Stop this borrowing madness

THE way our state governors are clamouring for bailout from President Muhammadu Buhari (PMB) shows
that some of our political leaders are yet to come to terms with the emerging global oil economy.

Anybody looking for funds to “carry on as usual”appears not to have realised that the present depressed crude oil prices represent the beginning of a new era of whittled-down crude oil power. If crude price should rise in answer to our prayers, it will simply boost the production of shale oil, which is still relatively more expensive to extract than the conventional crude.Therefore, the low crude prices distressing us today have actually slowed down the “shale oil”onslaught.

But with the hectic pace of development of the shale oil technology, its competitiveness will progressively improve. And many nations presently importing oil,have the potential to become “shale” oil producers. In fact, many of them are racing to join the United States which used to be the biggest importer of the Nigerian crude, until it attained its “shale” breakthrough. There are evenprospects of the US going beyond oil self-sufficiency to become a shale oil exporter! Already, we hear of ships laden with Nigerian crude in the international oil market, looking for buyers, even at a discount.

The verdict is therefore clear: Our crude oil revenue going forward,will not even be as high as what we are lamenting today. The chilling situation we all knew would one day come, but did not expect,at least for 30 more years – i.e. Nigeria without its crude oil power – is here! Crude oil is becoming a mere commodity.

If therefore we start piling up debts today in an attempt to bridge the current revenue shortfall, what will the upcoming generations use to repay the debts? If both federal and state governments are already crying about debt burdens today how will our upcoming generations (with the crumbled crude oil revenues) be able repay them? The state governments that are piling up debts today are simplycreating an economic gun powder for their upcoming generations! Even the banks giving out such loans today might as well start sharpening their disaster management skills – because massive loan defaults may be looming!

The burning task before President Buhari is therefore to urgently re-engineer the nation,to be able to survive with its tumbling oil revenue! I shall make an elaborate submission on this re-engineering. But for now, let me single out one aspect of it, because of the way our politicians seem to be rushing to pile up more debts – that is deflating the monstrous cost of this democracy, including government’s bizarre expenditure structure.

The real culprit is our bloated governance cost.Our democracy can give us world-class governance even from a fraction of what we now regard as diminished revenue. Take the federal government as an example. In 2001, all our democratic institutions had come in place; yet, the federal government budget for that year (by the Appropriation Act 8 of the National Assembly) was less than N1 trillion, out of which 56% was budgeted for capital projects. Government budgeted only N0.4 trillion for its “recurrent” expenditure(what it would spend on its officials and other overheads, rather than on capital development projects).Remarkably, by our 2014 budget, the recurrent component had ballooned to N3.6 trillion, gulping 76% of our total budget of N4.7 trillion, and leaving a paltry 24% (orN1.1 trillion) for capital development projects. The 2015 budget is even worse.

Of what good therefore is “more revenue” to Nigerians, if it is only 24% of what comes in that can go into development? Does government exist for itself, rather than for the people?

The problem is not “revenue”; it is what we are doing with it. For example, the total budget for our National Assembly in 2001 was only N15.5 billion. But by 2014 appropriation, it had shot up to a whopping N150 billion that is 10 times the 2001 figure! What on earth is the justification for that? Has there been an increase in the number of elected Senators and members of the House? Similar questions are begging for answers across the entire system.

As another example, I reviewed the data published by the Central Bank of Nigeria (CBN) on federally collected revenue, for the period 1961 to 2010 (the data stopped at 2010) and found the results very shocking: In the 29 years from 1970 to 1998, the total federally collected revenue (oil and non-oil) was only N3.6 trillion. However, because of the unprecedented oil price surge that started with this democracy in 1999, we amassed a whopping N24.8 trillion in the next eight years,from 1999 to 2006 (the Obasanjo years), and a further N25.7 trillion in four additional years, from 2007 to 2010 (the Yar’Adua years,mostly).