2023 and the Familiar Song —Olusegun Adeniyi
With the way we are running our country, I said in my Platform Nigeria 1st May 2019 presentation, ‘An Economy on Life Support: Time to Pull the Plug’, a convulsion was inevitable at some point.
“It’s either we have a conversation about the future of our country in an orderly manner or it is forced upon us when we may have little or no control. We are already living on borrowed time.” I then highlighted how different Nigerians were responding to our existential threats, before I zeroed in on “those who, like my friend Louis Odion would say, enjoy presiding over the seating arrangement in a sinking Titanic.”
That perhaps is the only way to interpret the statement by the Northern Elders Forum (NEF) spokesman, Dr Hakeem Baba-Ahmed, that the North “will lead Nigeria the way we have led Nigeria before, whether we are president or vice president, we will lead Nigeria.” Quite naturally, the statement has provoked the ire of several ethno-religious entrepreneurs across Nigeria, as perhaps it was intended. But what is clear to me is that the obsession with political power that confers nothing more than the opportunity to dispense patronage (sometimes without regard for our diversity) has not translated into progress either for the ‘North’ or the entire country.
Baba-Ahmed is a man for whom I have tremendous respect and he is not a frivolous person. I therefore fail to understand what motivated the outburst. A fierce critic of the current administration, Baba-Ahmed has, at various times, expressed concerns about the lack of development and the challenge of insecurity in the North. So, when he romanticises about Northerners leading Nigeria, especially at a time like this, I see it more as self-indictment. Given our enormous potential as a nation, nobody should be proud of what Nigeria is today. For the record, this is the picture of the Northwest where Baba-Ahmed hails from, painted by his own Governor, Nasir El-Rufai, on Tuesday: “I represent the north-west zone in Human Capital Development Council. And as you know our part of the country is afflicted with the highest numbers of out of school children. Some of the highest poverty rates and some of the highest drop-out rates in our schools.
“As if that is not enough, many of our schools are now closed due to the insecurity around our boarding schools. In most of the states of the northwest, schools have been closed for a while, while security operations are taking place making our educational situation even worse. Our health statistics are not better. When you disaggregate the national data into zones and regions, most of Southern Nigeria have statistics that are middle income country nature while most of the Northwest have human development indices that are closer to those of Afghanistan. Our region is in crisis.”
If the North-west from where the incumbent President Muhammadu Buhari hails is in such a deplorable condition and the Northeast is held down by insurgents who have killed thousands of people, displaced millions and practically rendered the zone prostate, should we be singing from an old hymn book about the future of our country? Should the prerequisite for leadership not change from where someone comes from to what they can deliver?
For the masses of our people (whether in the north or south) who understand that this elite game is never about them, what they desire in 2023 is a president who can make a difference in their lives regardless of which section of the country he or she comes from or the religion such a person professes. Even in the context of the ‘turn-by-turn’ politics that we play in Nigeria, the only legitimate conversation (and I intend to address this one day) is about the place of South-east (what I call the Ndigbo Question) in this whole arrangement. Aside that, the debate about 2023 should be on how to rescue our country with one of the challenges we face today being that of mounting debts.
Last week, Dr Doyin Salami, who chairs President Buhari’s Economic Advisory Council (EAC), lamented that the debt service-to-revenue ratio stood at 97.7 per cent (January to May 2021). From information readily available at the Debt Management Office (DMO), we are currently indebted to several multilateral institutions. They include International Bank for Reconstruction & Development (IBRD); International Development Association (IDA); International Monetary Fund (IMF); African Development Bank (AfDB); African Development Fund (ADF); Africa Growing Together Fund (AGTF); European Investment Bank (EIB); European Development Fund (EDF); Arab Bank for Economic Development in Africa (BADEA); Islamic Development Bank (IDB) and International Fund for Agricultural Development (IFAD). The Bilateral creditors are Exim Bank of China; Agence Française de Développement of France, Japan International Cooperation Agency, Kreditanstait Fur Wiederaufbua of Germany, and Exim Bank of India.
We need a serious conversation about our debts. As at the time President Olusegun Obasanjo took office in 1999 under the current democratic dispensation, Nigeria’s total outstanding debt was $28.04 billion comprising $20.51 billion to Paris Club, $2.04 billion to London Club, $3.93 to multilateral institutions and $1.49 in promissory notes. By the end of 2004 when Obasanjo subscribed to the Debt-Buy-Back proposition, Nigeria had a debt portfolio of $35.94 billion, of which the Paris Club alone accounted for $30.85 billion. Following Nigeria’s exit from the Paris Club in 2005, the Debt Portfolio became $20.48 billion. By the time we exited the London Club in 2006, Nigeria’s total debt had plummeted to $3.54 billion. From then there were marginal annual increases. It was $3.65 billion in 2007, $3.72 billion in 2008, $3.95 in 2009, $4.58 billion in 2010, $5.67 billion in 2011, $6.5 billion in 2012, $8.8 billion in 2013, $9.7 billion in 2014 and $10.72 billion in 2015. While the increase to $11.41 billion in the first year of the Buhari administration (2016) followed the same pattern, the debt portfolio jumped to $18.91 billion a year later in 2017. By 2018, the hike was more astronomical: $25.27 billion. It increased to $27.68 in 2019 and by December last year (2020), Nigeria had amassed a total debt of $33.35 billion!
Most of the loans we have taken in recent years were sourced from the Chinese Exim Bank. While the infrastructural projects, especially in the transport sector, that have been embarked upon by the Buhari administration are important, we need to discuss how the loans would be repaid. In my presentation, ‘Of China, Africa and Colonial Master’ at the 2018 edition of the Media Cooperation for Belt and Road in Boao, Hainan Province of China, I highlighted our indebtedness to China, and we have since borrowed more. From the NigComSat 1- R project, a space satellite that has expired to the installation of 2000 CCTV Cameras for Abuja and Lagos to the fully constructed Abuja-Kaduna rail that is working but at subsidized rates, there is no project that has the capacity for repayment. In fact, all of them would require funding from the federal government to be operational. So, repayment of these loans is tied to dwindling oil earnings.
Amid these challenges, we have lately been having a shouting match over Value Added Tax (VAT), following the judgement of the Federal High Court (FHC) sitting in Port Harcourt. In the case filed by the Rivers State government, Justice Stephen Pam held that the Federal Inland Revenue Service (FIRS) “has no constitutional authority to enforce and administer taxes not expressly stipulated under Items 58 and 59, Part I, Second Schedule to the 1999 Constitution of the Federal Republic of Nigeria.” Not surprisingly, it has become another North-South brickbat, after both Rivers and Lagos States enacted VAT laws, with the latter acting “in line with fiscal federalism that we have been talking about.”
We have a serious revenue problem, and we can’t borrow our way out of it, as the present administration seems to be doing. Neither will it be addressed by the catfight over VAT. Our revenue to GDP ratio is 7 percent whereas the level advised by the IMF and others is at least 15 percent. Of course, there is the issue of unsustainable cost of governance, compounded by cost of servicing debts at a period the national currency is dancing Skelewu against the Dollar and other convertible currencies. That we need a conversation on VAT and associated issues is therefore no longer in doubt. And it is not something we should play the politics of North-South with.
According to the State Commissioner for Finance, Dr Rabiu Olowo, Lagos alone contributed about 65 percent of the total VAT receipts in the country in 2020. His statistics further reveal that only Lagos, Rivers and FCT contributed more than they received while the remaining 34 states in the country received far more than they contributed to the VAT purse. Going by Olowo’s figures, the seven Northwest States (Kano, Jigawa, Kaduna, Katsina, Sokoto, Zamfara and Kebbi) received N227 billion despite contributing N40 billion which means they got N187 billion more than they gave. The six Northeast States (Bauchi, Borno, Yobe, Adamawa, Taraba and Gombe) contributed N16 billion but received N143 billion, a net gain of N127 billion. The Southeast States (Abia, Imo, Enugu, Anambra and Ebonyi) contributed N23 billion but received N123 billion which means they got N100 billion more than they gave. The six South-south States (Edo, Delta, Akwa Ibom, Cross River and Bayelsa plus Rivers) contributed N64 billion but got N163 billion, meaning what they received exceeded what they contributed by N99 billion. The Southwest States (Oyo, Ondo, Ogun, Osun, and Ekiti plus Lagos) contributed N828 billion but received N351 billion. That means they were ‘deprived’ of N477 billion. Ditto for the six North Central States (Kwara, Kogi, Niger, Nasarawa, Plateau and Benue plus FCT) which contributed N215 billion but received N151 billion thus earning N64 billion less than they contributed.
While Lagos indeed contributes a huge chunk of VAT, as Olowo highlighted, it is important for us to understand that statistics can be funny. I have heard people say that it is like a Bikini: What it conceals is sometimes more interesting than what it reveals! For instance, the VAT payments for bank branches across the country and other businesses that have their headquarters in Lagos (and most do) are accounted as Lagos VAT. It is the same with payments from the telecoms’ operators. All the federal employees in the state who pay PAYEE are counted as Lagos VAT. All the VAT collected by airlines are paid through Lagos. Some of the confusion that would arise (and the impact on businesses) from a situation in which every state is allowed to collect VAT is why some of us advocate a political solution to this problem.
Meanwhile, I fail to understand the solidarity of 15 of the 17 southern states with Lagos and Rivers because that is what their statement on VAT implies. It does not in any way advance their cause. Of the eight states that contributed less than N2.5 billion to VAT pool last year yet received ten times (or more) of that sum, four are from the South (Cross River, Abia, Osun,and Imo) while the remaining four are from the North: Taraba, Kebbi, Benue and Zamfara. Besides, we also need a conversation around the issue of VAT collection. In my chat last week with Cheta Nwanze, he expressed concerns about how the use of thugs for such collections could erode the credibility and legitimacy of the state. If care is not taken, we will get there.
Cheta sent me the August report of their research firm, SB Morgen titled, “Under the Hood: A Look into Taxation in Nigeria’s Informal Sector”. At six percent, Nigeria’s tax to GDP ratio is far below the World Bank’s recommended 15 percent minimum ratio which shows the level of our productivity and some of the issues we need to address. But that does not even tell the whole story. Challenging the widely held notion that Nigerians do not pay taxes, the report concludes that Nigerians in fact do pay taxes but “in an informal way and many times to non-state recognised actors” sometimes even when the payees make no money or derive any benefit from the various ‘governments’ that lord themselves over the people. “In most cases, the payers get little benefit from these non-state collectors and are only constrained to comply with the threat of force or loss.”
These and many other issues are what should engage critical stakeholders in the build-up to the 2023 general election. The challenges we face are quite enormous and they are in all sectors. In a report on the state of power supply in the country, Agusto & Co last month revealed that the cost of the tariff shortfall borne by the federal government in terms of electricity subsidies and other power sector interventions in 2020 amounted to N2 trillion. With non-cost-reflective tariffs, poor infrastructure, weak regulation, and inadequate gas supply, it is no surprise that everybody generates their own electricity with dire implications not only for the cost of doing business in Nigeria but also on the environment. We of course already know that subsidy payment in the oil and gas sector is a racket that has created several emergency billionaires, so it is not something to let go easily even when it impacts negatively on the future we want to build.
If we don’t address many of these problems and continue with a fixation on where the president should come from or which section of the country has the population to put people in power, we risk social unrest and continued instability in Nigeria. As things stand, whoever takes over in 2023 will inherit a country challenged on many fronts: insecurity, high external and domestic debts, high inflation rate, high unemployment rate, low economic growth, and generally low level of social economic indicators. With a huge youth population that is not engaged in productive activity, we can see the high level recruitment into banditry and the gangs of ‘unknown gunmen’.
Given the foregoing, the conversation we should be having cannot be about where the next president will come from but more about the options for digging our country out of the existential hole we have found ourselves. How do we create meaningful jobs? How do we retool our public service for optimal performance? How do we cut waste in different areas so that we can give ourselves a fighting chance of survival? How do we minimise the impact of tough but necessary decisions on the vulnerable among us? How do we revitalise our health and educational system? How do we make Nigerians more secure and save them from the plunder of terrorists, bandits, kidnappers, and sundry criminals? How do we reduce debt overhang and generate more revenues? How do we increase the productive capacities of our people and of our economy? How do we position our country for a world without oil etc.
With less than two years to go to the 2003 general election, the public space should be buzzing with ideas (and not just empty promises) about these important issues. Sadly, we are busy with our usual song and dance!