In every human civilisation, difficult problems are only difficult to resolve because of scarcity of problem solvers. And nations are unable to surmount their difficult problems because such nations do not have handy the right leaders to take up the problems head-on. But nations which grow and prosper are lucky because at every particular difficult time emerges gifted leaders to solve their problems.
That was what happened to China when Deng Xiaoping came into power in 1978. Handed an almost failed state left behind by Mao Zedong, notwithstanding the immense opposition he encountered, Xiaoping confronted these problems head-on. Besides millions of deadwood and 'ghost' workers removed from government's payroll, to increase efficiency, productivity, and transparency in government, he wasted no time in shutting down many government agencies and diplomatic missions abroad, merging agencies and departments, and cutting down the size of military and diplomatic personnel.
And by freeing money trapped in big government and investing it in industrial infrastructure development and expansion, soon China became investors' favourite because of the decreasing cost of doing business and the cheapness of labour. As an army of foreign and local investors invested in the economy, thereby creating jobs in the process, the once laid off public workers soon began to find far better paying private jobs than working for government.
Government after government in Nigeria, since the return to democracy in 1999, has talked about reducing the country's high cost of governance. The irony is that rather than reducing, every new government seems to be increasing it further than it inherited from its predecessor. For example, in the 2010 budget of N4.60tn, N1.80tn was set aside for capital projects, compared to the 2013 budget of N4.92tn, which set aside only N1.50tn for capital expenses, adding more than N300bn in 2013 to further bloat big government. That shows that rather than less wasteful, the Mrs. Ngozi Okonjo-Iweala-led economic management team is in fact more reckless and less wise in allocation and prioritising our scarce resources.
In the meantime, the Ahmed Joda Panel Report on the Review, Harmonisation of Agencies is forgotten, and so are the recommendations of the Stephen Orosanye-led Presidential Committee on Rehabilitation and Restructuring of Federal Government Parastatals, Commissions and Agencies. But without hiring reputable personnel auditing firms to conduct a full-scale personnel and competence forensic auditing, how does government want to remove the millions of dead wood and 'ghost' workers in its payroll? Is it because those to be affected should be mostly friends, brothers, sisters, wives, husbands, or sons of powerful members of government?
Because our economy is dependent on externally generated oil revenues, government's spending is dependent on foreign economies' growth and oil price increase. This means its growth in figures is based mostly on raw material exports without any discernible job growth since the exported raw materials are mostly in the hands of foreign multinationals, mostly using their home countries' technology. Whereas for industrial and diversified economies, their economies grow because the activities of the real sector firms are growing and creating jobs, and as a result growing government revenues through income, corporate, and value-added taxes to further boost infrastructure upgrading and expansion.
That is why for our budget to be truly growth-targeted, it should require a far-reaching restructuring of our fiscal and monetary policies. That means, a fiscal plan that is strategically growth-targeted should be capital expenses dominated, unlike ours which being highly consumption dominated, lacks both multiplier and trickle down effects. Because expanding economies' revenues are driven by taxation, rather than by allocation as it is the case with figure growing economies like ours, the size of their budgets is always far larger. That is why Singapore with a population of 5.3 million and with little natural resources, has its budget far larger than Nigeria's; and New York, as just a state in the US, budgeting $148bn in 2013 against Nigeria's $30bn.
Since increasing infrastructure spending reduces the cost of doing business and as a result attracts more investors to the real sector of the economy, every effort should be made to reduce Nigeria's $250bn infrastructure deficit. For a country with our huge infrastructure deficit with about 18.8 per cent of debt-to-GPD, compared with US's 105 per cent, India's 67.6o per cent, Brazil's 65.49, South Africa's 39.90 per cent, and Ghana's 44 per cent, means we are one of the world's under-borrowed economies.
''A national debt,'' Alexander Hamilton (first US treasury secretary) was reported to have rightly said, ''will be a national blessing...a powerful cement to the nation, which [rather than] being oppressive, will be a spur to industry.'' That we've high debt burden is not because we have higher debt profile than these countries. It is because not only have we been borrowing for consumption but also we have doing so from the wrong lenders. In other words, we've been borrowing domestically at extra-costly interest rates when other countries are borrowing for capital projects and doing so externally at either the London Interbank Offer Rate or US Treasury Bonds rates, which are the most competitive international debt instruments.
Which country than Nigeria should government borrow from local banks in a way that not only priced out its real sector firms from the money market but also did so unproductively and recklessly that between 2008 and 2012 alone, its debts have increased from N428bn to N3.39tn; that it costs it unheard-of N665bn in 2012 to service the debt alone? Isn't it mind-boggling how government borrows its own money from banks at cut-throat interest rates, which is later shared with banks and their officials while development projects the money is meant for are either delayed or never done?
That is why to force banks to reduce their interest rates government should stop borrowing from banks, so that without any genuine real sector firm ready to borrow at such cut-throat rates, banks will have no option but to reduce interest rates.
Besides borrowing for the development reasons and from the right lenders, government should focus on increasing its internally generated revenues to be coming from income and corporate taxes and value-added tax rather than externally generated revenues. But that shouldn't happen when government agencies involved in internally generating revenues are diverting the revenues.
That was what members of the House Committee on Finance saw when summoning some of these agencies early this year. They discovered that Section 22 (1) and (2) of the 2007 Fiscal Responsibility Act created some unbelievable loopholes that allowed these agencies remit almost nothing to the government treasury.
In other words, because Section 22 (1) demands these agencies establish a 'General Reserve Fund' and only pay in one-fifth of their operating surplus for the year, and Section 22 (2) goes to state that the only one-fifth of in question is their operating surplus, made these agencies to smartly push their operating surpluses close to zero so that one-fifth of close to zero surplus means close to zero amount of money to be remitted to the government treasury.
To describe how deep this defrauding of government by these agencies, imagine that they generated N3.06tn in 2009, but remitted only N46.8bn to government treasury; generated N3.07tn in 2010; only paid into government treasury mere N54.1bn; and generated N3.17tn in 2011, remitted N73.8bn. Defrauding government most are the NNPC and its subsidiaries, discovered to have internally generated as high as N6.20tn between 2009 and 2011, made zero remittance, simply because they declared zero operating surpluses.
But why should internally generated revenues owned 100 per cent by the Federal Government have to be treated as if they belonged to these generating agencies to the extent of diverting them, when the law is clear that no agency of government should spend outside appropriation since their annual expenses are only permitted through appropriation? If most modern economies are dependent on internally generated revenues to finance their annual budgets, why are our internally generated revenues diverted by the same agencies generating them? Marcus Cicero was right that, "The greatest incitement to crime is the hope to escape punishment.''
Because the main reason being that internally generated revenues have yet to be mainstreamed, it's now time to come up with a law that will mandate government to henceforth use IGR for recurrent expenses while externally generated revenues only spent on capital projects.
Should this law be enforced, a revenue inward-looking government should hardly waste any time in sealing off the leakages created in Section 22 (1) of Fiscal Responsibility Act of 2007 by making sure that all its internally generated revenues are paid into the Consolidated Revenue Fund Account, where no agency of government should have any drawing right to the account. What it will mean is that Sections 22 (1) and (2) are deleted from FRA.
It also will mean that the Fiscal Responsibility Commission should become more proactive in ensuring that all government agencies abide by the rules as dictated by FRA or else such agency should be promptly reported to the EFCC and the Office of the Attorney-General for further investigations and prosecutions.
To ensure that government focuses on increasing internally generated revenue, the lawmakers shouldn't pass into law any proposed budget unless the sources of funding demonstrate that internally generated revenues are for recurrent expenditure whereas externally generated revenues should be solely for capital spending.
Since our lawmakers have the responsibility to appropriate and oversight how public money is spent, our lawmakers should recognise that because this power of the purse is solely in their hand, equally, they are solely responsible for the financial actions or inaction of the other two arms of government.
Punch
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