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The parlous state of public finance, debts

By Editorial Board
23 August 2022   |   4:10 am
The sorry state of Nigeria’s public finance has become increasingly worrisome. A number of recent actions by some government officials tend to drive home this point and thus lends credence to this obvious fact.

The sorry state of Nigeria’s public finance has become increasingly worrisome. A number of recent actions by some government officials tend to drive home this point and thus lends credence to this obvious fact. First, the lamentation by the Minister of Labour and Employment, Chris Ngige that Nigeria is broke and thus incapable of financing capital projects in 2023 clearly indicates that the heat is increasingly being felt by the men in power. According to Chris Ngige, this situation seriously incapacitates the government in meeting the demands for pay rise of the various trade unions.

The sorry state of public finance is a situation that has been rearing its head in the past few years, especially under the watch of President Muhammadu Buhari. Nigeria currently is finding it difficult to pay its debt and thus virtually in a serious debt trap. Currently, the percentage of total government revenue that goes into debt service payment is virtually 100 per cent.

Oil production which is in the region of 1.3 million barrels per day falls far short of the OPEC quota of over 2.2 million barrels per day due to the incidence of oil theft. Presently, oil theft in the Niger Delta region has taken a new negative dimension to the extent that the country cannot maximally benefit from the tremendous increase in global oil prices since the inception of the Russia/Ukraine crisis. Contrariwise, Nigeria is suffering virtually as much as other countries which are not oil exporting. That is the tragedy of the Nigerian public finance situation which is made worse by the lack of political will by the authorities to confront the burgeoning cost of governance.

This is in addition to the growing official corruption which as always, has become a serious cog in the development of the Nigerian society. It is shocking that despite all the hue and cry about the fight against corruption, an Accountant-General of the Federation could be suspended from office for an alleged misappropriation of a whopping N109 billion. There are also other cases. With revenues falling and cost of maintaining the bureaucracy rising as well as that of financing development, it is indeed no gainsaying that Nigeria is in a deep fiscal crisis.

This has probably set the pace for the recent request by the government in alignment with other African countries to request for an extension of the timeline for debt service payments from the Group of 20 (G20) countries. This action which was spearheaded by the Ministers of Finance of Ghana, Senegal and Egypt in a formal letter of plea in this regard, on behalf of African Ministers of Finance and Central Bank Governors, is quite instructive. What is even more illuminating in respect to which Nigeria and the other countries are desperate for global assistance is the content of their requests which include the immediate liquidity support similar to the global support during the COVID-19 pandemic. The message to the global community, by this request by Nigeria and the other African countries is that they are in a dire strait and need life support else their economies may collapse.

It can be recalled that the G-20 established the Debt Service Suspension Initiative (DSSI) for developing countries during the pandemic era which terminated in December 2021. The current request is for the extension of DSSI for another two years as well as the rescheduling of the deferred interest payments for over five years. This, according to the Ministers of Finance, is to reduce the cost of debt and thus extend maturities. The basic arguments put forward by these Ministers of Finance that the COVID-19 effects on their economies are still subsisting and that the Ukraine/Russia crisis has devastated their economies appear necessary but not really sufficient nor convincing.

For many of these African countries, their current fiscal challenges go far beyond the effects of the COVID-19 pandemic and the Ukraine/Russia crisis. Internal poor economic governance reflected in financial dislocations in expenditure programmes are largely to blame for the current fiscal sustainability crisis in these countries. In Nigeria for example, the incidence of corruption has not abated. This is also the case in many of these other African countries. The Transparency International Corruption Perception Index has even worsened in the past few years in many of the countries. Costs of governance are still very high and inappropriately low expenditure allocations are made to critical growth sectors. The lazy thing to do is to lay the blame of the current economic woes on the COVID-19 pandemic and the Ukraine/Russia war.

This, however, is far from the truth in many cases. In Nigeria, a significant proportion of the public debts is used to finance consumption such as the lingering unresolved issue of subsidies on petroleum products. Oil theft in Nigeria which is becoming a booming business could not have been caused by the COVID-19 pandemic and the Ukraine/Russia crisis. The reported non-remittance of oil proceeds to the Federal Accounts Allocation Committee by the Nigerian National Petroleum Company Limited (NNPC) cannot be said to be externally-determined. It is a domestic issue. In all these, the President of the Federal Republic, Muhammadu Buhari appears to be missing in action as these anomalies continue to persist in the national life.

Truly, Nigeria needs some cushion from the international community to put its house in order but a lot of the work that needs to be done is domestic. While the request for a two-year extension of the DSSI would be value-adding for Nigeria, the Minister of Finance, Zainab Ahmed should take responsibility for the fiscal challenges in the past few years. While acknowledging that she reports to Mr. President on the direction of fiscal management, her financial expertise needs to be brought to bear on the management of her boss in relation to the frivolous borrowings and unwholesome costs of governance which have not experienced any significant reductions under her watch. Nigeria deserves better in the management of its public resources in the enhancement of its economy.

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