The federal government will apparently run another budget deficit next year. I am an economist, and I know what they say about government spending in economic downturns, I have heard everything about fiscal stimuli, I know that revenues will be down but spending priorities will still have to be met, and I know almost every country in the world will be running deficits in the interim period.
But lets get something straight. Nigeria is not "every country". Nigeria is Nigeria.
Japan's government debt is MASSIVE. Likewise the United States, France and the United Kingdom. Each of these country's government debt (all levels of government, not just national) are so enormous that they make the $30 billion debt Nigeria was complaining about a few years ago look like groundnut.
Which is sort of the point, isn't it?
Our tiny "groundnut" debt of $30 billion weighed heavily on our polity, economy and society, didn't it? We could have (should have) handled it a lot differently down through the decades (more on this later), and I remain unconvinced that it was worth it to expend $12 billion in available capital to retire it, but my opinions are not the issue. In the real, practical world our $30 billion debt was a giant, albatross hanging on the collective necks of the people of Nigeria, in ways that I am tempted to discuss here, except that it would take me away from the core point I want to make in this post.
Actually, the genesis of that $30 billion debt goes back to the 1970s, during the cash-rich years of the Oil Boom. There is a possibly apocryphal, possibly true, story that suggests international agencies/consultants told us we were "under-borrowed" for an economy our size. Whatever the reasons, we borrowed a little. Eventually, commodity prices fell on world markets, ending the Oil Boom; this was the start of nearly two decades of low commodity prices that only ended with the explosion in commodity demand from China and India at the turn of the century.
At about the same time the Oil Boom ended (in the late 1970s), the military/civilian diarchy in Nigeria handed over handed over power to a civilian administration, beginning the short-lived Second Republic. The problem was, Nigeria continued living as if the Oil Boom was still on (up to and including an over-valued Naira), and as a consequence our debts grew (as we borrowed to finance spending) even as our ability to pay the interest on those debts diminished. The Alhaji Shehu Shagari-led federal government introduced what were euphemistically known as Austerity measures, then was overthrown by the new military/civilian diarchy. Throughout the years of this second diarchy, under heads-of-state Mohammedu Buhari, Ibrahim Babangida, Ernest Shonekan and Sani Abacha, Nigeria felt the full effects of the continuing collapse in the global commodity markets. We were unable to meet the interest payments, so the interest got capitalized and the debt principal grew fast.
This is how we ended up with $30 billion in debt when civilian-led governments returned in 1999. This is why we paid $12 billion in a lump sum to our Paris Club creditors. Most of the $30 billion was capitalized interest; it is not like we borrowed $30 billion and used it as productive investment capital or anything like that. And of the little of it that was the original principal, only God knows what that was spent on.
The founding of the Fourth Republic in 1999 coincided with the point when Chinese and Indian growth drove global commodity prices up through the roof. It is for this reason the federal government was able to build up enough reserves to pay $12 billion in a single lump sum to retire the $30 billion debt.
And as we entered what seemed to be a second Oil Boom in the 21st Century, the federal government started borrowing again. This time they said it was necessary so that we could get a credit rating. The state governments started borrowing too; there was no legal or legislative limitation on the state governors' borrowing, no credible accounting of how much had come in and what it was spent on, no published plan of how it was going to be paid, and all this was occuring in 36 atomized states, most of which were borrowing to cover for not being economically viable in the first place.
Now I am not opposed to borrowing (it is a necessary part of economic life; heck, I have borrowed myself) but there has to be a point to what you are doing, a reason for doing it. And importantly the money borrowed must be invested in such as way as to create the conditions, the wealth, the assets or even the revenue stream that would support its repayment. Using myself as an example, I borrowed to fund my education, and that education is what is paying back the loan.
But I digress.
Here we are, and the second Oil Boom has, if not collapsed exactly, definitely been offset somewhat by the global economic crisis. And here we are again, same as in the Second Republic, carrying on (at federal, state and local levels) trying to spend as if the Boom was still on. Our reserves have been depleting fast, even as our deficits begin to accumulate.
Instead of opening academic textbooks and telling ourselves that in times like these a deficit is unavoidable, we should acknowledge the fact that our economy and polity can not deal with the medium- and long-term consequences if we don't get our fiscal situation in check. We have not done the things we should have done a long time ago, and cannot now make policy based on the pretence that we have.
Oddly enough, the economic difficulties present us with yet another opportunity to begin the process of "doing the things we should have done a long time ago".
Consolidating banks is nowhere near as important to Nigeria as geographical consolidation, or (put in simple terms) the consolidation of our second- and third-tier federation units. Put even more simply, there should be fewer states and fewer local government areas.
Going from 36+1 states to 6 states, from 774 local government areas to 72 local administrative districts, and from a bicameral federal legislature to a unicameral one will save Nigerian billions of Naira every year. As I have said over and over on this blog, while we the people obsess about criminal acts like theft, fraud, corruption, etc, we actual lose so much more to WASTE, the overwhelming amount of which is perfectly legal. It is not just about the simple savings accruable from supporting the retinues 6 governors instead of 36; each pole of power in Nigeria is the centrepoint of a concentric web of WASTE. And reform is not just about lowering the number of executives and legislators, nor even just about limiting the sizes of cabinets and "assistant-ocracies"; we must impose constitutional restrictions on annual deficits and requirements to be met before legislatures can authorize new debt. Mind you, none of this would be worth anything if we the people continue to lack the ability to substantively guide policy-making through a free-and-fair, transparent and "not-rigged" ballot box.
But before we get into all of that, let us start NOW to push for a consolidation of the states, local government areas and ministries. Even without further needed reforms, reducing expenses such as these and these might be enough in and of itself to turn 2010's deficit into a surplus.
Of course it won't happen.
There is no way these politicians will vote themselves out of a job, and we the people have no way of doing it ourselves through the ballot box.
Here we go again. Doomed to repeat history because we have not learned from it.
No comments:
Post a Comment