Democracy and its porous economy

on   /   in Viewpoint 9:02 pm   /   Comments

IN order to underscore the seriousness of the task before our Constitution Amendment Committee, I wish to revisit an analysis I first carried out in my 2008 book, Strategy for a Final Assault on Corruption.

The Table below shows Nigeria’s oil revenue from 1970 to 2006 (from CBN’s annual reports and other Statistical Bulletin on Public Finance Statistics).

Table: Gross Oil Revenue Federal Government of Nigeria, 1970 – 2006

Year    (N Bn)
1970    0.2
1971    0.5
:    :
:    :
1998    324.3
1999    724.4
2000    1,591.7
2001    1,707.6
2002    1,230.9
2003    2,074.3
2004    3,354.8
2005    4,762.4
2006    6,109.0
2007    4,463.0
Total (1970-2006) è    23,842.7

Now, notice the dramatic surge in oil revenue, which started in 1999, and continued rocketing upwards till 2006, before it slightly went down, probably as an early sign of the global meltdown that soon followed.  We can (from the full data) summarise the revenue streams as follows:

*Gross oil revenue in the 29 years,from 1970 to 1999

*Gross oil revenue in the next seven years (from 2000 to 2006) Total: 23.8

In other words, in the 29 years, from 1970 to 1999, our cumulative oil revenue was only N3 trillion; while a whopping N20.8  trillion was received in the next seven years, from 2000 to 2006! Again, these are official figures, from the CBN website.

There is no doubt about what we achieved  with the N3 trillion of the first (mostly military) 29 years: the massive post-war infrastructure development, including the extensive network of federal roads; numerous power plants and water dams; various airports across the country; seaports built in Lagos, Sapele, Warri, Port Harcourt, Onne, and Calabar; various telephone exchanges across the country; the Lagos “fly-overs” and bridges, including the Third Mainland Bridge; the Ikoyi federal secretariat; the massive Ajaokuta and Delta steel complexes, and various steel rolling mills; our various oil refineries; the petrochemical plants; the paper mills and fertiliser companies; various vehicle assembly plants in Kaduna, Lagos, Enugu, etc; all those federal universities, colleges of education, and Unity schools; the building of modern capital, Abuja (including Aso Rock, the Abuja road network, federal secretariats, the Three-arm Zone, various government edifices, the massive Gwarinpa housing estate (also, estates in Karu, Lugbe, Wuye, etc); and so on! All these were carried out from the N3 trillion!

Now, if N3 trillion achieved all these in the 29 years, up to 1999, what on earth did we do with the unprecedented N20.8 trillion that poured into the country in the next seven years?

Did we use the wealth to repair our deteriorating road network? No; our roads were so deplorable in 2007 that a new minister wept publicly at the sight of the ordeal Nigerian motorists were going through! Did we use the windfall to build massive housing for Nigerians? Not at all; instead, government sold the public houses it inherited from the military under the monetisation programme! We can say the same thing for our education system, health system, and so on! They were all deplorable!

Could we have invested the money in our telecommunications infrastructure? No! Instead the sector was another source of windfall for government! We wisely allowed the private sector to come in and invest its own money; which not only transformed the sector, but also helped government to reap additional revenue through licence fees and taxes!

What about refining capacity: Did we use the windfall to construct new refineries? Far from that! We could not even keep the existing ones running! Instead, we created a new special agency in June 2003, the Petroleum Products Pricing Regulatory Agency, PPPRA, for managing our fuel importation and subsidy!

But most importantly, how did that wealth impact on ordinary Nigerians? This was perhaps, the most tragic aspect of that windfall: Our population in poverty (as published by the National Bureau of Statistics, NBS) increased nationwide, from 67 million in 1996, to 69 million in 2004! It has continued to get worse, such that by 2010, the number of Nigerians in poverty had hit 112 million!

So where on earth did the money go? Somebody can argue that the value of the Naira was not the same over all those years. Very correct; but it absolutely cannot explain away the unprecedented windfall! Look at the eight-year period, 1998-2006. Government’s oil revenue doubled, tripled, quadrupled, and rocketed many folds, in that short space of eight years! That was enough to turn every part of this country into a modern paradise!

We can also look at the year-on-year increases. For example, in 1998 we earned N324 billion; but in 1999 the revenue shot up to N724 billion! Notice that the N724 we earned in 1999 was equivalent to the N324 billion of the previous year, plus an extra N400 billion!

As if this was not enough, in 2000, the revenue rocketed to N1,592 billion! This was equivalent to the jumbo N724 billion of the previous year (1999), plus an extra N868 billion!

What an unprecedented windfall! We can do a similar thing for many other consecutive years in the Table; but that will just return us to the nagging question: Where on earth did all the money go?

It is true that our democracy came with a higher level of governance costs – large number of legislatures, ministers, special assistants, and so on. But this equally cannot explain away the windfall. For example, by 1999, all the democratic structures were already on ground; and their needs were adequately met by the jumbo revenue of that year. Now, did the democratic structure subsequently expand each new year, to be able to consume that year’s new windfall?  .

Many patriotic Nigerians did raise alarms, including Gov. Bafarawa of Sokoto state: “When he [Obasanjo] came to power, crude oil was selling at $9 per barrel. Three months later, the price shot up to $30 per barrel, and remained so for two good years. If a State like Sokoto could receive N20 billion from the federation account over the period, imagine the quantum of resources at the disposal of the federal government!” (see ThisDay, 28th April 2002).

Poor Governor! He did not know that the real windfall was still on the way! The revenue that excited him in 2002, as “quantum of resources”, was to double, triple, and (more than) quadruple in the next four years!

Remember also that even the oil price of $9/barrel, which our democracy met in 1999, was already a windfall, for which the Abacha administration had set up the Petroleum Trust Fund (PTF)! We all witnessed what the PTF accomplished! So, where on earth did the real windfall go? What really went wrong?

Note that the windfall was not for the federal government alone! In fact, Sokoto cannot self-righteously blame Abuja, because the yearly statutory collections of every state in the country (from Sokoto to Bayelsa) also doubled, tripled, and jumped many folds, in a space of 7 years, from 1999 to 2006 – enough to turn every part of this country into a new paradise! For a state such as Lagos, which exploited its potentials to additionally harvest huge internally generated revenues, the windfall touched the skies! So, where on earth did the money go?

 

Note also that the wealth from Nigeria’s exhaustible natural resources belongs to both our present and future generations. This democracy has absolutely no right to squander it today as “recurrent expenditure”! What structures are we using this wealth to set up for the upcoming generations? Even the systems for their education and health are in shambles, at a time that knowledge has become the driver of the global economy!

That’s why our National Assembly and Governors must, as a duty to Nigerians, not miss the opportunity the ongoing constitutional amendment provides, for decisively fixing the flaws of this dysfunctional democracy!

Gabriel Zowam, a social critic,wrote from Abuja.

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