I believe that I have had sufficient practical experience in running private businesses and in managing the affairs of a state as to know what works and what does not work in the Nigerian economy.
As a country, we seem to overlook what is besides us in search of what is far from us. We seem to have the penchant for seeking for the exotic instead of the basic that are all around us. In managing our economy out of recession, we seem to have settled for the notion that we can only borrow ourselves out of recession.
Today, our debt service to revenue is almost 60%. Outstanding debts account for about 50% of the total national budget (states and federal). This excludes debt owed contractors, and other matured contractual obligations. In more organised societies, even when you want to borrow for capital goods, you must carry out an economic feasibility and viability report as well as social impact assessment on the investment you want, and then you rank the competing investments in order of preference.
We have borrowed to rebuild four Airport terminals at the same time. Are we sure that traffic in the four airports will generate enough revenue to pay back their share of the loans. It is common knowledge that Lagos airport accounts for close to 80% of our air traffic. So why didn’t we use the borrowed fund and first modernise and improve the Lagos airport into a regional hub instead of rebuilding four airport terminals at the same time, when none of them will even be built to worldclass standard and none will have the capacity to pay off the loan used to finance its reconstruction?
Unfortunately for us as a people, the revenue we are distributing and consuming is coming largely from oil, which is a diminishing asset. No modern society can survive and maintain its development without saving and investing for the future. We need to reverse our aversion to saving and make fresh commitment to saving for economic and social development
The need to borrow by the different levels of government has been largely driven by two factors: lack of savings and high cost of governance. We seem to have built our political structure on epicurean lifestyle – let’s take care of today and tomorrow will take care of itself. Our constitution does not allow savings; Section 162. (1) & (3) of the 1999 constitution states that, “The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation; (3) Any amount standing to the credit of the Federation Account shall be distributed among the three tiers of government.”
Unfortunately for us as a people, the revenue we are distributing and consuming is coming largely from oil, which is a diminishing asset. No modern society can survive and maintain its development without saving and investing for the future, particularly in its future generation. This is even more so for countries that depend largely on the extractive industry.
I want to use this opportunity to appeal to the present government to please amend the constitution for the sake of our children. We need to reverse our aversion to saving and make fresh commitment to saving for the economic and social development of our country today and particularly for tomorrow. We already have a law on saving of our excess crude oil receipts through the Nigerian Sovereign Investment Authority Act (NSIA).
I must appreciate Mr. Olusegun Aganga and Dr. Ngozi Okonjo-Iwela, our former Ministers of Trade and Investment, and of Finance for their contribution in establishing this Act and the initial investment of $1billion. Unfortunately, the NSIA Act makes provision for saving of the residue or excess, meaning that if there is no surplus, we cannot save. Our own definition of excess depends on what price we set as the benchmark for crude oil and our projected production volume. All a profligate government needs to do to avoid saving anything with NSIA is to set a high benchmark for crude price and volume. No wonder why only $2.5billion has been transferred to the NSIA from the Federation Account since the inception of NSIA in 2012.
Even while we are waiting for the constitution to be amended, to make it compulsory for us to save part of revenue, we can start today by saving the refunds we are about distributing to the three tiers of government. We should bear in mind that previous distributions of such refunds, including over $20billion excess crude have only gone to fuel the consumption of our governments without any tangible infrastructure investment to show for it. Today, we are talking about distributing $6.9billion excess deduction from the Paris Club debt. Out of which $1.250bn being N380bn had already been distributed and the second tranche of about $1.650bn (about N500bn) had already been earmarked for distribution, leaving about $4bn yet to be distributed.
NNPC/NPDC have just agreed to an unremitted $21.8billion and N316.1billion respectively and have given a proposal on how to repay same to the government. The Federal Government has announced their intention to sell 10 NIPP power generation plants this year. These 10 power plants, if I can remember when I was in office, had a reserve price of about $6bn as at 2013. With the balance of $4bn of Paris club refund that is undistributed, NNPC $21.8bn and NIPP sale proceed of about $6bn, we now have about $31.8bn.
If we resolve to save this money as a nation today through our already established Nigerian Sovereign Investment Authority at an annual contribution of $2.5bn and an income of 7.5% (I am sure they will achieve more) from January 2018 to 2030, the year of conclusion of UN SDG, which we are signatory to; by then, this amount will be $51bn, plus what we have today in the NSIA account, we’ll be having about $55bn. Our current foreign reserve is $30bn. I see that the Federal Government has increased the reserve by about 10%. If they continue with 5% increment annually, by 2030, it will be about $57bn. With a combination of sovereign wealth fund investment and foreign exchange reserve, our total reserve will be over $100bn by 2030.
A major and critical part of the macroeconomic instability we are facing today is as a result of our weak foreign exchange reserve. Should Nigeria have a reserve of over $100billion, we would be able to maintain a stable exchange rate, rein in on inflation, meet the demands for legitimate imports as well as attract foreign portfolio and direct investors. We would be in a position to embark of massive infrastructure spending. In any case, I do not think that our economy would have gone into recession in the first place if we had over $100billion in foreign reserve. To further elucidate why we must commence savings immediately, Nigeria was not included in the BRICS economy even when it was the biggest economy in Africa because of its poor infrastructure.
One can see clearly the need for us to resolve today to start saving in order to turn around our economy tomorrow.
Once again, I appeal to our current government officials at the federal and state levels, in the interest of our country and our children not to share these impending refunds, but to rather invest them.
Excerpts from a speech delivered by former Governor of Anambra State, Mr. Peter Obi, CON, at the Covenant Christian Centre, Iganmu, Lagos, last Monday.
Excerpts from a speech delivered by former Governor of Anambra State, Mr. Peter Obi, CON, at the Covenant Christian Centre, Iganmu, Lagos, last Monday.
