Buharinomics has failed to impress economists around the country as the traditional methods aimed at improving economic growth, like borrowing money to fund budget deficits, have not been able to spur growth of the Nigerian economy.
In the years under President Muhammadu Buhari’s government, Nigeria has doubled its domestic and external borrowing in order to fund its ever-growing fiscal budget.
This has doubled the total debt levels since 2015 while economic growth in that period has halved.
In the last five years, Nigeria’s total debt stock increased by N12.88 trillion to settle at N24.94 trillion, surging 107 percent, with about 71 percent of the increase coming from its budget deficit of N9.16 trillion and the remaining 29 percent off-budget spending across the period.
This, therefore, establishes Nigeria’s budget deficits as the major incentive for more borrowings during the Buhari-led administration.
Also, total expenditure during the same period expanded by some N4.96 trillion to N23.29 trillion with total actual budget deficit accounting for 39 percent against 23 percent four years prior to 2015.
However, higher spending during the period did not see GDP growth outperform levels prior to 2015. The year 2011 to 2014 recorded an average growth in Nigeria’s GDP at 5.62 percent, according to data from the World Bank. Average growth rate slowed significantly to 0.94 percent levels between 2015 and 2018 despite high debt and expenditure levels.
The spike in debt levels has seen analysts and international bodies raise concerns on the need to curb borrowings which have not translated into economic growth so far however leading the country to a state of debt overhang.
This is a situation where the nation’s debt exceeds its future capacity to repay, hence creating possibility for stagnation in growth and degradation of living standards. The lack of funds or will to spend on key areas that will improve the economy such as health care, education and infrastructure is a problem that the President should be thinking about.
While one could have expected the leverage level under the current administration to have stimulated growth in the economy, opposite is the case with subdued economic growth, recession in 2016 and slow growth at 2 percent levels as forecast by the IMF.
Recently, in a bid to boost non-oil revenue, reduce budget deficit and end rising debt levels, Nigeria increased revenue target from tax remittances by 56.02 percent from N5.32 trillion in 2018 to N8.3 trillion in 2019.
However, Tunde Fowler, executive chairman, Federal Inland Revenue Service (FIRS), who responded to a query sent by the presidency on the agency’s inability to meet targeted tax revenue, blamed this on sluggish economic activities coupled with low income from crude export due to fall in prices and production, which has weighed on company’s income levels.
Supporting this claim is a report from the National Bureau of Statistics (NBS) which puts the number of small and medium businesses that shut down between 2013 and 2017 at 2,877 with other struggling to pay taxes on sluggish economic activities.
Achieving this target may be impossible as Nigeria’s debt levels have not translated into improved economic activities hence putting a strain on potential revenue generation and infrastructure development across the economy.
“Only a government with unrealistic expectations would expect higher tax revenues from an economy still on its knees,” an analyst told BusinessDay.
There is also the pressure mounting on the nation’s foreign reserve on the back of volatile Brent crude oil prices, below capacity crude oil production and recently announced $9bn legal dispute with Irish gas company, Process and Industrial Development Ltd (P&ID).
DAVID IBIDAPO & IFEANYI JOHN
