|
Getting your Trinity Audio player ready...
|
I have written a lot about our debt problems over the last few years, mostly about how we seem to be sleep walking into a debt crisis. The background to the problem is a government whose spending plans have far exceeded its revenue plans, both in absolute terms and in growth trajectory. A matter made worse by the fact that spending plans are easy to actualise but revenue plans are much more difficult. The outcome has been public debt that keeps piling up and debt servicing costs that continue to rise, restricting the ability of government to do anything besides the basics with its actual revenue. All this has been said before.
It is not unexpected that the executive arm is not too worried about the debt problem. Indeed, it is normal in most countries for executives in democracies who know they will be out of office in four or five years to not worry about problems whose consequences may not show up for four or five years. It will be someone else’s problem anyway. In most democratic countries, the legislature is the arm of government which typically cares about such potential long-term problems and passes laws to mitigate them. We hear of the constant drama in the United States about raising their debt ceiling and the executive always has to justify its long-term debt plans and its strategy for keeping it all sustainable.
Do we have such laws limiting debt build up in Nigeria? Yes, we do actually. We have the fiscal responsibility act which, as you have probably guessed from the name, tries to make sure the executive remains responsible especially with regards to debt. For instance, the fiscal responsibility act says the fiscal deficit in each year should not exceed three percent of GDP. Yet, we have seen the actual fiscal deficit climb from 1.6 percent of GDP in 2015 to 3.6 percent in 2017 before paring a little to 2.8 percent in 2018. We still await the full year numbers for 2019 and 2020 but unless there is a miraculous increase in revenue in both years, we will probably breach the legally allowed fiscal deficit limit.
From a sustainability standpoint we have seen the debt servicing to revenue ratio climb from 32 percent in 2015 to 44, 61, and 54 percent in 2016, 2017, and 2018 respectively. All this does not include CBNs new and ever climbing debt which is technically public debt and has taken on a life of its own.
By all the metrics which we measure debt problems we seem to be heading to a debt crisis. Yet there is nary a word from the National Assembly. The institution which should theoretically be tasked with protecting Nigeria’s long-term financial viability. The 2020 budget is being debated now and effects of the new minimum wage bill will further widen the gap between the government’s spending plans and its already overoptimistic and unattainable revenue plans. Will the National Assembly wake up to its responsibility this year?
Government agencies gone rogue
What do citizens do when a government agency goes rogue? If an agency or a regulator decides to go beyond its legal mandate and do whatever it feels like to extract revenue or towards some other objective, how are citizens supposed to respond? In the last few months we have seen some agencies take extraordinary steps in their attempts to raise revenue. Customs went so far as to seal car dealerships until they prove their innocence. A reversal of the innocent until proving guilty philosophy which I thought we worked with. We have seen a continued brouhaha between the banks, Telco’s, and their regulators. The CBN continues to be the CBN bullying banks and other financial sector participants with circular after circular.
Clearly, government agencies and other regulators, are supposed to work within the framework of the law. Where they exceed their mandate, citizens are supposed to be able to seek redress in court. But then abuse of power is not uncommon in these parts. “You took me to court eh? I will deal with you” behaviour is almost guaranteed. So, what do we do?
Historically we have avoided these questions because oil revenue was mostly enough to distract government agencies and other regulators, leaving Nigerians and their businesses with relative freedom, at least from government. The new revenue drive is however destined to change that arrangement. So how will we proceed? Will car dealers actually try to sue customs? Will banks get the liver to sue the CBN when it oversteps its limits? Will our justice system be put to the test? Stay tuned.
NONSO OBIKILI
Dr. Nonso Obikili is chief economist at BusinessDay.
