The incoming administration has its job well cut out
For years, managers of our economy have been harping on the ratio of Nigeria’s debts to the Gross Domestic Product (GDP). Now that the figures can no longer add up as the debts keep mounting amid dwindling revenues, director-general of the budget office of the federation, Ben Akabueze has sounded the alarm. “Once a country’s debt service ratio exceeds 30 per cent, that country is in trouble, and we are pushing towards 100 per cent and that tells you how much trouble we are in,” said Akabueze who laid bare the economic challenges that the next administration would have to grapple with. “While the size of the federal government budget for 2023 created some excitement, the aggregate budgets of all governments in the country amount to about N30 trillion. That is less than 15 per cent in terms of ratio to GDP.”
There could not have been a more apt way to put the situation in which Nigeria is today. Emerging facts suggest that the nation’s finances and the economy are already in dire straits. Yet, there are no easy options ahead. While there is nothing wrong for a country to face temporary economic setback so long as the managers are capable and indeed able to fix it, what is tragic is that we continue to live in denial with public officials still wallowing in profligacy.
On the debt problem, we reaffirm that it is true every nation borrows. But borrowing must be done with a well-thought-out investment initiative conceived to yield maximum benefits. That has not been the case in the past eight years under President Muhammadu Buhari. As we have always highlighted on this page, debt in comparison to GDP is only sustainable when the revenue generation is high. In the case of Nigeria, while the debt profile is rising and with it our population, government revenue continues to dwindle, with no conscious effort to cut down expenditure on the recurrent side either by the federal government or the 36 states.
To compound the challenge, transparency and accountability in ministries, departments, and agencies (MDAs) are at the nadir as official corruption is still high. The annual audit report from the Office of the Auditor General for the Federation is very instructive in that regard. The number of government agencies that fail to subject themselves to audit scrutiny under the present administration continues to increase.
Faced with a declining national economy worsened by the Covid-19 pandemic and subsequent low oil prices, many of the states across the country are withering. Their battered financial state has been worsened by the huge amount of money used to service unjustifiable debts accumulated over the years. States like Kogi, Adamawa, Plateau, Benue, Taraba, and Osun are suffocating under debts and inability to live up to their responsibilities. Many others are also in a fix over mounting salaries and pensions. Since most of them perilously depend on handouts from Abuja, their inability to pay salaries is becoming a national security challenge.
Given the foregoing, the nation is at a crossroads. Even at the best of times, by focusing only on payment of salaries to workers in the public sector that is largely unproductive at the expense of much needed social infrastructure like power, schools, hospitals and reliable institutions, poverty is being reinforced across the country. A nation that spends more than it generates to sustain civil servants and public officials is surely on a journey to perdition. This catastrophe is enhanced by the absence of creativity in governance.
The states have the latitude to create their own revenue survival kits through taxes, sensible investments, and prudent management. They have the power to slash their recurrent expenditure and drastically right-size their workforce and spend less on frivolities. Sadly, this is not happening. Authorities at all levels must therefore move quickly to steer the ship of state out of this rather dangerous trajectory. But more importantly, we hope the incoming administration of Bola Ahmed Tinubu understands the enormity of the challenges ahead. There will be no honeymoon period!