the treasury. When you expect more but get less, you need no one to tell you that negative trends are trying to buck the system. As hostile an act as they come.

There must be either some leakages or someone is not doing enough to collect all the money due to the government. And the government is worried, as indeed it should be. The first place it thought to look was the Federal Inland Revenue Service, FIRS. On August 8, the chief of staff to the president, Mallam Abba Kyari, requested the chairman of the FIRS, Babatunde Fowler, “to explain variations in budgeted collections and the actual collections reported by the agency for the period in question.” Kyari said the collections for 2015 – 2017 were “worse than what was collected between 2012 and 2014.”

I have read part of Fowler’s response to Kyari published in the newspapers. I found it both interesting for what it revealed and disturbing for what it portends. Fowler admitted that “actual collections for a three-year period were significantly worse than what was collected between 2012 and 2014. Total actual collection for the said period was N14,527.85 trillion, while total actual collection between 2016 and 2018 was N12,656.30 trillion.” Obvious shortfall, right?

Here is what I find disturbing. It would appear from Fowler’s letter that the FIRS is not failing in its duty to collect all the taxes due to the government. The problem was the bad behaviour of crude oil. This has always been bad news for our crude oil-dependent economy. Fowler underlined this. He wrote: “The highlight of these collection figures was that during the period 2012 to 2014, out of the N14,527.85 trillion, oil revenue accounted for N8,321.64 trillion or 57.28 per cent, while non-oil accounted for N6,206.22 trillion or 42.72 per cent and during the later period of 2016 to 2018, out of N12,656.30 trillion, oil revenue accounted for N5,145.87 trillion or 40.65 per cent and non-oil revenue accounted for N7,510.42 trillion or 59.35 per cent.”

I am not in a position to determine if Fowler was right about the details in the variance in revenue collection. What worries me is that crude oil still rules. It has been demonstrated time and again that each time the oil revenue suddenly dips, the Federal Government is forced to manage poverty, not wealth. A tough challenge no one would wish on any administration. But nothing has significantly changed in our diversification policy to free us from the occasional bad mood of the crude oil market.

Fowler put it so well in his letter. He wrote: “Notwithstanding government efforts to diversify the economy, oil revenues remain an important component of total revenue accruable to the federation.” The price of crude oil fell from $113.72 per barrel all the way down to $52, $43.80 and $54.08 per barrel in 2015, 2016 and 2017. Our crude oil production also declined during the same period from 2.31 million barrels per day in 2012 to 1.88 million barrels per day in 2015, 2016 and 2017. It is good to know from Fowler’s explanation that oil thieves did not cause the problem.

Still, this is not a good picture of the Nigerian economy. We expect a robust economy, not one ravaged by crude oil shortfall in production and revenue. I agree with Shehu that “…if urgent steps are not taken to halt the negative trends in target setting and target realisation in tax revenue,” we are in for trouble. This country has had too many shocks to its economic management since crude oil tried to throw our development efforts out of kilter in the 1970s.

The problem with our near total dependence on crude oil revenue is that it is a buyer’s market. The occasional glut in it is not caused by the oil-producing countries because the buyer rather than the seller dictates the market price at which the seller must either sell or deal with the unpleasant prospects of perhaps drinking his crude oil. We have had too many challenges in this sector to pretend that things would right themselves. From the details given by Fowler, non-oil revenue is making an impressive showing but it would take sometime before we can reasonably depend on it. But we must make a determined effort to start now to halt the negative trend in its track. My hope, and a sincere take on that, is that the government would not be forced too soon to take on the challenges of managing poverty. It would be disastrous for Buhari’s second term in office.