Behold, Terrible Times Ahead!
By
Dele Sobowale
culled from VANGUARD of Saturday, September 20, 2003
If Nigeria Plc were a private or publicly owned company instead of a
country, it would have been declared bankrupt years ago and even now
it would have difficulty securing any new loans from creditors on any
terms.
Bluntly put, the country has become a dead-beat, unable and perhaps
unwilling to pay its debts as and when due. Inexplicably, the
situation has worsened in the last four years during which the nation
earned more from crude oil than at any time in its history. For those
who, like President Obasanjo, are still wedded to false optimism, we
present below some of the evidence to back up our claim.
External debt stands at $31 billion or N4.3 trillion today; it was
N2.4 trillion in 1999 when the present administration took over,
promising prudent management of our resources. Interestingly, the
debt when the President handed over to Alhaji Shehu Shagari in 1979
was a mere N1.96 billion. Per capita, the debt was N28 in 1979; it
jumped to N20,200 by 1999; and today stands at N35,800. Further
devaluation of the currency will over the years increase the
escalating debt owed by each Nigerian with little toshow for it. Recently, the U.S government deferred debt repayments
due on account of our support on the "war on terrorism". Two obvious
conclusions derive from that. One: we still owe; the future has
merely been mortgaged by the current government. Two that is implied
but not stated is the fact that our foreign policy has become hostage
to external debts. We have been enslaved where diplomacy is concerned.
Local contractors are owed N1 trillion and that adds another N8,300
per person to the debts owed to foreigners. That too has its
implications. The local contractors are quite often the Small and
Medium Scale employers of labour; many have been crippled and most
cannot pay their staff as and when due. Thus, the same government
which has been cajoling banks, without much success, to lend to SMIEs
is making it virtually impossible for them to repay the banks and
secure fresh loans. It is also endangering the banking
system by either forcing banks to add to their already burgeoning
non-performing loans portfolio or to run foul of official directives
with regard to loans to small scale enterprises. Either way, the
banks stand to lose. No nation wanting to grow its economy should put
its banks in that position.
The bottom has fallen out of the pension scheme with the public
service scheme alone in need of at least another N1.5 trillion just
to pay for the backlog of pensioners' entitlements. That adds N12,500
per capita. As it is, the government has given up on finding money to
fund pensions which were subjected to fraudulent management in every
government including this one.
The proposal to introduce a contributory pension scheme while
meritorious does not address the existing problem nor does it go far
enough to allay fears regarding fraudulent practices which ruined the
exiting pension scheme.
On those three accounts alone, every Nigerian owes a total of N56,600
while our income per capita is N36,000; meaning that to clear the
debt we must forgo everything including food and shelter for one and
a half years. But the picture is even worse than that. The burden
falls not on all Nigerians but disproportionately on the working
middle class; the children are excluded; so are the aged. The rich
are notorious tax-evaders while governments at all three tiers
pretend not to notice. The people who must bear the brunt of this
calamity cannot be more than 12 million; and that brings us to the
crux of the matter. They cannot pay either because the burden is too
heavy.
States are also financially encumbered. For years many economists who
have bothered to look into the matter have long felt first concern,
now alarm given the fiscal irresponsibility of military and elected
officials of states as well as Local Governments. Those fears have
now been concretised by the Chief Economic Adviser to the President,
Professor Charles Soludo who revealed that most states have mortgaged
their future statutory allocations.
But Soludo confirmed more than the mortgage of the future by past and
present leaders at the state level.
Indeed, the picture he painted, quite accurately it might be added,
was like a death sentence on the other two tiers of government
because according to him, only Lagos State was able to generate up to
50% of its revenue internally; Rivers which came next raised only
32.4% and Kano 17.9% meaning that 33 states mobilized less than 15%
of their revenue from internal sources. Unsaid by Soludo but known to
economists is the fact that at least 20 states generate less than 10%
of their revenue from internal sources, making their dependence on
the Federal Government and by extension on oil revenue almost total.
The implications of that state of affairs are numerous but only two
will be touched upon here to drive home the point. First, any decline
in the price of crude oil which will reduce the inflow of funds into
the federation accounts from the present height of $28 per barrel to
about $20 or less will have devastating effects on the States and
Local Governments who are locked into debt payments deducted at
source.
Secondly, the imminence of that catastrophe is underscored by the
return of Iraq to the international crude supply market under
American control. The U.S wants cheaper crude oil and will get it now
that it has subjugated a major producer; that fact alone is enough to
send warning signals to Nigerian governments at all levels that
current statutory allocations, insufficient as they are, might not
even be sustainable.
President Obasanjo's warning that Nigerians should brace up for more
hardship is realistic but it fails to address the consequences of the
almost inevitable economic adversity for our fledgling democracy and
security.
Clearly, we can no longer afford the 36 states and 774 Local
Government structure. That opium of the masses dispensed by the
military to pacify us which led from three regions to four, then
twelve states; then 19; 21; 30; and now 36 while we cheered, is
proving like most addictive drugs, to have unintended and perhaps
fatal side-effects. Right now, the most urgent is the
fact that most States and Local Governments are gradually grinding to
a halt fiscally irrespective of the person or the party in power.
The Federal Government also might collapse if crude oil prices should
fall below $18 per barrel; it is tottering as it is with the existing
price levels. NEEDS, the new economic initiative unveiled by
Professor Soludo viewed from this standpoint appears like a structure
constructed on quick-sand with very little prospect of success unless
the basic political problem responsible for this condition is tackled.
There is only one way out; and that is a National Conference that
will lead to total reconstruction of the country, reducing State and
Local Governments to affordable proportions and doing away with the
frivolity of appointing 42 ministers and uncountable advisers. It is
either that or we surrender more if not all of our sovereignty to our
foreign creditors. This economic house has fallen.
