Mitigating Nigeria’s penchant for wasteful spending
Nigeria’s penchant for borrowing money and wasting it on frivolities surges forth in rising debts without any tangible accomplishments to show for them, which is why Nigeria’s thirst for debts has become a growing concern among economists. At present, the nation’s debts have risen by 278 percent or N4.03 trillion in the last six years. This public debt data was disclosed by the Director General, the Debt Management Office, Mrs Patience Oniha. According to the document, Nigeria is owing so much as at December 31, 2021 and that the new borrowing allocation for 2015 was N1.46 trillion which was 90 percent of N1.62 trillion budget deficit.
For 2021, the allocation for borrowing was N5.49 trillion which was 85 percent of N6.45 trillion budget deficit. On the source of the figures, the document avers, “2015 comprises 2015 Appropriation Act and the supplementary budget of N575 billion for the same year. The year 2021 comprises 2021 Appropriation Act and the supplementary budget of N802 billion for the same year.” The data also identified issues around the public debt level, which include fast- growing debts, high debt service to revenue ratio, and concerns around the use of proceeds from the debts.
However, Mrs Oniha tried to justify the debts as due to recession, infrastructure deficit, consecutive budget deficits and low revenue base. The World Bank has said Nigeria’s debt attracts risks of becoming unsustainable in the event of macro- fiscal shocks. For the International Monetary Fund (IMF) high public debt in Nigeria is worsening inflation. The IMF disclosed this earlier this week in a blog post titled: How Africa Can Navigate Growing monetary policy challenges. It said, Sub Saharan African economies are vulnerable to high inflation, “given the often heavy dependence on food and energy imports.”
Sadly for Nigeria, food imports have exceeded exports by N2.23 trillion in 12 months. The total international trade in agriculture in Nigeria stood at N3.24 trillion in 2021 with the import value exceeding export value by N2.23 trillion. Despite interventions by the Federal Government to diversify the economy and increase food production in the country, security concerns have driven most farmers out of their farms. According to the National Bureau of Statistics, while Nigerian farmers exported goods worth N127.2 billion in the first quarter of 2021, the country imported N630.2 billion goods.
In the second quarter, agriculture goods worth N165.27 billion were exported while import value was N652 billion. According to NBS, most of the agricultural products were exported to Europe and Asia. It is noteworthy that Nigeria first looked abroad for loan in 1964 to build the Kainji Dam. The loan built for us a gigantic hydroelectric dam at the Kainji Island on the Niger River, it was the longest dam at the time. Although it would later cost us $2020, the decision to borrow to fund infrastructure development was a game-changer for Nigeria then.
While the Kainji Dam is still standing today, a few if any ground breaking projects like that have been built through loans since then. That Nigeria’s latest loan of $1.25 billion is to finance the wasteful petrol subsidy scam leaves much to be desired. The controversial petrol subsidy which was to be phased out by June, has been deferred to continue till the end of Buhari’s tenure. Despite the drain on our revenue, Nigeria continues to stick with it against the odds of high level poverty in the country today. As we sink deeper into debt with nothing to show for it, in terms of economic growth and social infrastructure, it shows that we have not managed our economy well. If it took Federal Government six years to appoint an economic adviser much less an economics minister, you can see how backward we are.
The government has also failed to acknowledge (who will tell them?) that the economy has shrunk from $546.67 billion in 2014 to only $436 billion in 2021, despite rising population. Nigeria’s shrinking economy has worsened poverty and has created mass unemployment. Upon this dismal economic outlook, Nigeria’s idle government refineries posted a loss N63. 3 billion from September 2020 to August 2021, according to data from the Nigerian National Petroleum Corporation (NNPC). The NNPC itself lost N227.4 billion.
All the government refineries located in Warri, Kaduna and Port Harcourt have been lying idle since 2019. Though the refineries are not operating, government will continue to pay them since they are civil servants. Since the shut down of the refineries, Nigeria has relied on imports to meet her needs. But the Federal Executive Council had in March last year approved to rehabilitate the refineries instead of selling them. Rehabilitating the Port Harcourt refinery alone will gulp $1.5 billion.
Another challenge has emerged as the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has raised an alarm that Nigeria loses more than 90 percent of crude oil pumped into its Trans National Pipeline (TNP) to theft and vandalism in the Niger Delta Region. The PENGASSAN president, Festus Osifo who spoke to journalists in Lagos, exposed what he termed acts of sabotage in the nation’s oil industry. He warned that unless urgent steps were taken to halt the criminality, the nation’s economy will collapse.
Speaking further, Osifo said, “Reconciliation at Bonny Terminal shows that less than 10 percent of crude oil metered from the operators gets to the terminals.” Arguing further, the labour leader said beyond the reduction in revenue to the companies and the national economy, the act of sabotage has caused serious environmental degradation to the host communities and region, just as the health implications of the unwholesome situation is impacting on the people. The way to mitigate this continuing indebtedness is reduce the civil servants by a quarter, merge the ministries, sell the refineries, reduce wages by half and abolish the National Youth Service Corps. Without military training youth service is both a waste of resources and a waste of time for the youth corps members.