The Tinubu federal government has announced a number of micro-economic measures, meant to cut the runaway cost of governance. The English saying is “cut the coat according to your size”. But the government’s new economic thinking appears to be: arrange your body to fit the coat’s size, since it can no longer take adjustments to fit you into it.
The first decision was to reduce the size of the delegation heading for this month’s United Nations General Assembly sessions in New York, USA. Presidency spokesman Ajuri Ngelale said in a statement, “As part of a broader effort to reduce the cost of governance in Nigeria, President Bola Tinubu has directed the Federal Ministry of Foreign Affairs to freeze the processing of visas for all government officials seeking to travel to New York for the United Nations General Assembly without proof of direct participation in (the) UNGA’s official schedule of activities.”
It was a bold and courage decision, I must admit. Something called for in the face of the nation’s shrinking purse but which previous administrations, including, surprisingly, Buhari’s that was known for not dashing money out any how, didn’t do. In the recent past, Nigerian delegations to international events, including sport, were the largest. Ministers would attend with their permsecs, personal assistants, wives, concubines and girl friends. All to get more estacodes. A story was told of a former finance minister who arrived Tokyo to meet his Japanese counterpart. The Japanese official received him at the airport and beckoned him into a waiting taxi that would take him to their rendezvous. But the Nigerian protested, explaining that the lone car could not take him and his retinue of hangers-on. The Japanese official was shocked that the Nigerian minister had brought many people with him to a meeting of just two. He promptly cancelled it, saying he would have to consult his prime minister. See what damage profligacy had done!
The second decision Tinubu took last week was that his government would not take external and domestic loans. He said would rely on funds saved from the abolition of the subsidy on petrol to implement governmental programmes and projects. The occasion was the inauguration of a presidential committee on fiscal policy and tax reform. He promised to end Nigeria’s “over reliance on borrowing to finance public spending.” According to him, spending some 96 percent of export receipts on debt servicing is ‘inviting’ the debtor’s disease. To understand the import of Tinubu’s decision, we should give it a perspective. In eight years, Nigeria’s public debt rose by over 500 percent, from N12.06 trillion in March 2015 to N72.55trn in March of this year. A result of increased borrowing largely. Buhari, even already on his way out, borrowed $800 million dollars to finance the oil subsidy that Tinubu has now removed. Debt Management Office (DMO) data show that the N75 trillion total public debt consists of N19.64trn of foreign borrowing, N30.21trn domestic and N22.7trn Ways and Means debts. In that period, the country spent N3M.36trn to service those debts in 2022, representing a 14.68 percent increase from N2.93trn the previous year. According to the World Bank, Nigeria spent 96.3 percent of its revenues to service debts in 2022, up from 83 percent the year before. Tinubu describes this as madness. “It is a path to destruction. It is not sustsinable. We must make the very difficult changes necessary for our country to (rise) from (its) slumber and be respected among the great nations of the world,” he said.
Paul Harrison, in his classic, “Inside The Third World”, explains how the debtor’s disease is contracted. Countries get it when they reach a stage where they cannot pay back debts and private credit is drying up. “Exporters are unwilling to supply goods on credit, export insurance agencies will not insure exports to them, banks will not let to them and even international development banks dare not lend any more. At such a point, the debt crisis reaches deep into the political and social fabric of the victim country, cutting living standards of the poor, increasing inequality and strengthening the influence of right-wing groups”.
Nigeria may not have arrived at this point yet. But it is not far ahead. It is ok that the president has seen the problem and the way, and how to get, out of it. But, and it is a big but, can it be done? With a kleptomaniac bureaucracy, encouraging unrestrained spending, that he inherited and which his predecessors had been unable to tame? We wait to see.
