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Nigeria's 2013 Fiscal Austerity Budget (3)

09 Nov 2012

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By Odilim Enwegbara


''Let's fix our infrastructure with 4bn barrels of oil''
It was with such sheer absolutism, feudalism, and philistinism that Louis XVI ruled the people of France as their monarch. And to support the extravagant luxuries of his monarchy, French peasants were ruinously taxed. But trying to extent this ruinous taxation to French bourgeoisie, soon made him the most unpopular monarch, his ministers and the nobles the most hated public parasites in the monarchy's centuries of history. Without enough home tax revenues, continuing with government's fiscal recklessness meant loading France with large foreign debt. Twice the interest rates paid anywhere in Europe, servicing the huge debt soon turned France from one of Europe's richest nations into Europe's most indebted and impoverished nation on the edge of bankruptcy.


Now with such huge debt obligations, government had less flexibility in raising money to deal with emergencies. Unable to milk the peasants further, and the fact that as one of Europe's major trading nations, France couldn't raise revenue through customs tariffs, the king's efforts to tax the nobles got rebuffed. Making their privileges non-negotiable, made the imposition of a "just and proportioned" tax impossible. Switching from making people aware of their bottled rights to injecting anger, frustration, and hatred against the monarch and the ruling aristocrats, Enlightenment theorists such as Voltaire, Diderot, and Turgot, began to set the stage for the French Revolution.


The unexpected soon happened. While harsh winter caused by a strong El Niño<http://en.wikipedia.org/wiki/El_Ni%C3%B1o> cycle from the Iceland caused meager harvests across Europe, decades-long government mismanagement of agriculture in France made crop failures more severe, causing shortage of grain and consequently raising the price of bread. Because bread was the main source of nutrition for peasants, this meant starvation. The bread riots in 1789 soon became a testing ground for the impending revolution. Because of the severe hunger, peasant fled their villages to French cities in search of employment, which soon became overcrowded causing more hunger and destitution alongside disaffection, making France increasingly closer a revolution.
But quickening the end of his monarchy was the king himself. Sending troops to Versailles to disperse the newly formed Assembly, Louis XVI exploded the bottled anger in the masses.


A provocation led to poor masses attacking Bastille, forcing the nobles to flee France. From unrest to popular rebellion led to the king's overthrow. With the monarch removed, France became not just a republic. Aristocracy too was replaced with new principles of equality, citizenship and inalienable rights. With transition to an elected National Assembly completed, King Louis XVI was publicly executed, which brought centuries-old absolute monarchy in France to an end.

No doubt most readers would be wondering why France in the 18th century! Nigeria, as it is run today has a lot of similarities with how Louis XVI's France was run in the late 18th century. And not to end up the same way the king ended, or the way Ben Ali of Tunisia, Hosni Mubarak of Egypt, and Moammar Gaddafi of Libya did as a result of the sudden Arab Spring, our leaders should understand that Nigeria is approaching the end of the road.


Like French monarchy's fiscal recklessness during the 1780s, Nigeria's annual budgets are wasteful, debt-bugged, corruption-ridden, anti-growth and anti-jobs. Like Louis XVI's, our budgets are lavishly concentrated on meeting politicians' and civil servants' insatiable opulence lifestyles. Just like French peasants, Nigerians are not happy with their rulers. But unlike the peasants wanting bread, Nigerian masses are only demanding that they be spared the agony of having to provide themselves such basic social infrastructure as power supply, water, and road, people of even poorer nations today take for granted, at least as a reason to justify the very existence of a government in a country endowed with huge oil wealth.


How come it's only few countries like Nigeria that marathon-running development suddenly gets crippled and exhausted? Why has development, which most countries achieved with such an ease become so mystifying in Nigeria? To say that it's puzzling to see such a giant is submerged to the extent of importing food and fuel, in perpetual darkness, without good water supply, without modern hospitals, without good schools and good roads, is to just say the least. Or, should our rulers have to wait for mass riots before they begin to rise up to the challenges of leadership? Since when has economics become a rocket science to the extent that we've to follow western economic theories sheepishly? For how long should the people cry for help, while their rulers luxuriantly immerse themselves in the culture of ''We can't do it because it isn't in line with World Bank, IMF, and WTO set rules? Why continuing bloated government while the people's needs are continuously forgotten by government after government?


If Adam Smith in trying to defend British interests employed his fake absolute advantage theory, where he advised nations to not restrict free trade, did Alexander Hamilton, America's first secretary of treasury, listen to him when using high tariffs and bans to promote and protect America's infant industry from Smith's British advanced industrial products? Of course not, especially when he knew that Smith was just using his pen as Britain's economic hit man. Deng Xiaoping fully understood that rather than western development model show developing countries the right way, it's the wrong way it always directs them. For this reason, warning his fellow leaders, he philosophically said, ''It doesn't matter whether a cat is black or white, as long as it catches mice.''


If for ages it's clear that government's critical responsibility is provision of basic infrastructure, why is government in Nigeria outsourcing this responsibility to so-called private sector through so-called Public Private Partnerships and Built Operate and Transfer when China, India, Brazil, South Africa, the United Arab Emirates continue investing hundreds of billions of dollars expanding and upgrading their own critical infrastructure? With $200bn infrastructure deficit, should we continue with the 20-2020 dreams?


If Louis XVI's dethronement and execution was because he abdicated his sovereign duties by relying so much on his ill-informed and ill-intentioned advisers, who should our elected officers blame for their gross mismanagement of our economy? That managers of our economy apportioned larger part of our annual budgets to keep our politicians happy, while stifling the supposedly benefits to the people, certainly, it's our politicians who, like Louis XVI, should take all the blames.


Or, who else should take the blames for the Lagos-Ibadan Expressway handed to Bi-Courtney since April 15, 2009? Of course, if government couldn't find the N90 billion needed to execute that economically important road, why blame Bi-Courtney? Where should the company find such a huge amount of money, when the government that awarded it the contract keeps most of the nation's money in America to be used in developing US economy? Should the company compete with government in paying such unheard-of interest rates, which tend to constantly crowd out companies like Bi-Courtney? Or why should any bank finance Bi-Courtney's capital-intensive infrastructure project with all its associated high risks, when the bank investing in government's risk-free, high interest-yielding Treasury Bills and Bonds could easily earn so much to declare 200 per cent profit yearly?


What does it really require to deal with our perennial infrastructure deficit than drawing down our huge foreign reserves kept in America? Shouldn't $10 billion as foreign reserves be enough to get us meet any sudden financial crisis? With our current 40 billion barrels of oil, can't we turn it into strategic dollar-denominated reserve? Shouldn't commonsense tell us that our oil too could serve as our foreign reserves since we've the option of borrowing with it? Had part of our huge reserves been spent on the abandoned Lagos-Ibadan road since 2009 and tolled, shouldn't half of that investment have been recovered by now? Or, what sense does it make that we've about $43 billion dollars in foreign reserves while our federal roads are ''only better than Somalia's roads''?


Should a nation as vastly endowed with oil wealth as Nigeria continue using lanterns and candles in powering its development, or remain in darkness when it should have used a fraction of its 40 billion barrels of oil reserves (between two and four billion barrels) as strategic collateral to raise between $200 billion and $400 billion, enough money to tackle its power sector, its agriculture, its road infrastructure, etc., head-on? Why can't we try to make this kind of offer to China and India? With four billion barrels invested in infrastructure, not only should the result include fast-tracked diversification and industrialization, but also a record growth in GDP from today's $270bn to about $900bn by 2018, which besides being enough to repay the loan also makes our 20-2020 dream realizable. Equally unmatched should be the multiplier and trickle-down effects, including millions of industrial, agricultural, and service jobs, mass prosperity with millions out of poverty.


Shouldn't fixing our infrastructure make our millions of small businesses and entrepreneurs get to work and compete with their foreign peers since they'll henceforth enjoy access to cheap government loans and venture capital financing, easily, cheaply, and safely transportation network, cheap and steady power and water supply?


By enjoying superior infrastructure, which Nigerians should have been taking for granted by now, Mr. President knows how much love Nigerians should shower on him as their visionary leader who succeeded where others failed. In fact, with that, should he want a reelection, Nigerians should reward him handsomely as Americans rewarded Franklin Roosevelt, as South Koreans praised Gen Park, as Chinese worshiped Deng, and Brazilians adored Lula.


In the meantime, no matter our miseries and anguishes, let's accept the advice from Samuel Adams that ''It does not take a majority to prevail…but rather an irate, tireless minority, keen on setting brushfires of freedom in the minds of men.'' But unlike the use of violent revolution in fixing of 18th century France, ours should be conducted peacefully. Let's agree with Plato that rulers suffering from intemperate and effusive longing for raw power, whose habitual financial recklessness reduces their nation to rubble, deserve sincere sympathy for theirs is a genuine sickness.


Enwegbara, an MIT-educated specialist in money and financial matters can be reached at: basil_enwegbara@yahoo.com<mailto:basil_enwegbara@yahoo.com>; odilim.enwegbara@thisdaylive.com<mailto:odilim.enwegbara@thisdaylive.com>

Tags: 2013 budget, Business, Featured, Fiscal Austerity, Nigeria

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