The other day, a friend narrated a story, which I found stranger than fiction; the story related to the travails of a family who lost a successful and illustrious breadwinner, who, incidentally, died without a Will. The family’s elders were consequently entrusted with the responsibility of efficiently managing the estate of the deceased.
In spite of the huge credit balances, lucrative estates and other profitable income generating businesses, the Elders’ Council decided to consolidate the incomes from these investments as savings for future generations! Consequently, rather than spend from the robust income streams available, the Elders’ Council, in their wisdom, gleefully funded their expenditure by borrowing at over 15 per cent interest rate from their bankers, while their savings earned paltry yields, often below five per cent!
Predictably, the oppressive interest charges rapidly gulped up the erstwhile flourishing income streams until the mortgaged estates were systematically acquired by the banks as repayment for mounting debts. Within a few years, the once prosperous business became bankrupt and the family was reduced to penury.
“But why didn’t the children protest?” I wondered! “Well, according to the story, the management of the estates by the Elders’ Council conformed with tradition and the bereaved children were, anyhow, too young to confront the ‘Trustees’! Other conscientious sympathetic relatives were intimidated by the acclaimed credentials and communal respect for members of the Elders’ Council; therefore, such sympathizers barely murmured their dissent!
I wondered aloud to my friend, whether or not this story related to a family made up of stark illiterates, but I was surprised when he confirmed that the Elders’ Council actually comprised reputed professionals, educated in some of the best universities in the world! Worse still, these Trustees brazenly refused to consider superior professional advice from other conscientious members of the community.
“What happened to the Elders’ Council?” I finally asked my friend; “oh” he replied, “they are all doing very well; in fact, they all became major shareholders in the same bank in which the family had its account”!
When my friend took his leave, I quietly wondered if this story could ever be true; however, later that evening, it occurred to me that as outrageous as it may seem, in reality, the story of this tragic family appears congruent with the story of our country, Nigeria!
Nigeria is, undoubtedly abundantly blessed with resources; for example, crude oil revenue alone often exceeds projected annual spending. Curiously, in spite of such fortuitous revenue base and our favourable balance of payments, we have inexplicably found ourselves rapidly, needlessly compounding our debt burden over the last decade or so. Annually, managers of our economy deliberately understate projected revenue with very conservative benchmarks for crude oil price and output. The government subsequently proceeds to finance anticipated ghost deficits by borrowing at oppressive rates often above
15 per cent, while simultaneously consolidating revenue ‘surpluses’ as savings with yields well below five percent, particularly for dollar or euro denominated deposits!
The definition of ‘surplus’ as “amount in excess of what is needed” is obviously meaningless to government; clearly, you cannot have surplus savings alongside a deficit!
It is also of no consequence that the same banks that receive our incomes and deposits for little or no yield are predominantly the same sources, which fund our government’s borrowings. In other words, it is not clear why government borrows back its own money with excruciating costs!
The beneficiary banks, which are currently posting hundreds of billions of naira profits, are the same banks, who were also beneficiaries of over N5tn government funding in the last three years, according to recent reports from AMCON; notwithstanding, revitalization of the real sector and increasing employment opportunities have remained just promises! Incidentally, AMCON has recently reported a N2,500bn loss in its most recent trading results!
It is bewildering that our respectable Economic Management Team, would endorse such a profligate and oppressive fiscal strategy. It is inexplicable that deficit financing should increase our domestic debt burden almost a hundred per cent in the last three years to the current level of about N6tn; meanwhile, actual income exceeded expenditure by over $10bn annually!!
In spite of the huge borrowings to fund such budget ghost deficits, ‘surplus’ revenue is regularly hounded into a so-called Excess Crude Account or alternatively consolidated in a savings account designated as a Sovereign Wealth Fund; the yield from either account is probably below three per cent. Incidentally, the constitution does not recognise either of these accounts, which are definitely discordant with true federalism.
Instructively, the funds consolidated in both accounts may ultimately become inadequate for the liquidation of the rising debts, which were avoidable in the first place, as our income exceeded expenditure. Thus, it would require over N593bn (well over 10 per cent of total revenue) just to service (not repay) these debts in 2013 budget!
So, as it is with the misguided recklessness of the Elders’ Council in our earlier story, so it is with the management of the Nigerian economy. In spite of our fortuitous resource endowments actually generating more income than projected in annual budgets, government remains committed to a strategy of borrowing at excruciating rates of interest to fund ghost deficits, instigated by deliberate understatement of projected revenues annually. It is no wonder, therefore, that despite these increasing ‘surplus’ savings, there is deepening poverty and very little on the ground nationwide to show for our simultaneously bourgeoning debt profile. Meanwhile, the Economic Management Team grabs every opportunity to extol the wisdom of a fiscal strategy, which is taking us nowhere fast!
Nevertheless, fortunately, all is not lost, as the National Assembly still constitutes a superior authority over the economic team. Indeed, in May 2008, in an article titled “National Assembly Fiddles as Debt Burden Cripples”_ http://www.lesleba.com/260508.doc, this writer warned parliament to stop the frenzied debt accumulation by the Debt Management Office and the Central Bank; regrettably, the Legislature remained reticent.
However, now that the cancerous impact of reckless debt accumulation has become very glaring, the current Legislature would have failed our nation woefully if they do not immediately suspend all government borrowings. It is imperative that we first determine the reasons for accumulating such an oppressive, yet avoidable debt burden. Our economic security and that of future generations will be foolishly compromised, if we maintain the current socially destructive business model!
By Henry Boyo
