The making of a new Nigeria
The key to our growth as a country is to seek ways to build financial resources for economic and social development of our country in the midst of apparent scarcity. As a country, we seem to overlook what is besides us in search of what is far from us. We seem to have the penchant for seeking the exotic instead of the basics that are all around us. In managing our economy out of recession, we seem to have settled for the notion that we can only borrow ourselves out of recession. While it is true that borrowing may be necessary, if you don’t have saving, to spend out of recession, I am personally worried with what the borrowing is being spent on. There is nothing wrong with borrowing for investment in capital goods but there is everything wrong with borrowing for consumption.
Today, our debt service to revenue is almost 60 per cent. Outstanding Debts account for about 50 per cent of the total national budget (states and federal), this excludes debt owned contractors, and other matured contractual obligations. In more organised societies, even when you want to borrow for capital goods, you must carry out an economic feasibility and viability report as well as social impact assessment on the investment you want, and then you rank the competing investments in order of preference. We have borrowed to rebuild four Airport terminal at the same time. Are we sure that traffics in the four airports will generate enough revenue to pay back their share of the loans. It is common knowledge that Lagos airport accounts for close to 80 per cent of our air traffic. So why didn’t we use the borrowed fund to first modernise and improve the Lagos airport into a regional hub instead of rebuilding four airport terminals at the same time, when non of them will even be built to world class standard and none will have the capacity to pay off the loan used to finance its reconstruction.
The need to borrow by the different levels of government has been largely driven by two factors: lack of savings and high cost of governance. We seem to have built our political structure on epicurean life style: “let’s take care of today and tomorrow will take care of itself.” Our constitution does not allow savings; Section 162. (1) & (3) of the 1999 constitution states that “The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation, (3) Any amount standing to the credit of the Federation Account shall be distributed among the three tiers of government.
Unfortunately for us as a people, the revenue we are distributing and consuming is coming largely from oil which is a diminishing asset. No modern society can survive and maintain its development without saving and investing for the future, particularly in its future generation. This is even more so for countries that depend largely on the extractive industry.
I want to use this opportunity to appeal to the present government to please amend the constitution for the sake of our children. We need to reverse our aversion to saving and make fresh commitment to saving for the economic and social development of our country today and particularly for tomorrow. We already have a law on saving of our excess crude oil receipts through the Nigerian Sovereign Investment Authority Act (NSIA). I must appreciate Mr. Olusegun Aganga and Dr. Ngozi Okonjo-Iweala, our former Ministers of Finance for their contribution in establishing this Act and the initial investment of $1billion. Unfortunately, the NSIA Act makes provision for saving of the residue or excess, meaning that if there is no surplus, we cannot save. Our own definition of excess depends on what price we set as the benchmark for crude oil and our projected production volume. All a profligate government needs to do to avoid saving anything with NSIA is to set a high benchmark for crude price and volume. No wonder why only $2.5 billion has been transferred to the NSIA from the Federation Account since the inception of NSIA in 2012.
Even while we are waiting for the constitution to be amended, to make it compulsory for us to save part of revenue, we can start today by saving the refunds rather than distributing to the three tiers of government. We should bear in mind that previous distributions of such refunds including over $20 billion excess crude have only gone to fuel the consumption of our governments without any tangible infrastructure investment to show for it. Today we are talking about distributing $6.9 billion excess deduction from the Paris Club debt. Out of which $1.250 billion being N380 billion had already been distributed and the second tranche of about $1.650 billion (about N500 billion) for possible distribution leaving about $4 billion yet to be distributed.
NNPC/NPDC have just agreed to an unremitted $21.8 billion and N316.1billion respectively and have given a proposal on how to repay same to the government. The Federal Government has announced their intention to sell 10 NIPP power generation plants this year, this 10 power plants if I can remember when I was in office had a reserve price of about $6 billion as at 2013. With the balance of $4 billion of Paris club refund that is undistributed, NNPC $21.8 billion and NIPP sale proceed of about $6 billion we now have about $31.8 billion.
If we resolve to save this money as a nation today through our already established Nigerian Sovereign Investment Authority at an annual contribution of $2.5 billion and an income of 7.5 per cent (am sure they will achieve more) from January 2018 to 2030 which will be the year of conclusion of UN SDG which we are signatory to; by then this amount will be $51billion plus what we have today in the NSIA account will be about $55 billion. Our current foreign reserve is $30 billion, I see that the Federal government has increased the reserve by about 10 per cent, if they continue with 5 per cent increase annually, by 2030, it will be about $57 billion. A combination of sovereign wealth fund investment and foreign exchange reserve, our total reserve will be over $100 billion by 2030.
• Excerpts from the speech delivered by former Governor of Anambra State, Mr. Peter Obi at the Covenant Christain Centre, Iganmu, Lagos.