Promises
The Presidential election is over and the disastrous state of government revenues is finally becoming apparent.
APC (the new incoming government) had made campaign promises that it would build a national railway, interstate roads, ports, establish another government structure to manage its public works programme and build a new generation of domestic oil refineries.
Additionally, it stated it would increase spending on middle level technical manpower and create six government bodies for regional development. In short, it had promised an explosion of government spending in a period of a glaring decline in government revenue caused by the relative fail in the price of oil but (and more importantly) stubborn fixed government costs. It claims this is achievable by stopping wastage and reducing corruption. It has not said what the yearly corruption and wastage figures in Nigeria amounts to nor the costs of its added expenditure would come to.
Economic Challenge
What we do know is that an APC government would be working with drastically less revenues than the present government has been working with.
This is partly because of the fall in oil price (but even that is of negligible effect). The price of oil is around $60 dollars a barrel (above the average price of oil over the last decade and more than the price of oil during the entire OBJ period when Nigeria accumulated huge reserves). Additionally, the value of the dollar against most major currencies of the world has risen significantly in recent times. The real issue is that Nigeria has no one wanting to buy its oil. The Shale oil revolution in the US produces oil of the same grade quality as the one produced by Nigeria (therefore the US has no need for Nigerian exports) and the only major alternative market in Asia has refineries more suited to the different grade of oil that is exported from closer Middle Eastern countries.
The present coordinating minister for the economy has since revealed that the Nigerian government is battling to stave off bankruptcy. It has borrowed the equivalent of 1% of Nigeria’s GDP (which stands at 600 billion dollars) in the first 4 months of this year alone. The projected service obligations of the FG, as stated in the proposed FG budget of 2015 (and before the current debt binge had been embarked upon), had Nigeria spending 20% of its revenue on debt servicing. We now know that Nigeria under the Jonathan/Iweala government has practically borrowed 6 billion dollars in 4 months just to pay recurrent expenditure. There is no end in sight with that policy as the high blood pressure and the late night work days of officials of the ministry of finance seems to attest to.
When the debt service implications of this added borrowing is added to the pre-existing debt service obligations, Nigeria’s stubborn recurrent expenditure, its stubborn political bureaucracy, APC’s campaign promises and the Government’s significantly reduced income base, the new President Buhari has the impossible task of trying to keep the lights of the government on and still make good on his unrealistic promises to the Nigerian people. It was this very issue that was identified by Charles Soludo before the election and which neither party ever seriously addressed. The APC’s response seemed to suggest that eradicating corruption was sufficient to address the revenue challenge. That in itself will be seen to be pie in the sky.
http://pointblanknews.com/pbn/articles-opinions/soludo-article-economic-response-fg-apc/
Political Implications
All this points to a very challenging political and economic environment for the APC.
The full impact on Nigeria’s economy will slowly become apparent to its people in the first couple of months of the Buhari government. I see APC becoming very unpopular due to no fault of its own. It would have to cut workers pay, lay off workers, borrow more money to both meet its current obligations and invest on alternative sources of government revenue (mining and agriculture). The high interest environment being championed by the CBN would make it very challenging for the private sector to grow.
Chances are that the private sector and private sector employment will contract.
This will mean that the PDP, perversely, may return to power in just 4 years time provided it concentrates on choosing a candidate from the South South in the mould of a Donald Duke and chooses a Vice Presidential moslem candidate from the middle belt.
It should run so far away from President Jonathan so that Nigerians stop associating the PDP with President Jonathan or any minister that was prominent in President Jonathan’s Government. It should then focus its energy on the politically swing zones of the North Central and South West (who have voted in the exact same way in 2011 and 2015). Both zones voted in almost identical voting numbers and percentage of votes for the two parties (57/58% for APC and 42/43% for PDP). Those two zones, will determine in the short to medium term whether the core northern centered APC or the South Southern centered PDP will hold power in the next four years. None of those two zones place that much weight (at the current time) on ethnicity. Their choice will be based on the economic conditions they face in 2019 and who they blame or praise for it. The North West and North East vote along similar lines and will stick with Buhari irrespective of his challenges in government and the SS and SE have voted along the same lines and will stick with a South Southern candidate for similar sentimental reasons.
Buhari’s victory may prove to be a pyrrhic one after all.
Dele Awogbeoba
Dele.awogbeoba@gmail.com