I wrote the article i am serializing in June 2010.

After 10 years, the article is still accurate

Sad.

Nigeria is going broke!

We can’t pay our bills, we have no savings.

Our bills are what are on the expenditure side of the annual budget, capital and recurrent i.e. the salaries and also the classrooms and hospitals.

So this year we projected we will have bills of N5.2 trillion (4.2t in the budget plus N620b supplementary budget) but we are projecting an income of only N3.08t (based on selling 2.3mbpd at $67) hence we have a budget deficit of N1.52 trillion.

We have projected to fund this N1. 52 trillion deficits by borrowing N897b from Nigerians via bond sales borrow another N75b ($500m) from the international Bond market and sell new oil blocks for N132b.

Just recently the President has also forwarded a request to borrow $915m from the World Bank to fund the deficit. Note that the Excess Crude account has been decimated, from a high of $20b in 2008 to just over $2b today, so we cant go there.

It’s also interesting that the federal government will finance the deficit by borrowing and selling, while Lagos state funds 75% of her budget through internally generated personal income taxes, but i digress.

A close look at the budget revenue figures also shows how optimistic and fragile our assumptions are. We are projecting two things, (a) is that we will sell 2.3mbpd (b) oil will sell at $67 a barrel.

For us to sell 2.3mbpd there has to be zero MEND activity, no bombings, no spills of the pipelines nothing, that is a tall order. (In 2009 with the amnesty and total elimination of sabotage, oil output was put at 2.29mbpd) the oil price assumption is also fragile at best.

The point is if oil price falls to $60 and production falls to just 2mbpd then we will create another funding gap of N1 trillion naira in the budget. Where will we get another N1trillion, print?

Too late the CBN has already printed close to N1.5t for banks & power sector, AMC i opine will suck up a further N3t. so what can we do? Pray? If we cannot fund this deficit, then we cannot pay the police & civil servants, we cannot repair roads and sponsor Senators

The simple answer is reducing our expenses, not investments. we have to cut our budget to fit our oil revenues, not our spending plans,(sorry Honourables) if we will only get N3trillion in revenues, then the budget should be maybe N2.8trillion not N5trillion.

We have to view the oil wealth not as a harvest but as a seed, it should not be spent 150% but at least 10% be set aside for a rainy day.

Nigeria spends so much because we are funding a bloated federal structure. We have inconsequential ministries, wasteful states and local governments that exist only in name and paper.

The Federal government has allocated to itself powers such as the privilege to educate and provide water to the citizens not because it can do so, but rather to corner the revenues required to pay for these services.

So solution?

First of all we need to remove the policy of federal character in the constitution because it mandates 36 ministries are created for 36 states. Why is this necessary? What if the president wants just 10 ministers?

In effect the constitution is mandating a spending plan irrespective of the revenue earned; because no matter what happens we must maintain 36 ministers and their ministries (The US has 50 states and only 15 cabinet secretaries) .

At this time, and in the future we need flexibility, We cannot sustain 36 ministries and numerous boards, parastatals, commissions and councils etc what does the National Institute for Cultural orientation do? Should the Nigerian National Merit Award be a Commission?

This is important when we consider that in Nigerian budgets recurrent expenditures i.e. salaries and allowances are usually more than the budgets for developmental and simulative activities i.e. road and power projects.

The Min of education no longer exist to educate students, it now exists to pay salaries. 83 % of the funding for federal universities from 2005 to 2009 went to salaries of the workers, direct teaching and laboratory cost plus research only took 4% of the entire budget!

Next, we cut the size of the FG by transferring some powers to the States and LGs, and converting ministries who do not contribute to the creation or protection of our GDP into agencies and departments.

Specifically, transfer Education, Health, Water and Agriculture Police, Works from the Federal to the State and Local Governments list of responsibilities. , then let the Federal govt do Defence, Foreign Affairs, Finance, Labour, Judiciary and Commerce.

The Min of Aviation, Communications, Culture, Environment, Housing, Industry, Information, Power and Steel, Science, Solid minerals, Sports, Transport, Women affairs, convert them to parastatals or Agencies.

For guidance the average contribution of the aviation sector from 1999 to 2008 to the Nigerian GDP from is less than 0.06%, yet it a ministry with 2 ministers, permanent secretaries, state offices, but most importantly budgetary allocations, a waste.

Is it reasonable that we can have a minister in Abuja who will dictate where and how water bore holes will be built? Can the federal minister oversee nomadic education in Funtua and also oversee boy child education in Abiriba, should this not be a duty for the States?

Who should we hold responsible for the 10 % pass rate of the NECO exams? States or federal government? We can’t really say, these are federal exams, taken by state students, paid by federal money to local, state and federal teachers.

Also remember that states earn PAYE tax, Federal does not. Lagos as an example generates N14b a month, 75% of that figures comes from PAYE, Levies & fines. So if education is moved to the States, you as a citizen can demand to see your tax money at work from your state governor

The GDP growth of the Nigerian economy has come not from oil (which generates the bulk of foreign exchange) but from the nonoil sector, which has an 80 % share of the GDP Level.

The policy of the government should be to utilise the oil earning to grow the non oil sector by provision of infrastructure and the well being of the citizens, the oil money has been used to pay salaries.

To grow GDP we must create in the economy the conditions that will make private investors borrow and invest capital.

But Kalu, you really want to give the governors the education & health budget to spend, are you serious? They will just host seminars & lobby to become VP with the money. Not really, the governors have had a free ride because the FG have provided them a good cover.

Ask why roads are bad the answer is FERMA, ask why schools are bad the answer is SUPEB (funded by the federal govt), ask why there is not drugs in the hospital, the answer is that Min of Health has not done counterpart funding.

Let the Federal government set policy, set up the master plan, then let the states implement and spend to achieve it. A governor and a LGA are easier to get to than a minister in far away Abuja.

It will be tough, but once people start paying taxes and realise the states are responsible they will hold them accountable.

Then we make the parliament a part time job, yes i am serious in the second republic the parliamentarian were not full time allowance collectors, they came in, sat and were paid sitting allowances, now a senator gets N42 a quarter for passing just 4 bills from 2007 till date.

By making the lawmakers earn only sitting allowances this nation will save N102billion a year (this is the yearly cost of maintaining the Senators and House of Reps members a year). Then we pass the Freedom of Information bill FOI so no idiot governor can buy a TV for N500k

This is my take, but nothing can work till we eliminate section 14(3) of the constitution, look it up, it’s a big contributing factor to why we are underdeveloped.

This Nigeria remains our problem, we need to fix it!

June 27th 2010