Theoretically speaking, Nigeria is by far the richest country in Africa. However, it remains to be seen whether Nigerians live the richest life in the continent. The quality of life in Nigeria for the average Nigerian is subdued when compared to that of other rich.
There are so many rich people in Nigeria, in fact, rich people are everywhere, and they can have something to say about the level of economic development in their home countries.
In 2021, Africa’s 18 billionaires were worth an average $4.1 billion. The 18 of them come from seven different countries. South Africa and Egypt each have five billionaires, followed by Nigeria with three and Morocco with two. Altogether they are worth $73.8 billion, slightly more than the $73.4 billion aggregate worth of the 20 billionaires in 2020’s list of Africa’s richest people.
As a country’s economy grows, as measured by indicators like Gross Domestic Product (GDP), scholars hypothesise that individual-level income will increase, and poverty will be reduced. While previous research demonstrates this correlation at a global scale, some authors contend that the correlation may be heavily influenced by trends in more populous countries such as China and India, which have seen particularly large economic growth and poverty reduction over the past 30 years. In many developing countries as in Nigeria, persistent income inequality has kept poor populations from benefiting from economic growth.
There has been no consistent relationship between economic growth and poverty reduction in Nigeria, as measures of poverty have not changed significantly since 1996 in spite of continued economic growth.
The poverty of Nigerians is also manifest in the country’s leadership drenched in debt while on a borrowing lifeline. As the government deals with budget deficits year after year, it prefers to pile debt rather than cut back on a costly lifestyle that has eaten away at national budgets for decades. In fact, in 2021, the Nigerian government used more than 90% of its revenue to service debts. Doesn’t that sound bizarre? But that is the reality.
Figures from the Minister of Finance, Budget and National Planning, Zainab Ahmed, shows that Nigeria’s revenue profile in 2021 was N4.30 trillion and debt service expenditure of N4.20 trillion. This implies that the government used 97.67% of its revenue to service debts leaving a balance of 2.33% for other governmental expenditures. All the other expenditures, from salaries to overheads and capital expenditure, came from a deficit and borrowed funds. Nigeria is simply broke and insolvent – a Federal Government that borrows to pay salaries of its personnel.
Considering the foregoing as the background to the approved 2022 federal budget, it should be clear to Nigerians that we are facing a fiscal crisis of unimaginable proportions. Specifically, the country is faced with a debt crisis that requires that it use all its revenue to service existing debts. The authorities in the executive and legislature are in denial and the minister of finance would rather call it a revenue crisis to cover up the fiscal misadventure.
If the country borrowed over N6.6 trillion between January to November 2021 to fund a N14 trillion budget, it will need over N9 trillion in new borrowing to fund the N17 trillion 2022 federal budget. This year may likely witness a scenario where Nigeria may need to augment retained revenue with borrowed funds to be able to meet our debt service obligations.
“Common sense dictates that when one is digging a hole and is desirous of coming out of it, at a time he needs outside assistance to be pulled out, he will stop digging,” Eze Onyekpere, the Lead Director of the Centre of Justice, said in a reaction to this development.
He said that the federal government at the executive and legislative levels have a different idea, which is to keep digging, to keep borrowing. “They have even gone ahead in the Finance Act of 2021 to expand the conditions for borrowing to include a nebulous term, viz “critical reforms of significant national impact,”” he added.
As it stands today, Nigeria is using about 97% of earned revenue to service debts. Yet, there is no end in sight. Proposals under the 2022-2024 Medium Term Expenditure Framework incorporate robust borrowing plans for the future of this country.
The borrowing and debts show the level of disregard that has been deployed in fiscal governance. First, contrary to Section 42 of the Fiscal Responsibility Act (FRA), the President, Minister of Finance and the National Assembly have in an extraordinary conspiracy failed, refused and neglected to set the debt limits of the three tiers of government as provided in the Act. The executive and legislature collaborated to enact that FRA and are further collaborating to violate the provisions. Even the judgement of the Federal High Court in 2018 mandating the Federal Government to set the limits has been ignored. Debt limitation would have taken cognisance of the Gross Domestic Product, available and projected revenues, ability to repay, etc., as indicators to inform the limits.
The Act also mandates the executive and legislature to maintain the national indebtedness at a sustainable level. Upon any construction or interpretation of the concept of sustainability, a debt level that ensures that 97 kobo out of every earned 100 kobo is used for debt service cannot be stated to be sustainable. This is a clear violation of the FRA.
The FRA states that we can only borrow for capital expenditure and human development. Obviously, there is no way that borrowing for recurrent costs can scale the hurdle of being capital expenditure. Attempts to justify these debts under human development are to stretch human development to become so omnibus as to justify borrowing in an anything-goes fashion. This is sheer economic sorcery and fails the test of reason and interpretation of laws in a bid to discover the intention of the legislature.
Again, executive requests to incur debts are by law to be tied to specific capital projects and accompanied by a “cost benefit analysis” showing the exact costs and benefits and the ability of the project to regenerate its sector of the economy so as to position the country for eventual repayment of the debt at the appropriate time. The question is, which Nigerian has ever seen the Cost Benefit Analysis of the projects for which we are borrowing? It is even evident that the executive does not submit the cost benefit analysis to the legislature.
Granted, the government has many competing demands for financial support. However, any spending should be tempered by fiscal responsibility and by looking carefully at the spending’s impact. When a government spends more than it collects in taxes, it runs a budget deficit. It then needs to borrow. When government borrowing becomes especially large and sustained, it can substantially reduce the financial capital available to private sector firms, as well as lead to trade imbalances and even financial crises.
The implication of this is that the Minister of Finance’s argument that “Nigeria’s debt is still very much within sustainable limits” becomes illogical when matched with the fact that the government’s interest payments continue to absorb more than 90% share of the federal government revenues. Perhaps, Nigeria is not really a rich country after all.