Several years ago a friend of mine told me about this formula for determining financial well-being: if your expenses exceed your income, your upkeep will be your loss.
I found it really hilarious and wondered why I had to go through obscure prose to pass my undergraduate economics course. Even now I laugh every time I think of the formula. Yet, fanciful as it may sound, it deserves to be applied with the precision of the laws of physics. It reminds me of Newton’s third law of physics: action and reaction are equal and opposite. It also seems very basic. Yet it is this principle that has enabled jet flight and space exploration.
And there is another parallel. In flight technology, any miscalculation regarding action and reaction is almost always catastrophic. In the financial realm, failure or inability to meet the income / expenditure principle will certainly cause distress or even downfall. Applied to government, distress is suffered by the people. In places, it also causes the downfall of governments.
Regarding the Nigerian government, expenditure obviously exceeds income. And so, there is a deficit – a major liability. Worse still, the spending is grossly insufficient to help the population. There is a serious funding gap for health care, education and all services that improve the quality of life.
Why such a gap? Nigeria is in fact a rich country, rich in natural and human resources. Projected revenues this year were 10.1 billion naira, including 3.2 billion naira from crude sales and taxes. It could have been more, if the government got all it is owed. But as the Panama Papers report, the oil companies trick Nigeria into underestimating actual inflows, overestimating costs and other questionable accounting practices.
“The Nigerian government may have lost $ 4 billion in revenue over the past seven years, and this is precisely where production sharing agreements exist,” reported the International Investigative Reporting Consortium, in March 2016.
Even then, the dominant assessment by experts is that the government can do much better for the people than it does. Spending is simply not going enough towards the right things. Another exploitation duped by foreign companies, much of the income is sucked up by very familiar practices: corruption, extravagant salaries and benefits for civil servants and bloated bureaucracy. And there are the economically unproductive expenses, like overpriced office buildings.
The cost of governance issue has occupied quite a few politicians lately, including Vice President Yemi Osinbajo, Kaduna State Governor Nasir El-Rufai and Alhaji Tanko Yakasai, founding member of the Arewa Consultative Forum and former special assistant to President Shehu Shagari. .
“Right now in Nigeria, 80 percent of Nigeria’s income is spent on bureaucracy, spent on running the administration,” Yakasai told PUNCH on Sunday in an interview in October. “At the end of the day, you can’t grow with 20% of total revenue when you commit to 80% of recurring expenses. This is what is happening at the federal and state levels. With this situation, no country can develop.
In an address later in the month, Osinbajo called for action. “Nigeria must make progress in reducing the high cost of governance in the public sector and be strengthened by establishing transparency and accountability at all levels of government,” he said in a speech.
In times of financial distress, this is not easily accomplished through layoffs. El-Rufai took the plunge but quickly canceled such plans earlier this year following an outcry. Cutting red tape puts people in distress. However, as has been argued with oil subsidies, the resulting savings would benefit everyone in the long run. That is, if the resulting savings are applied to development projects.
Another area of potential savings is one that may never be addressed: the inflated salaries and benefits of lawmakers and governors. When I first read that they are among the highest paid in the world, I was skeptical. But then I checked the numbers and found this statement to be absolutely true. This is not just relative to the country’s per capita income, but in gross terms in many cases.
In November 1979, the late President Shehu Shagari refused to increase the salary of the Speaker of the Legislature. Wouldn’t it help Nigeria if today’s political leaders follow suit?
The follies of lawmakers are not just waste; it nourishes the general culture of consumerism. When a classmate or neighbor is suddenly swimming in the dough just to get to NASS, the impulse is to find a way to catch up. It is often the motivation for infamous businesses, including voter fraud.
Speaking of the infamous, one should not speak of income and expenditure without noting the impact of insecurity. Beyond the victims, it weighs on economic activities. Farmers cannot cultivate, traders fear roads and markets, and other professional groups cannot do their jobs normally. All of this weighs on collective income and adds a big chunk to government spending.
According to data reported by Trading Economics, Nigeria’s military spending fell sharply and steadily between 2011 and 2017. Then it increased in 2018, decreased in 2019, then increased in 2020. Between 2019 and 2020, it went down. ‘approximately $ 1.9 billion to the United States. $ 2.4 billion, the newspaper reports.
Relative to GDP, it is in fact one of the lowest in Africa. But the gross allocation is just behind that of South Africa. What is most important is the huge increase of 29 percent. Spending for 2022 is expected to be even higher. And we know why.
Money that could have been used to reduce poverty is used to keep people safe and alive. Even IPOB’s recurring containment declarations in the Southeast have economic repercussions. It’s a case of flexing muscles that hurts its own people.
In sum, Nigeria can certainly use more income. The biggest problem is where the outgo is going?
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