World Bank on Nigeria’s debt to revenue ratio

FOR good reason, the country’s worsening security situation has dominated the headlines. No matter where you turn, Nigerians are sharing the same fears, whether of being kidnapped on the highway or attacked in the privacy of their homes. At no other time in the history of the country has the average citizen felt more vulnerable. However, while the focus on everyday security is totally justified, it tends to draw attention away from another imminent danger facing the republic. This is the danger of economic collapse. As we have pointed out in previous editorials, Nigeria is a country living beyond its means, a grim reality again underscored by the World Bank Country Director for Nigeria, Mr. Shubham Chaudhuri.

Speaking last week during a webinar on the theme “Nigeria in challenging times: imperatives for a cohesive development agenda” organised by the Lagos Business School (LBS), Mr. Chaudhuri revealed that the country’s revenue-to-Gross Domestic Product (GDP) ratio, which fell to between five and six per cent last year, is the lowest in the world. This is not the first time that Mr. Chaudhuri, formerly a professor of economics at Columbia University, New York, USA, has spoken frankly about the dismal state of the Nigerian economy. In December last year, upon the release of the World Bank report on Nigeria for 2020, Mr. Chaudhuri had warned that between 15 and 20 million Nigerians could be driven into absolute poverty, bringing the total of Nigerians living from hand to mouth to a staggering 100 million.

If the revelation regarding the country’s revenue-to-GDP ratio is profoundly disturbing, none of the other observations that the World Bank Country Director made about the Nigerian economy will come as a surprise to any average observer. For instance, Mr. Chaudhuri reiterated the fact that Nigeria depends on revenue from oil to a sickening degree: “In Nigeria, I think the basic economic agenda is about diversification away from oil because oil has really been like resource curse for Nigeria on multiple dimensions.” He also reminded the audience that Nigeria has the potential to get it right by leveraging its immense human and natural resources: “Nigeria is a country with tremendous potential… Nigeria is still the largest economy in Africa. So, just think about the potential that Nigeria has because of its natural resources, but more than that, because of its dynamism and all of its population. Nigerians are more entrepreneurial by nature.”

How does the country extricate itself from its current logjam? Mr. Chaudhuri was crystal clear: “No country has become prosperous and realised its potential, eliminated poverty without doing two simple things: investing in people, and unleashing the power of the private sector in creating jobs by investing and growing business. And then, of course, the business of the state is to provide security and law and order.” The trouble with Nigeria, and the reason why, according to Mr. Chaudhuri, the country “at the moment ranks sixth from the bottom in terms of the human capital index” that the World Bank produces every year, is that its priorities are misplaced. For example, “Nigeria spends more on PPMS (premium motor spirit) subsidy than it does on primary healthcare in a year, and we know who the PMS subsidy is benefiting.”

We hope that the Minister of Finance, Budget and Planning, Mrs. Zainab Ahmed, represented at the meeting by Special Adviser to the President on Finance and the Economy, Dr. Sarah Alade, is listening. No society constructed on the kind of dubious economic fundamentals that the World Bank Country Director has carefully laid out can survive for long. The question is how long Nigeria can continue to ride its luck.

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