By Emma Ujah, Abuja Bureau Chief
ABUJA—Former governor of the Central Bank of Nigeria, CBN, Prof. Chukwuma Soludo, has said that the nation’s economy was suffering from a broken public finance and needed urgent strategy to fix it.
He said in an interview, in Nsukka, Enugu State, that the bloated recurrent expenditure of the federal government required a courageous action to balance the capital/recurrent budget provisions.
Federal government’s recurrent expenditures have consistently hovered around 70 per cent to 80 per cent, leaving capital with merely between 20 per cent and 30 per cent that are never fully funded.
According to Prof. Soludo, the level of borrowing must also be closely watched to avoid a situation in which all public funds would go into debt servicing in the future.
He said: “I think our public finance is broken, period. The public finance is broken and needs to be fundamentally fixed.
“I think the debt issue is simply a symptom of that- part of the manifestation of the public finance chaos, or the broken nature.
“100 per cent of our capital is borrowed, for example, and you have a debt service ratio to the GDP or the current revenue, you do the numbers. We are on a debt cliff and something must happen to the revenue base. You have over N100 trillion economy in nominal terms and you collect between 4-6 trillion revenue.
We are not anywhere near…so the first point I make is that you look at the revenue, the revenue mix and you think the way to solve it is to borrow your way out? You compound it to such a level that with time you would do nothing else than service debt. So the debt is only a part of it.”
Bloated recurrent expenditure
On the bloated recurrent expenditure, Soludo said: “Look at the recurrent expenditure. I don’t think anybody has the courage to confront the recurrent, as it were. It didn’t start today. That is the point I made when I wrote shortly before the last presidential elections.
“What I said now, I said then in my write-up, that public finance was broken. We were borrowing for even recurrent at the peak of oil boom in Nigeria in 2012, 2013, 2014 we had oil prices in $120s and so forth and we were borrowing for recurrent.
“The point is, it is a structural problem and the question is ‘who is going to bell the cat?’ and that will require a lot of courage to confront the size and growth of the recurrent , you also tackle the revenue base, and you also deal with the composition of spending itself.”
We must think post-oil Nigeria
The former CBN boss said that the political elite must think post-oil Nigeria.
He regretted that in spite of the talks about how to develop a post-oil Nigerian economy, the actions pointed to the contrary, as government officials had begun to return to their old ways, the moment crude oil prices rose.
“The mindset that has to change in this country is for us to begin to think post-oil. We have to think of a Nigeria without oil. But unfortunately, what I see creeping in is that we are back in the old ways.
“The oil is bouncing back and we are now again beginning to say ‘oh wonderful, lets enjoy ourselves,’ instead of thinking of Nigeria of tomorrow, Nigeria without oil. What do we need to do differently today to cope with Nigeria without oil? And what we need to do today is what you will also require to create jobs in the non-oil sector.
“The oil sector doesn’t create jobs. It is an enclave sector, very infinitesimal. It is the non-oil sector that creates jobs. With the massive urbanization, you need a new industrialization strategy. You have got to create industrial jobs for the teaming urban population, as it were,’’ he said.
Prof. Soludo said that the nation’s leaders must create the enabling environment to attract businesses into the country, as well as, have those that had exited earlier to return.
He said: “In a world of rapidly changing technologies, you can’t do it with the old method of just doing it by preaching to people- create jobs, be entrepreneurial. That is fair enough. It has to be.
‘’But you also have to understand why is it that many companies have closed shops and are closing shops? That is important because when you are asking people, go in, and you don’t understand why others are exiting, there is some quite creative destruction that is taking place and we have to understand the dynamics of this in the first instance.”