Nigeria’s 59 years of ‘potential’ without economic development
From the amalgamation of the protectorates to independence; from agrarian economy, hallmarked by groundnut and cocoa pyramids, to the discovery of oil; from military disruptions to 20 years uninterrupted civil rule; from discovery of numerous mineral resources to unfulfilled promises of mining development, it’s been all about unlocking opportunities.
Summed in 59 years after independence, the potential for economic emancipation of the country remains the hope that everyone entertains from the beginning, but far from realisation. That is the recurring potential narrative.
Nigeria, no doubt, has the global reputation as a country rich in natural resources. That alone confers the nation a right to economic wellbeing for its citizenry, but if only inclusive development goal and commitment to good governance are just a given.
On the contrary, events and developments have only placed the expected progress to the sidelines, with a fast rising cliché of “huge potential” pasted on the country’s identity. Unfortunately, Nigeria still remains deep in it, even in 2019.
The controversy over performance of the nation’s yearly budget is just one of the series of drama of absurd order of government’s failure and lack of commitment to the development of the economy through prioritised infrastructure projects. It is also key to the unrealised potential.
In the last 20 years, despite budgets in excess of N77 trillion, the nation’s yearly fiscal appropriation, which started from a modest expenditure plan of N948 billion — apart from supplementary requests — in 1999, consistently grew to approximately N9 trillion in 2019.
Arguing that successive budgets have failed by provisions, quality of work done and implementation, an Abuja-based development consultant, Jide Ojo, noted that there is just little to justify the yearly budget exercise that is tending towards mere “ritual.”
“There is need for inclusive and transparent budgeting process in accordance with the provisions of the Nigerian Constitution and the Fiscal Responsibility Act. Otherwise, budgeting in Nigeria will remain a hollow ritual. The potential mantra will elongate.
“No matter how little the capital investment in the national budget is, overtime, it has ended up either not being executed or not executed properly. How can the country make a headway, with the current fiscal crisis?”, he queried.
The items in the appropriation plan have not been an exception to Nigeria’s unrealised potential, as experts said that the combination of frivolous and fictitious heads, as well as duplications have remained major challenges, leading to poor performance and huge wasteful provisions.
High recurrent expenditure, which partly was paid out to “carefully crafted ghost worker” syndicates, who took advantage of the system inefficiency, notwithstanding, the non-implementation of capital votes as planned and abandonment of projects after mobilization, helped to bring the country down.
The frequent play of words like purchase, maintenance, upgrade, and furnish in relation to fixed assets are ordinarily not supposed to be repeated on yearly basis, as the items have longer duration/usage.According to investigations by The Guardian, all the ministries are culprits and have frittered away public funds in billions of naira through such repetitions.
For example, the Ministry of Agriculture, is notorious for using “seed” repetitively, allocating several hundreds of millions at each mention of “seed,” “seeds,” “seedling,” “improved seeds,” “seed and seedling,” as well as “insecticide,” “herbicides” and “fungicide.”
For example, in 2019, a joint campaign against wasteful and frivolous items and appropriations that have become routine in the national budget, led by the Centre for Social Justice (CSJ), succeeded in eliminating up to N45.93 billion, out of the N74.18 billion flagged by their budget review in the 2019 fiscal plan.
Earlier, the tardiness and recurring issues of non-clarity in the nation’s budgeting process, were seen in the proposals by Public Complaints Commission; Independent National Electoral Commission (INEC); National Judicial Council (NJC); and Niger Delta Development Commission (NDDC), as a violation of the rules.Besides, virtually all ministries, departments and agencies (MDAs) got votes for clothing and uniforms worth N3.2 billion, even when most of them have no need for such items.
The Public Complaints Commission had N4.2 billion, without details, the same argument that now seeks to compel the National Assembly to disclose details of its budget. INEC had N45.5 billion; NJC, Abuja, N110 billion and NDDC N95.19 billion. The NDDC had a vote of N95.1 billion; Ministry of Niger Delta N41.6 billion; while the Amnesty Programme has N65 billion, amounting to N201.7 billion.
At the Office of Secretary to the Government of the Federation (SGF), the North East Development Commission was awarded N10 billion, when Service Wide Vote of N45b captured same.But the amount saved by review of these estimates and others, at N45.93 billion is equivalent to the 2017 planned mass metering programme of the Abuja Electricity Distribution Company, covering FCT, Nassarawa, Kogi, and Niger states, or the UK Department for International Development’s N46.2 billion spending on the promotion of education in Nigeria through projects support.
Still, some of the country’s lawmakers have been indicted by the Independent Corrupt Practices and Related Offenses Commission over hoarding of Constituency Project’s items. How would the the potential be realised?
Indeed, it would be heart-rendering to imagine how many billions that could not be dictated by the review and long years of such felony against sovereign development plans.
The former Director-General of the Bureau of Public Procurement, Emeka Eze, said that the number of government projects currently abandoned across the country stood at 19,000 as at May 2016.He said that besides duplication of office buildings, personnel and overhead cost, there was the tendency for each agency of government to assert its authority in procurement process.
The result, according to other experts, has been poor execution or outright non-execution of projects after mobilisation, as well as over-pricing of projects, after delays in budget preparation and presentation, inconsistencies in timeframe and questionable figures.
Former Head of the Association of Chartered Certified Accountants of Nigeria, Mrs. Oluwatoyin Ademola, once lamented the country’s ugly budget developments, saying that “the duplications and ambiguous sub-heads in the documents show lack of transparency and poor processes. It is a pitiable situation for the country, given its place among other nations.
“Truly, if there’s a system and procedure, somebody should see something wrong in this development and somebody must be responsible and held responsible too.”But a lawyer and civil society activist, Eze Onyekpere, said what Nigeria’s economy gets in return for its abundant opportunities is all about self-inflicted economic disaster, because laws that work in other jurisdictions are subjected to ridicule, political gimmicks and ultimately ignored in this country.
According to him, Nigeria has earned the notoriety for poor ranking in the international open budgeting index, as well as the locally developed budget index.One of the measurements of these studies includes the level of participations of citizens, but the other challenging tasks that have given the country the low score are the tardiness between presentation and passage of the budget.
Sadly, among the bills passed the National Assembly that are not assented to by President Muhammadu Buhari is the Budget Timeframe Bill, which seeks to stipulate a time for budget process circle. It is also intriguing that he did not offer alternative, leaving the all-important national task to individual whims and circumstantial outcome.
“The budget circle is a major economic determinant, not only for its performance, but also in mobilising the private sector resources, as well as other economic agents to influence various activities that support growth. These confusions have defied ‘change’, yet we are expecting different result,” Onyekpere retorted.
Missing budget timeframe
An amendment, tagged: “Constitution of the Federal Republic of Nigeria, 1999 Fourth Alteration, No. 28 Bill, 2017,” proposes that instead of the old order, where the president and governors present the budget estimates at any time in each financial year, they would now be bound by a 90-day period to the end of the financial year. since 1999, the country has suffered from late passage of budget.
This amendment has secured the approval of both Houses of the National Assembly (NASS) and that of the required majority of State Houses of Assembly in accordance with section 9 of the Constitution.But the President has withheld assent to same. Meanwhile, there are more questions than answers for the refusal. Is it against national interest to pass budget early and run it from January to December?
Section 318 of the 1999 Constitution (as amended) defines the financial year as any period of twelve months beginning on the first day of January in any year or such other date as the National Assembly may prescribe.
At the moment, NASS has not enacted any new date as the official beginning of the financial year, but in recent years, the financial year has been undulating and is more of a pendulum, depending on the time the lawmakers were done with the approval of the budget and when the President decides to assent same.
President Muhammadu Buhari had severally, including the 2019 budget speech, indicated his intention to return the financial year to the January-December timeline. At one point, he even blamed the NASS for delayed approval of the budget.
But he has refused to commit himself and submit his intention to constitutionality, by signing the bill that will specifically put a maximum period for national budget to be signed into law. As at now, no one has fathomed a reason for the refusal, yet no clear alternative has been put forward.
Dr. David Agu of the Heritage Institute, said: “Any other course of action will be a great disservice to the long suffering people of Nigeria. Nigerians do not expect that the executive-legislative rift should get in the way of such clear-headed amendments.
“There must be irreducible minimum levels of cooperation between the two arms of government, no matter the situation; otherwise the government will need to throw in the towel and call for fresh elections under the doctrine of necessity.
“What is going on now is part of the constitutional architecture that can only promote dictatorship in both the long and short term.”He reiterated that an endeavour of this nature that has traversed both chambers of the NASS, with two thirds majority vote to amend sections and the resolution of not less than 24 State Houses of Assembly, cannot be held hostage by one person.
Weak Fiscal Governance
The war against corruption, specifically focused on the looting of public treasury by public officials, has gained traction now than ever, although other previous administrations have a level of claims in the fight. But by pattern of execution and results, they all appear to be the same.
An estimated N500 billion may not have been properly accounted for, going by findings in the 2016 report of the Office of the Auditor-General of the Federation (OAuGF), published on its website and submitted to the National Assembly.
For fiscal governance experts and public affairs analysts, the breaches are due to lack of enabling laws to compel and sanction Ministries, Departments and Agencies (MDAs) that ignore audit queries.Meanwhile, President Buhari, earlier this year, was served the sensitive audit reform bill, which is key to fiscal governance in the country, for assent, but he withheld his signature without open communications and failed to proffer alternatives. This is tacit encouragement of fiscal indiscipline in his government.
The audit bill, when passed, would reveal and plug the leaking pipes of corruption, compel and sanction MDAs that ignore audit queries; monitor compliance of MDAs; and create the independence of the office of the Auditor-General of the Federation.
Meanwhile, the National Assembly has not conducted a legislative hearing on the floor on any of the Audit reports through its Public Accounts Committee, a development that has reduced the tedious work of the Auditor-General to a mere academic exercise. So, when will the potential of fiscal governance in the country be realised?Onyekpere noted that the Federal Audit Service Commission Bill or the Audit Reform Bill received a much colder treatment because there was incontrovertible evidence that the bill was forwarded to the President.
“The President neither formally declined assent nor gave assent to this bill. It is customary that when the President declines assent, he sends a letter to the National Assembly, indicating his reasons for declining assent. He just acted as if the bill was not forwarded to him.
“The implication is that the government does not believe in most of what it says. It believes more in the propaganda of reforms, rather than actually implementing real reforms.“There is evidence of lack of capacity and political will on the part of this administration to timely and properly account for resource expenditure. Budget Implementation Reports (BIRs) no longer come on time and no longer reflect what actually happened.
“Fiscal stability is part of fiscal responsibility and transparent reporting is a key cornerstone of the two. Thus, Nigeria cannot be said to be fiscally stable in an environment of uncertainty and lack of reporting timelines, coupled with the administration’s impunity mindset that believes it owes the citizens no reporting obligation,” he added.
In the latest fiscal assessment of the country, covering 2016, there is extensive violation of statutory financial reporting obligations by government’s agencies, which raises great concern on the fight against corruption.
Most of the government corporations, companies and commissions have not submitted their audited accounts for 2016. Only 51 audited Financial Statements for 2016 and 149 for 2015 have been submitted to OAuGF as at 27th December, 2017, despite the provision of Financial Regulation 3210(v), which enjoins these bodies to submit both the Audited Accounts and Management Report not later than 31st May of the following year of account.
“As at April 2018, 109 agencies have not submitted beyond 2013, 76 Agencies last submitted for the 2010 financial year, while 65 Agencies have never submitted any account since inception,” the report noted.While the anti-corruption campaign is taking upswing, government agencies have became more reckless with public finance, as 323 agencies failed to submit report in 2016, from 215 in 2015 and 148 in 2014.
Meanwhile, the report detailed unremitted deductions amounting to more than ₦3.79 billion involving over 40 government agencies, including the Presidency, Economic and Financial Crimes Commission (EFCC), National Assembly, a development remarked as lacking in transparency and not in line with the requirements of the accounting standards.
The audit report also noted that about N13.96 billion reported as salaries and wages in the consolidated financial statement of the EFCC was not in their trial balance submitted for reconciliation.Besides, the EFCC was again listed as an agency with “doubtful” cash balances amounting to over N315 million, alongside the House of Representatives, N291.68 million; and Lagos University Teaching Hospital, N343.7 million, among hundreds of other agencies.
The State House headquarters, Office of the Chief of Staff to the President, EFCC led 62 other MDAs in the list of government offices with outstanding personal advances estimated at N4.87 billion as at December 31, 2016.The Partner/Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele, said there is need for fiscal transparency in the country, citing national survey conducted by the Nigerian Economic Summit Group, where about two in every three adults do not trust government with their taxes, hence about 83 per cent of individuals and nearly 70 per cent of businesses do not consider tax evasion as wrong.
“Government at all levels must urgently start taking steps to address fiscal transparency issues to build the much-needed trust in the system. This trend, unfortunately sends the wrong signal about tone from the top, which further dampens citizens’ tax morale. The vast majority of citizens and Nigerian businesses are unwilling to voluntarily comply with their tax obligations majorly due to lack of transparency and non-commensurate social services,” he said.
Indeed, Nigerians will wait more, even in the midst of grinding poverty, Federal Government’s revenue shortage and huge borrowings, to see the potential in fiscal governance.
Nigerian-born Dr. Philip Emeagwali, once said that “Nigeria is a West African nation of over 100 million energetic people. It is endowed with lots of natural resources, but lacks human resources.”The lacked human resources is not about certifications and exposure, but partly an obvious dearth of self and political will and ingenuity, needed to transcend seeming impossibility, particularly in the area of policy implementation, which “diversification” has emerged a victim and mere mantra.
The country’s Balance of Payments (BOP) may be notching up, but the inflows that drove up the numbers have always been dominated by the crude oil and gas market- a clear vulnerability to external shock and a confirmation of how shallow the country is in the diversification scheme, despite claims.
Nigeria’s economic hub is Lagos State, with the busiest gateway lying situate at Apapa, one of the state’s suburb. It’s roads, irrespective of their economic importance, are simply like “roads leading to nowhere.” For typical Nigerians, with “can do spirit”, risks are meant to be taken and indeed, they are bearing the risks. But how have they fared? What are the implications for the economy?
Despite the indispensability of Apapa Ports, several governments have played to the gallery when it comes to renewing its infrastructure base to ensure continued cash flow. The current administration, with four years gone, is also one.
Presently, the gridlock remains. As at March 2019, inefficiency at the ports delayed shipment of 50,000 tonnes of cashew nuts valued at $300 million and threatened this year’s output targets, as the traders were cash-strapped. The commodity, which was 2018 harvest, was due for export by January 2019, but according to the Nigeria Cashew Exporters Association, was still in the containers on trucks waiting to enter the ports or on wharves, till March 28, 2018.
A politically exposed person and economist, confided in The Guardian that the lack of real diversification in the country runs around slow evolving of efficient strategy, commitment and implementation.“It is the mediocrity seen around the corridors of power overtime, that only wants to eat and not concerned with the future of the country. Nigeria’s diversification setbacks are far from over.”
It would be regrettable to know that right in front of the nation’s major gateway- Apapa ports, export-bound non-oil commodities lose value due to unending gridlock, caused by combined lack of strategy, non-prioritisation of projects, poor enforcement of rules and ineffective implementation of plans.
The continued siege to Apapa Ports roads by the drivers of articulated vehicles is nothing short of dearth of ideas and tacit admittance by the country’s leadership at all levels. It betrays the acclaimed successes in the ease of doing business.
The “change” has failed to change the impunity that continues to eat deep into the country’s potential earnings, discourage small businesses, create losses for entrepreneurs, destroy the environment and the already strained infrastructure.
An exporter Tony Adi, retorted: “Please tell them, in case they don’t know, that ease of doing business is not only about registering businesses. It is about seamlessness in getting value from the businesses registered without undue encumbrances.
“After registering a business, you struggle to produce and end up losing the products. What is the ease of doing business in all of these? I am afraid the country is moving in the cycle of poor prioritisation due to the selfishness of the leadership, cluelessness of appointees and lack of political will. They are only sabotaging their own policies, because they are the owners of these tankers”.
The Debt Brouhaha
Nigeria’s debt profile is estimated at N24.95 trillion as at March 31, 2019. It is still far away from the international threshold of 56 per cent for countries of Nigeria’s caliber at about 20 per cent presently. The reality is that despite the economy being under-borrowed, going by the measurement of the threshold, the debt stock is already assuming a more disproportionate weight against the country’s growth and development, a situation that will dispose the nation to perpetual borrowing.
The only solution that is practical, with improved governance, is the urgent implementation of policies that will grow and diversify the revenue base of the country to avoid imminent debt crisis. So, Nigeria’s debt sustainability potential is hugely hinged on what and how the proceeds are utilised. This point, again, is a hot controversy, judging by government’s claims.
Firstly, an analysis of figures showed that the growth in Nigeria’s debt is higher than the growth in revenue and Nigeria has the lowest government revenue to Gross Domestic Product (GDP) ratio at six per cent among some selected countries.Among the countries was Kenya, with 19 per cent revenue to GDP; India, 21 per cent; China, 28 per cent; and South Africa, 28 per cent.
FSDH Research fingered Nigeria’s over-dependency on crude oil revenue, combined with volatility in both the price and production of crude oil as the major reasons for sluggish growth in government revenue. Ayodele Akinwuni of FSDH Merchant Bank Limited, said growing non-oil revenue will require that the economic environment has inherent structures that can support business growth.
“Such structures include adequate physical infrastructure, policies, legal and regulatory frameworks that will make the economy business-friendly to generate taxable profits,” he said.The challenge remains why there are incremental obligations without corresponding fiscal structures on ground.
Secondly, an analysis of the ratio of the interest payment on domestic debt in comparison with the Federal Government’s allocation from the Federal Account Allocation Committee (FAAC), showed that the government is spending too much of its revenue to pay interest on loans, with the principal still hanging.
For example, there is a persistent significant increase in interest payment on domestic debt relative to government’s revenue from FAAC in the last three years.In 2016, while the Federal Government earned N2.1 trillion from FAAC, it paid N1.24 trillion as interest rate on local debt. In 2017, it got N2.64 trillion allocation from FAAC, but spent N1.45 trillion; while in 2018, figures available showed that it has already paid out N931 billion in interest payment on domestic debt as at second quarter, out of N1.71 trillion allocation.
“This leaves the government with little resources to spend on critical sectors of the economy that could support strong growth and maintain a healthy economy to generate revenue.“The current high interest payment relative to revenue may also increase the credit risk of the country. Although the government has been able to meet its debt obligations (interest and principal payments) so far, if the current situation is not addressed, the interest rate on government loans may increase because of the perceived elevated risk.
“This would also lead to higher interest rates for private sector operators. It is important to note that the external environment is becoming tighter than before because of the rising interest rate in the United States,” Akinwumi, who is also an economist, noted.
Thirdly, an analysis of the country’s debt sojourn since 2013 showed that there has been a steady increase in the profile, with less than proportionate rise in revenue.For example, in 2013, government revenue-to-total public debt was N8.9 trillion against N10 trillion debt; in 2014, the revenue shot up by N600 billion to N9.5 trillion, while debt profile rose by N1.2 trillion to N11.2 trillion.
However, in 2015, while the debt increased by N1.4 trillion to N12.6 trillion, the government’s revenue base lost its steam by N2.3 trillion to settles at N7.2 trillion.It was a dramatic turn in 2016, when the debt moved from N12.6 trillion to N17.4 trillion, while revenue plunged further to N5.7 trillion, from N7.2 trillion and eventually led to economic recession.
In 2017, it was not better still, as the debt moved further to N21.7 trillion, with a marginal increase in revenue to N6.9 trillion compared to N4.3 trillion rise in debt.In 2018, debt profile settled at N24.39 trillion, with revenue projections, after a wide criticism by analysts, fell flat, with widened budget deficit.
For analyst at Afrinvest Securities Limited, gross revenues significantly improved by 35.8 per cent to N6 trillion for the first eight months of 2018, from N4.4 trillion in the previous year. “However, when compared with budget expectation of N8.9 trillion, it represents a shortfall of 31.2 per cent. Also, there was a broad-based recovery in the revenue segments, but oil surged the most at 53.2 per cent to N3.6 trillion and its share of total revenues moved up 5.9 percentage points to 59.1 per cent.
“Interestingly, non-oil revenues also recorded a double-digit growth, although slower at 18.7 per cent to N2.5 trillion. Corporate taxes was the standout performer, with a growth of 31.1 per cent to N970.7 billion, while VAT and customs and excise duties also improved at 12.6 per cent and 11.2 per cent to N706.3 billion and N445.4 billion respectively,” the company’s Managing Director, Ayodeji Ebo, said.
They argued that to enthrone a more sustainable fiscal condition, government has to align its projections with revenue realities by cutting down running costs, but that was not to be, even now.Rather than adjust to realities, government officials have doubled efforts in telling Nigerians that there is no debt crisis, even with mounting evidence of incremental stock of obligations, along with huge debt service bill and the concomitant effects on the national revenue and growth plans.
Indeed, this has raised questions over the leadership’s sincerity, its capacity to save the country from imminent pre-2005 debt dilemma and what becomes of the next generation.Nigeria’s Minister of Finance, Mrs. Zainab Ahmed, was the first to advance the contradictory debt narrative of “No Debt Crisis, But Revenue Crisis”, as her approach to fend off fearful realities that beset the economy. She has not only repeated that same line, but influenced others to chorus it, irrespective of the inherent distortions.
The mindset adopted by the officials short-circuited the meaning debt crisis to a situation where government cannot pay anymore. That is fundamentally wrong, especially when the ability to service the debt is impaired so much that the economy is now deprived of a fiscal space.Ahmed said Nigeria does not have debt problem, citing the country’s debt ratio to Gross Domestic Product at below three per cent threshold set by the Fiscal Responsibility Act.
“What we have is a revenue problem. We don’t have revenue to pay salaries and to meet the recurrent expenditure, as well as the capital expenditure,” she said.But the minister did not take into consideration the implication of low revenue with regards to debt sustainability. Only time will tell if she is right in this postulation.
Living in denial of the nation’s ongoing fiscal crisis and the soon to come escalated headwinds against the economy, for whatever reason, cannot erase the ugly realities, nor spur the long-sought growth fundamentals that have been altered since 2016.
The truth is that the economy is in dire need of strategy and an effective one, to bail it out of the current quagmire. An economist, Ucha Nwagbo, said the country has always opted for homegrown strategy, especially given our peculiar environment, querying why such has not been applied in this debt saga.
“It’s surprising that the so-called economic managers have held on to the ‘theoretical’ international debt threshold to deceive those that are not aware. Threshold does not pay debt nor does it determine ability.“It is hypocritical to dish out half-truth to Nigerians with the narrative that there is no debt crisis. When you use more than half of your revenue to service debts and borrow more to execute your normal activities, you are only increasing the debt stock, as well as the service bill.
“The debt service provision in 2018 budget was N2.01 trillion and in 2019, it is over N2.3 trillion. Who is now deceiving who?” he queries.
Also, another economist at the Abuja-based Centre for Social Justice, Fidelis Onyejegbu, said his grouse with Nigeria’s debt is all about sustainability, as it seems to be increasing with no clear thoughts on how these debts would be repaid.
“DMO’s 2016 Debt Sustainability Analysis (DSA) reported that although the nation’s debt position is sustainable, it experienced some deterioration and had slipped from a low-risk of debt distress to a moderate-risk of debt distress. The 2017 DSA also maintained the same remark.
“The proposed 2019 federal budget represents the first time that debt service (both servicing and sinking fund) would be higher than the capital expenditure at the proposal level; while the former is 25.65%, the latter is 23.02%, with 2.63% being the margin,” he said.
Onyejegbu advised that instead of growing the debt profile, government should focus on increasing public private partnerships through well prepared projects, involving the MDAs, the Infrastructure Concession Regulatory Commission and the private sector.
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