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“As an individual, who undertakes to live by borrowing, soon finds his original means devoured by interest, and next no one left to borrow from, so must it be with a government.”
—Abraham Lincoln
By Omoniyi Salaudeen
Nigeria’s Super Minister, nay the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, was on the spot last week for presenting a budget deficit proposal of N12.42 trillion in the 2023-2025 Medium Term Expenditure Frameworks (MTEF) and Fiscal Strategy document before the National Assembly for consideration.
To be sure, the adjective “Super” attached to her official designation is only used here to buttress the enormity of responsibility invested in her for superintending over three critical departments rolled into one.
No other ministry is as pivotal to the success or failure of the fiscal policy of the government as her ministry. It is the livewire of any administration because it is the only body statutorily empowered to manage the finances of the Federal Government, including monitoring of revenues and expenditures.
In other words, it is her direct responsibility to stabilize the economy by manipulating the levels and allocations of taxes and government expenditures. Fiscal measures are used in tandem with monetary policy to achieve certain goals.
As the Chief Driver of the economy, it can be presumed that Ahmed already had at her fingertips all the indices that qualified Nigeria to access more loans in addition to the outstanding debt stock put at N41.60 trillion in the first quarter of 2022 by the Debt Management Office before heading for the Senate Chamber to make presentation of the hard to sell deficit financing proposal.
This is more so with the apprehension that has been trailing the country’s rising debt profile and its sustainability in the face of the current global uncertainties. But the proposal failed to sail through the scrutiny of the Senate Committee on Finance, which declared that the borrowing trends by the Federal Government “cannot be allowed to continue unchecked and conscious efforts must be made to reduce budget deficits.”
As an alternative way out, the Committee Chairman, Senator Solomon Adeola, challenged the ministry to work out measures on how to block revenue leakages, as well as boost revenues of the government in the face of dwindling resources from traditional revenue source of crude oil. The panel’s objection to more loans, he stated, was “premised on the need to reduce government yearly budget deficits resulting in massive borrowings from local and international sources.
“It is in this wise that the committee frowns at the projected N12.41 trillion budget deficit contained in the 2023-2025 MTEF/FSP and the alarming projection of ‘no provision for treasury-funded MDAs’ capital projects in 2023.”
What’s more, the lawmakers got a resounding applause for that firm resolution especially knowing full well that the Federal Government is currently spending about 89 per cent of its revenue earnings on debt servicing, reflecting poor domestic revenue mobilisation capacity.
Over the years, the argument the government has always used to douse public skepticism over its borrowing spree is the low debt to GDP ratio. According to expert, “debt-to-GDP ratio is a measure of a country’s ability to pay back its debts. It has also been interpreted as the number of years needed to pay back debt if GDP is dedicated entirely to debt repayment. The higher the debt-to-GDP ratio, they say, the less likely the country will pay back its debt and the higher its risk of default, which could cause a financial panic in the domestic and international markets.
So, it is by hiding under the hypocrisy of low debt to GDP ratio that the Minister of Finance has always provided a technical justification for Nigeria to continue borrow.
While report confirms that Nigeria’s debt to GDP ratio is less than 25 percent, far below the World Bank recommendation of 64 percent debt to GDP ratio, the revenue to debt servicing is said to be one of the highest in the world. At present, Nigeria’s debt service-to-revenue ratio stands at 118.9 percent. This undesirable disproportionate debt service profile, according to the Economic Intelligent Unit EIU, one of the world leaders in global business intelligence and Industry reports, “underscores the current unsustainable fiscal policy and the government’s stubborn resistance to changing policy.”
Nigeria’s capacity to generate revenue has been severely restricted by a number of factors including oil theft as well as income leakages in solid mineral sector. While the Federal Government has continued to lament the effects of oil theft on revenue, it has also lost control of the solid mineral sector due to the influx of ghost players.
Yet, the government often finds indulgence in the disposition of the leadership of the National Assembly which is always at the beck and call of the executive to take more loans. For instance, the Senate President, Ahmed Lawan, in a speech titled ‘Beholding the Silver lining in Nigeria’ delivered to mark the 2nd anniversary of the 9th Senate under his leadership, in an attempt to justify the approval for additional borrowing, “said the National Assembly would continue to approve loan requests, which are for the provision of critical public infrastructure, which Nigerians cannot do without and for which the country had no choice but to obtain.” With this justification, the National Assembly went ahead to approve the sum of $6.1bn bringing the country’s total loan stock to NGN107trillion (USD87.239billion) as of March 31, 2021.
It is, therefore, curious to see how the Senate suddenly realized that Nigeria has over borrowed. What the government has been doing is to use only debt to GDP in making borrowing decisions without considering revenue to debt service ratio which should serve as a note of caution. Some experts are of the opinion that the current indices still provide Nigeria a little window of opportunity to borrow considering its current debt to GDP ratio which is less than 25 percent against the World Bank 64 percent. But it is high time the lawmakers stood up to their responsibility by stemming the danger of reckless borrowing in the face of the dwindling revenue to the Federal Government. They should go beyond rhetoric and put the Minister on the spot to demonstrate to the Nigerian people how to strike a balance between revenue to GDP ratio which is less than 8 as against 15 recommended by the World Bank as optimal, and the revenue to debt service now said to be the highest in the world.
Nigerians have watched things degenerate to this level and it is already obvious that the nation cannot continue to carry on in the business as usual. Beyond the possession of B.Sc. degree in accounting and MBA, there is no other demonstrable evidence to show that Hajia Zainab Ahmed has the requisite capacity to carry the enormous responsibility of maintaining a strong macroeconomic stability in a country as vast as Nigeria to withstand the vagaries of the global economy. Among other things, foreign exchange sleaze, domestic and direct foreign investments, tax revenue leakages arising from corruption in the system are some of the fundamental issues that need to be seriously looked into to reverse the current negative trend. Concerned Nigerians have watched with an incredible sense of loss the inability of the government to refine crude oil locally which has constituted a clog in the wheel of progress, while on the other hand, the so-called subsidy on imported fuel has become a chess pool of corruption.
As of today, a lot of Nigerians are still contesting the sudden increase in daily petrol consumption from 30 million litres in less than five years to a current estimate of around 100 million litres per day. This is a clear testimony of underlying sleaze in the system. For any Economist or Finance Expert that knows his onion, there is no justifiable reason for government to borrow N11 trillion and spend N3.3 trillion on the payment of petroleum subsidy out of which about 80 percent will go into individual pockets of some vested interests. The figure is too staggering to contemplate.
Until her appointment as the Minister of State for Finance, Budget and National Planning, in the first instance, and subsequently conversion to the substantive Minister in 2019 after the exit of Kemi Adeosun, Ahmed had had a stint as Executive Secretary and National Coordinator of the Nigeria Extractive Industries Transparency Initiative (NEITI) as well as Chief Finance Officer of the Nigeria mobile telecommunications company. Following her appointment, President Muhammadu Buhari brought the two ministries under her watch as one, making her the de facto Minister of Economy. Here stands Nigeria under her three and a half years of service. By refusing to approve the request for another deficit budget financing in this last lap of the Buhari administration, the lawmakers are out to put her capacity to manage the economy is a crisis situation on trial.
