LOOMING FINANCIAL CRISIS AFTER SENATE REJECTION OF LOAN REQUEST.
“Doesn’t anybody around here know how to play this game?” New York Baseball Coach after his team lost the seventeenth game in a row in the 1970s.
After campaigning vigorously against the $30 billion loan request by the Federal Government and waking up a few days after to read that the Senate had rejected the request, the feeling should be one of elation. For once the Senate of Nigeria had done the right thing. But, economics is full of paradoxes and economists can sometimes find themselves being right and sad at the same time. Beating back Buhari and his Economic Management Team, EMT, provides as much joy as beating up on an old man who shuffles into a sucker punch. Buhari had that humiliation coming because he had assembled an incompetent team of economic advisers and managers. Unfortunately for the President, that might not be last drubbing he will receive as long as nobody on his team knows how to play this game. And the name of the game is persuasion.
A favourite working definition of democracy says “democracy is a system of government under which decisions are made by counting heads instead of cracking skulls.” The point of that statement is persuasion; leaders in a democracy must acquire the ability to persuade the followers; otherwise they run the risk of looking back and discovering there is nobody following. If President Buhari had taken the trouble to read Nigerian newspapers, he would have discovered the near total opposition to the loan request. Even a majority of the on-line and social media were against it. The Federal Government provided the Senate the opportunity to appear patriotic and responsible at its expense. The question is: what could have been done differently? For part of the answer, we must take note of what a Governor or a President in the US would do under similar circumstances.
Back in the early 1970s, one of my classmates at the university was working for the BOSTON GLOBE, the largest selling and most influential paper in the Northeast of the US. One day, he received a call from the Press Secretary to the Governor of Massachusetts, who had invited him and other journalists, including the state correspondents of THE NEW YORK TIMES, WASHINGTON POST, WALL STREET JOURNAL and the CHRISTIAN SCIENCE MONITOR to lunch. As it turned out the State government was about to launch an ambitious development programme which would entail huge and unprecedented loans. The Governor had been forthright with the media people; he had asked for questions, suggestions, comments, after his presentation. He had ended by asking for the support of the assembled journalists – who were also asked to treat the information imparted as confidential until it went to the legislators.
The Governor had followed that meeting with working breakfasts with leaders of the State legislature – the people who were going to pilot the bill through the house. He had also conferred with community leaders, the Clergy, Labor leaders and scheduled speaking engagements at four universities in the state. Persuasion was central to the steps taken and not surprisingly, he got his wish – at least most of it. He did not have the request flung in his face.
Perhaps the greatest social welfare programme carried out in the US after World War II, was the Great Society initiative introduced by President Lyndon Johnson, 1908-1973, shortly after being elected by a landslide in 1964. It was preceded by several months of consultations, meetings with Congressional leaders, Civil Society groups and students. It was a wide-ranging package of benefits accompanied with the taxes to pay for them. There was going to be “free lunch” for the poor, but the rich were going to pay; not Uncle Sam. Loans were also to be taken, but each loan request had its own repayment plan attached. By the time the package reached Capitol Hill, all the details were included.
We even had precedent under a military government when President Babangida’s regime was considering taking a mere $2 billion loan from the International Monetary Fund, IMF, in 1986, with all the conditionalities attached. IBB, irrespective of any other fault he might have, threw the matter open for national debate. Workshops and seminars were organized. Views sound and silly were heard; sages and fools had their say before the Structural Adjustment Programme, SAP, was launched. Whether SAP was successful or not need not delay us here. The most important thing was the mass participation and the opportunity given the people to anticipate the monumental change which was about to occur in their lives. That was not an elected government. Yet, it respected the followers. By the time SAP became official several stakeholders in the economy were prepared to face the risks and opportunities that would be presented by the paradigm shift.
By contrast, Buhari’s loan request was contemptuous of the people and their elected representatives given the enormity of the request and the consequences if the loan is not well managed. It took all of twenty six (26) years, from 1978 to 2004 for Nigeria to accumulate $36 billion before we were delivered from the debt trap. Buhari’s request would have the nation assuming debt in one year almost as high a debt stock as we acquired in almost a generation – defined as thirty years. Certainly, nobody over the age of sixty can hope to live to see the end of it. Worse still, the Federal government is asking this generation of Nigerians to mortgage the future of their grandchildren and nobody thought of involving the people in making this monumental decision. The slap in the face by the Senate was well deserved.
That said; we still have a problem. To be quite candid, it is a financial crisis that is looming. The Federal Government is broke and several Ministries, Departments and Agencies, MDAs, might shut down by this month. Granted, the fault lies with Buhari’s EMT, but this is no time for apportioning blame. Nigeria cannot afford the shutdown of public services. That is a calamity better left unimagined. The Senate and the House of Representatives must move quickly to save the country from the ineptitude of the Executive branch.
What is required is selective approval of the loan request – to provide sufficient funds for the last two months of the year. After that, the Federal Government must be forced to raise the Internally Generated Revenue, IGR, significantly from 2017 instead of always depending on loans to cover deficits which, for the most part, are self-inflicted. For example, the 2017 Budget, which is still to be received by the National Assembly, NASS, is as flawed as the 2016 appropriation bill. Like the current year, that budget is based on export of 2.2 million barrels per day. Already, those who monitor global crude oil exports know that Nigeria lacks the effective demand and the production capacity for 2.2 million barrels per day in January 2017 and the estimates don’t support 2.2 million per day output and sale. Revenue projections based on that assumption are unrealistic ab initio. And, the self-induced revenue deficits will mount as the year 2017 progresses.
The problem with this perennial flawed budgeting process is that it prevents us from facing the realities of our lives; from acknowledging that we have to raise taxes and tariffs and ensure that those who use the courts pay to cover the costs of administration of justice; that if we want to provide free food for poor kids, then rich adults must pay more; that we cannot go and borrow to pay N5000 monthly to five million idle people – among others.
In the mean time, the NASS should approve a little bit more than enough to last government till January 2017. Thereafter, the lawmakers should insist on having all the details before accepting any more requests from the President and his team.
Incidentally, the African Development Bank, ADB, had just granted Nigeria $600 million out of the $1 billion requested. If our own brothers in Africa are unprepared to grant the full $1 billion, Nigerians can predict how the rest of the world will do with the rest of the request for $29 billion. Most probably they will take their queue from the ADB and offer us less than we demand.
Unless we face the realities, a major crisis looms in 2017.