Radical uncertainties

ON October 1, the retired partners of KPMG who are still awaiting their gratuity and pension were gathered in Abuja to celebrate Nigeria’s 58th Independence Anniversary as guests of President Muhammadu Buhari GCFR and also participate in the 48th Annual Conference of the Institute of Chartered Accountants of Nigeria [ICAN]. Alas, as we drove from Nnamdi Azikiwe International Airport into town, we were confronted by huge billboards of President Buhari who is bidding for a second term in 2019. However, there were other bill boards (sponsored by XKPMG and Grant Advertising Nigeria Limited) contending for space and attention:

(i)            Chief (Dr.) Sylvan Olisanye Ebigwe (Vice President-General, Ohanaeze Ndigbo (Worldwide); President Emeritus, Aka Ikenga; Consultant Dental Surgeon and the Iyasei Onowu (Prime Minister), Agbadagba, Okpanam, Delta State): “Nigeria is practising primitive democracy (revenge and retaliation) with some primitive minded individuals in the field. They don’t have the love of this country at heart. Why should people kill and maim others in order to come and serve a nation?” (ii) Jeff Rich : “The one thing we know about the future is that it comes one day at a time.” (iii)                Dr. Chukwuemeka Ezeife, former Governor of Old Anambra State: “Nigeria is a total failure and Nigeria may be inching towards extinction the way things are going. An Igbo man has never ruled Nigeria for one day, no elected Igbo President for one day. (Major-General Johnson Aguiyi Ironsi was a military leader and he lasted only six months). Therefore, if by chance Dr. Kingsley Moghalu gets it, nobody should complain.”

(iv)Professor Neal Hartman, Massachusetts Institute of Technology: “In this volatile, unstable, complex and ambiguous operating landscape, to survive and thrive, Nigerian leaders need to make innovative impacts in their organisations in several ways.”(v.) Daily Sun newspaper: “IMF’s timely warning: “The International Monetary Fund [IMF] recently warned Nigeria and other sub-Saharan African economies to urgently check rising debts and diversify their revenue bases. It advised that they should not delay such reforms because of rising oil prices in the international market as the ‘good times’ would not last for long. Specifically, the IMF warned the Federal Government to check the rising levels of debts and deepen diversification efforts and revenue base. Failure to heed the warning could result in serious economic crisis. This is not the first time this year that IMF has warned Nigeria of the likelihood of debt crisis, its latest warning came at the IMF/World Bank annual meeting in Bali, Indonesia, during which it unveiled the World Economic Outlook entitled,“Challenges to Steady Growth.”

“We urge the government to critically examine all the areas of the economy that the IMF has raised concerns and initiate far-reaching reforms that will stimulate sustainable growth.We agree with IMF that looming debt crisis, occasioned by frequent borrowing without deploying such funds to productive sectors, the need to enhance the non-oil revenue mobilisation and proactive banking supervision, are some of the challenges the government must quickly address. For instance, Nigeria’s debt stock reached N22.3trn as at June 30, 2018. About two-thirds of the government’s revenues are reported to go into servicing interest payments, with the principal still awaiting redemption at maturity. In 2017 alone, N1.8trn was spent by the Federal Government on debt servicing, out of which N1.455trn went into domestic debt servicing.

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“We recall that President Muhammadu Buhari is seeking the approval of the Senate for a fresh $2.86bn external loan for part-financing of key infrastructure projects, and another $82.54m from the international capital market to refinance the balance of $500m mature Eurobonds. In all, the fiscal plan recorded N2.426.73trn shortfall, according to figures from the Budget Office of the Federation (BoF). The Economic Counsellor of IMF, Mr. Maurice Obstfeld, observed that the Nigerian economy and those of other sub-Saharan African nations may witness growth rebound as a result of the current high oil prices, but warned that rising borrowing levels will likely vitiate the gains. This, therefore, calls for boosting non-oil revenues and fiscal consolidation plans. Such fiscal buffers will make room for policy responses in the likelihood of the “next recession” that awaits countries that fail to plan against the ‘rainy day.’

“In spite of the Federal Government’s assurances that its borrowing plan is still within the acceptable threshold as well as its commitment to diversify the non-oil sector, we are inclined to side with the IMF position that our economy is yet to receive a significant boost from policy implementations that can truly withstand the shocks that pushed it into recession a few years ago. The IMF and the World Bank had insisted last year that the fanfare that greeted Nigeria’s exit from recession came on the heels of new foreign exchange measures by the Central Bank of Nigeria, rising oil prices, attractive yields on government securities, a tighter monetary policy regime and increased external reserves. But some of these are on the reverse gear now.

“No doubt, Nigeria’s fiscal challenge is about revenue shortfalls and lack of wise investments of available resources in critical projects that can stimulate growth. Borrowing is not bad, it is how such loan is deployed into productive sectors that matters. Statistics from the BoF and the Debt Management Office (DMO) show that the ratio of interest payments is rising in great proportion. Therefore, the government should be careful about issuing debts in international capital market as it is currently doing.

• Bashorun Randle is a former President of the Institute of Chartered Accountants of Nigeria (ICAN).