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Will $5.5bn loan revive the economy?

SENATE CHAMBER

By Henry Boyo

WHAT do you think of the Federal Government’s plan to borrow another $5.5 billion, to service existing debts and sustain recovery from recession?

I would like to think that the government knows what it is doing, however, when you examine the platform on which government bases its expectations, it becomes arguable whether or not the eminently capable hands and minds in government are deliberately misleading the people or they themselves are actually ignorant.

Naira

However, my considered opinion, is that, government’s decisions to borrow foreign currency to pay Naira debts and further compound an already oppressive debt burden, is not in consonance with common sense.

Why do you say so?

If you have a situation where debt service and repayment is already an acute problem, the common sense response would primarily, be two fold. First, you reduce spending, by cutting down on frivolities and expenditure leakages and duplication, so that the pressure to worsen an already, back breaking debt burden will be less. The second response is to increase your sources of income. Instructively, the primary source of government’s income is invariably taxes.

So, in practice, is government’s present debt strategy, in consonance with common sense? Has government attempted in any way to reduce expenditure, particularly recurrent expenditure? The answer is no.

The Federal Government’s strategies to reduce recurrent expenses, currently, include removing ‘ghost workers’ emoluments from the wages bill, reduction in salaries, allowances and other expenses of the National Assembly and Federal Executive, restoration of equity in public expenditure. Unexpectedly, however, despite government propaganda, recurrent expenditure has never reduced year on year, even after thousands of ghost workers were reportedly expunged from the salary budget and leakages and widespread serial corruption allegedly tamed, recurrent expenditure has remained stuck as high as 70% of total budget.

But a lower salary bill will lead to some job losses, and government obviously doesn’t want to do that, hence the need to borrow for capital projects while working to improve income sources?

I think you miss the point. Are ghost workers part of a genuine labour force?

No, but they had a programme through which they expunged ghost workers from the system, which means they had done something in that regard?

Thank you. That’s exactly what I’m saying; if you claim that 100, 000 ghost workers, for example, were deleted from the payroll, you would expect to see a reduction in the recurrent expenditure bill. Or, shouldn’t you? If revenue leakages that facilitate corruption, have indeed been reduced, why does recurrent spending always remain nearer 70% of total expenditure? I am not suggesting that retrenchment should be automatic. I’m saying that in order to restrain obsessive debt accumulation, you do two things; the first is to reduce your expenses; shunting out ghost workers and adopting a TSA    system that captures all government income, are some ways of reducing wastages and leakages, to reduce the pressure to borrow.

Inexplicably, however, recurrent consumption has grown, from about N2 trillion, to about N5 trillion within 4 years. Not only that, debt burden has spiraled so badly, such that, government now deploys, almost 60 per cent of its actual aggregate revenue to service Nigeria’s present sovereign debt. Furthermore 70% of the balance N40 million will be consumed as recurrent expenditure.

Ultimately, with increasing debt and reduced revenue, you may infact need to borrow much more to service existing debt and fund recurrent expenditure, with little or nothing left over as capital expenditure!

But the government is assuring that borrowed fund will be spent on roads, rail and power infrastructure, which will generate economic activities that will create jobs and also generate revenue that will be used to service the debt…

I believe you are asking this question as a journalist? However, when you think carefully about what you are saying, you will probably find that you are building your expectations on sandy soil, because ultimately, it is not the amount of money that government spends, either as recurrent or capital expenditure that positively drives the economy. For example, annual budgets have significantly increased over the years, but is there any notable increase in employment or social infrastructure, that has positively touched our lives? If your answer is no, then your expectations for positive outcomes are not predicated on any realistic platform. So, clearly, any propaganda to the contrary, is deliberately intended to simply mislead our people.

There is truly little to show for earlier debts, but as this government is relatively new to power, shouldn’t Nigerians give them the benefit of the doubt and support the borrowing plan, but also police the fund to ensure that it is utilized for the purpose it is being acquired?

Well, government has already borrowed over N4Tn in the past two years alone, but have you seen any positive social impact of these debts? The answer is no. Alarmingly, they have, conversely, put Nigerians on notice that, over 50 per cent of what they want to borrow is not going to be applied to any physical infrastructure enhancement, will be dedicated to service local debt. It is madness! Besides, who is going to ‘police the use of funds’ with corruption, still an endemic tradition in public service?

So, you are saying that government should not borrow, even if Nigerians continue to suffer the adverse effects of infrastructure deficit, which when reversed can unleash the economy?

I’m also asking if you have witnessed any positive impact on employment or real growth in personal income or social infrastructure, etc, despite the Trillions of Naira constantly borrowed, annually. If you are honest with yourself, the answer again, is no; notwithstanding, you still insist that, ‘let’s forget about the two years they have been there, they are still young and we should allow them to borrow some more, even if fresh debts are being incurred to primarily service old debts!

Now, let me repeat —government expenditure, is too modest to drive the kind of economy that Nigerians anticipate. N7 trillion budget in 2017, is only, about $23 billion; meanwhile industry experts suggest that we require well in excess of $100bn to get steady power, while aviation, maritime and transport infrastructure also have similar funding short falls; so, how do you expect a mere $23 billion annual budget, with just $6bn or 30% capital allocation redeem our economy? Has the annual serial increase in debt, brought any succour? The answer is no. So, why should we follow the foolish path of saying, let them keep repeating the same failed solution while we hope trustingly that, we will get a better result this time. Can you see why I said you are standing on quick sand?

 

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