LITERATURE:Story Of The Week.

The other day, a friend narrated a story,
which I found stranger than fiction. The
story related to the travails of a family who
lost a successful and illustrious
breadwinner, who, unfortunately, died
without a Will. The elders of the family were
consequently entrusted with the
responsibility of efficiently managing the
estate of the deceased.
In spite of the huge credit balances,
lucrative estates and other profitable
income generating businesses, the Elders’
Council decided to consolidate the incomes
from these investments as savings for
future generations! Consequently, rather
than spend from the robust income
streams available, the Elders’ Council, in its
wisdom, gleefully funded its expenditures
by borrowing at over 15 per cent interest
rate from its bankers, while its savings
earned paltry yields, often below five per
cent!
Predictably, the oppressive interest charges
rapidly gulped up the erstwhile flourishing
income streams until the mortgaged estates
were systematically acquired by banks as
repayment for mounting debts. Within a
few years, the once prosperous business
became bankrupt and the family was
reduced to penury.
I wondered aloud to my friend, whether
this story related to a family of stark
illiterates, but I was surprised when he
confirmed that the elders’ council
comprised reputed professionals, who were
educated in some of the best universities in
the world!

“What then became the fate of members of
the Elders’ Council?”, I finally asked my
friend; “Oh”, he replied, “they are all doing
very well; in fact, they all became major
shareholders in the same bank in which the
family had its account”!
When my friend took his leave, I quietly
wondered if this story could ever be true;
however, later that evening, it became clear
that as outrageous as it may seem, in
reality, the story of this tragic family
appears congruent with the story of our
country, Nigeria!
Nigeria is, undoubtedly, blessed abundantly
with resources; for example, crude oil
revenue alone often exceeds projected
annual spending. Curiously, in spite of such
fortuitous revenue base and our favourable
balance of payments, we have inexplicably
found ourselves rapidly, needlessly
compounding our debt burden in recent
times. Annually, the managers of our
economy deliberately understate projected
revenue with very conservative benchmarks
for crude oil price and output. The
government subsequently proceeds to
finance anticipated “ghost” deficits by
borrowing at oppressive rates often above
15 per cent, while simultaneously,
paradoxically consolidating revenue
“surpluses” in savings accounts with yields
well below five percent, particularly for its
dollar or euro-denominated deposits!
It appears to be of no consequence that
the same banks that keep our incomes and
deposits for little or no yield are
predominantly the same sources, which
fund government’s borrowings. Pray, why
borrow back your own money with
excruciating costs?
These banks, which currently post
hundreds of billions of naira profits, are
also beneficiaries of the over N5tn AMCON
funding in the last three years;
notwithstanding, the expected revitalisation
of the real sector with bank support has
remained elusive, while AMCON’s trading
loss could be well over N2.5tn by the end
of 2012!
In spite of huge borrowings to fund ghost
deficits in budgets, “surplus” revenue is
regularly hounded into a so-called Excess
Crude Account or alternatively consolidated
in a savings account designated as a
Sovereign Wealth Fund. The yield from
either account is probably below three per
cent. Incidentally, the constitution does not
recognise either of these accounts, which
are definitely discordant with true
federalism!
Instructively, the funds consolidated in
both accounts may ultimately become
inadequate for the liquidation of the rising
debts, which were avoidable in the first
place, as availability of surplus revenue is
indicative that our gross income exceeded
expenditure.
It is bewildering that our respectable
Economic Management Team, would
sustain deficit financing and increase our
domestic debt burden almost at hundred
per cent in the last three years despite
existing surplus revenue accounts!
So, as it is with the misguided recklessness
of the elders’ council in our earlier story,
so it is with the mismanagement of the
Nigerian economy. In spite of our
fortuitous resource endowments actually
generating more income than projected in
annual budgets, the government remains
committed to a strategy of borrowing at
excruciating rates of interest to fund ghost
deficits, instigated by deliberate
understatement of projected revenues
annually. It is no wonder, therefore, that
despite increases in our ‘surplus’ savings,
there is deepening poverty and very little
on the ground nationwide to show for our
simultaneously bourgeoning debt profile.
Meanwhile, the Economic Management
Team grabs every opportunity to extol the
wisdom of a fiscal strategy, which is taking
us nowhere fast!
Nevertheless, fortunately, all is not lost, as
the National Assembly still constitutes a
superior authority over the economic team.
Indeed, in May 2008, in an article titled,
National Assembly fiddles as debt burden
cripples,this Writer cautioned the parliament to stop the
frenzied debt accumulation by the Debt
Management Office and the CBN.
Regrettably, the National Assembly
remained unperturbed!

“However, now that the cancerous impact
of reckless debt accumulation has become
very glaring, the current federal legislature
would have failed our nation woefully if it
doesn’t immediately suspend all
government borrowings. It is imperative
that we first determine the reasons for
accumulating such an oppressive, yet
avoidable debt burden. Our economic
security and that of future generations will
be foolishly compromised, if the current
socially destructive business model is
sustained!”

The above is an excerpt from an earlier
article published in December 2012! Anyone
who doubted the credibility of the riches-
to-rags story of the rich man’s family
should now take a second look at how the
travails of the family is loyally mirrored by
the reckless management of our economy
by our distinguished and acclaimed
Economic Management Team. Recently,
none other than Sanusi, belatedly
conceded, as regularly canvassed by this
writer for over a decade, that it does not
make sense to continue to fund the cash
base of banks with government’s free
deposits, only for the CBN to return to the
same banks to borrow back funds at
between 13 and 14 per cent interest rates,
just to simply sterilise (or keep idle) such
funds from use!
In realisation of this oppressive anomaly,
the CBN, in July 2013, directed that only 50
per cent of government deposits in banks
should count as part of the 12 per cent
Cash Reserve Ratio of banks. Not
surprisingly, despite this directive, the
burden of surplus cash remains
problematic, as the CBN and the DMO have
since cumulatively borrowed well over
N300bn from these banks just to reduce
cash supply in the economy! Undoubtedly,
a self-serving Elders’ Council is still in
charge! 

Culled From Punchng.com.

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