BY LEKAN SOTE
That Nigeria is spending revenue or income before it is earned is another way of saying that Nigeria is living on debt. The bigger danger is that Nigeria’s earning is not commensurate with its import-oriented spending.
Therefore, it will be a fat chance for Nigeria to balance its budget without using more debts to finance its government’s activities. It’s going to be difficult to avoid having a deficit budget as has been happening for some time.
Many observers have recently told a not so surprised nation that more than 90 per cent of Nigerian government’s earned revenue goes into servicing the national debt.
But that is not the only tragedy. More than 70 per cent of Nigeria’s crude oil is stolen, and the revenue there from diverted to private coffers of high profile bunkerers and their foreign collaborators.
Timipre Sylva, Minister of State for Petroleum Resources, has even confirmed that security operatives of Nigeria connive with criminals to steal Nigeria’s crude oil big time.
The situation is compounded by a government that is borrowing money to run a bloated bureaucracy, in addition to having a compulsion to embark on grand infrastructural projects, whilst also prosecuting wars in several fronts against insurgents, terrorists and separatists.
Former Minister of Finance, Kemi Adeosun, once revealed that the Federal Government of Nigeria borrowed as much as N165 billion monthly to pay only the salaries of its sundry workers (which include ghost workers).
It doesn’t look as if things are much better now than when she announced that, early 2016. Because she said this very early in the life of this administration it is reasonable to think the situation was the same under the previous administrations.
The government of President Muhammadu Buhari identified two major expense directions for itself: completion of outstanding projects of the government of former President Goodluck Jonathan and introduction of its own infrastructure projects.
Despite the tardy pace of execution, everyone can see implementation of railway projects, ongoing work on the Second Niger Bridge, renovation of airports, completion of old, and construction of new, road projects and (even though poorly done) electricity power plants.
“If you contrast the N0.948 trillion expected from sale of crude oil to N3.61 trillion that has been earmarked for debt servicing in the 2022 budget you will see that expected crude oil revenue is far, far lower than one-third of money allocated to debt servicing
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The sundry theatres of war in Nigeria include Boko Haram insurgents in the North East, Islamic State of West Africa Province jihadists, (poorly) restrained bandits now labeled terrorists and the pacification of separatist Indigenous People of Biafra (and to a lesser extent), Oduduwa Republic agitators.
The Tucano combat jets that Nigeria recently took delivery of from the United States of America are emblematic of the huge sum that the government is spending on security, even though not so much success is recorded.
You can see that before the Federal Government of Nigeria earns or receives revenue (either from crude oil sale or sundry taxations) it is already spent. That is why the government undertakes the dangerous adventure of borrowing in order to service debts.
Nigeria’s 2022 N16.126 trillion budget had a one-third deficit of N6.25 trillion. This suggests that expected inflow into the budget, less the deficit, is N10.826 trillion, (out of which only N3.16 trillion is expected from sale of crude oil).
Now, if 70 per cent of projected revenue from sale of crude oil of N3.16 trillion is N2.212 trillion, it means that Nigeria should only expect N0.948 trillion or 30 percent of expected revenue in the year.
This should explain the government’s yearly apologies that cash available for disbursement to government expenditure is never the same as the amount budgeted.
That should also explain why the Federal Government of Nigeria, through the Nigeria National Petroleum Company Limited, is usually slow, or even unable, to meet up with its Joint Venture cash calls with its International Oil Corporation partners in mining for crude oil.
If you contrast the N0.948 trillion expected from sale of crude oil to N3.61 trillion that has been earmarked for debt servicing in the 2022 budget you will see that expected crude oil revenue is far, far lower than one-third of money allocated to debt servicing.
That is scary and dreary. With this situation you could even say that those who are raising the alarm over loss of Nigeria’s crude oil revenue are even understating the problem.
You will see that indeed Nigeria’s crude oil revenue can only go to service debt, and it’s not even enough. One hopes that there will be no need to indenture Nigerians to work in foreign lands in the future in order to repay the loans.
Worse still is that the N6.25 trillion deficit or debt expected to be used to augment inflows expected into the 2022 budget would have generated its own debt servicing expenses in due course.
With the N4 billion loan approved by the National Assembly late 2021 Nigeria’s debt profile may rise beyond N45 trillion. One can only hope that the President Buhari government will not lead Nigeria into the abyss of financial doom.
One wonders if that N4 trillion loan, a little shy of the 2022 budget, has been earmarked to fund the N4 trillion subsidies on petroleum products that the National Assembly recently approved for the President.
That subsidy and loss of crude oil to bunkerers are the doors through which Nigeria’s gains from the Ukrainian-Russian war-inspired spike in the price of crude oil will be lost.
Mike Obadan, member of the Monetary Policy Committee of the Central Bank of Nigeria, is reported to have revealed that as much as 500,000 barrels of crude oil, valued at $3.3 billion, are stolen from Nigeria’s crude petroleum fields daily.
You would have thought that the government will invest in every security and control hardware to ensure the integrity of Nigeria’s oil fields. Add pipelines too, because pipelines for petroleum products are also vandalized on a routine basis.
Those incompetent, even mischievous, public finance experts who argue that Debt-to-Gross Domestic Product ratio is more appropriate than Debt-to-Revenue ratio to weight the implications of Nigeria’s loan portfolio are not only weak in the head, they are also dangerous.
Adopting Debt-to-GDP ratio instead of Debt-to-Revenue ratio to evaluate Nigeria’s debt profile betrays the grossly misleading mentality of a doctor who thinks it is more expedient to treat ringworm instead of leprosy. It reminds one of the ostrich burying its head in the sand while its derriere is exposed.
To be sure, revenue, that could be cash or accounts receivable, is more liquid than GDP, which is more opaque, like the Retained Earning element of a company’s balance sheet that may not necessarily be, or readily convertible to, cash.
Revenue is the stream of inflows coming into a commercial enterprise as a result of its business operations. Revenue could be either outright cash or it could be receivables.
But for the budget of a nation, or a sub-national component of a nation, revenue includes, not only proceeds from sale of assets, income from sale of crude oil (in the case of Nigeria), sundry tax collections, incomes from sovereign wealth investments, but also loans, strangely.
That is why the deficit is on the same side of the budget as these other revenue streams. You can see that the rules of public finance are sometimes different from those of the accounting profession.
Also, Internally Generated Revenue of a nation is just that, revenue (of the nation), not the GDP of that nation.
