Parable of the Fool and his Money…, By Henry Boyo
BY HENRY BOYO
“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, also died without a Will. Consequently, the family elders were formally entrusted with the responsibility to efficiently manage the estate of the deceased for the benefit of his children and dependants.
“Curiously, however, despite the huge credit balances, sprawling lucrative, estates everywhere and other profitable income generating businesses, the Elders’ Council in their wisdom, decided to consolidate all income from these thriving investments in Savings Accounts for the children of the deceased and future generations! Although, these Savings Account, incidentally paid paltry yields below 5 per cent interest, the Elders’ Council curiously, decided, to simultaneously, fund all expenses, by borrowing with over 15 per cent interest rate, from the same banks, which anchored their Savings!
“Predictably, the related oppressive interest charges, rapidly gulped up the erstwhile flourishing income streams, until the estates were mortgaged and systematically acquired by the same banks as repayment for the rapidly mounting debts. Expectedly, the once prosperous businesses became bankrupt very quickly and the once illustrious family was reduced to penury.
“Naturally, I challenged my friend, whether this story related to a family of stark illiterates, but I was surprised when he confirmed that the ‘Elders Council’ comprised very reputable and exposed professionals, who were educated in some of the best schools in the world!
“What then became the fate of members of the Elders’ Council?”, I asked uncomfortably; “oh” my friend replied, “they are all doing very well; in fact, they all became major shareholders in the same banks in which the once illustrious family had its accounts, but the deceased’s wife and children now live, regrettably, in abject poverty!”
“When my friend finally took his leave, I quietly wondered if this story could ever be true; however, on reflection, later that day, as outrageous as it may seem, the story of this tragic family seemed congruent with the story of our country, Nigeria; sadly, our presumed representatives and public servants have prospered, while, we the people are increasingly oppressed by deepened poverty!
“Nigeria is, undoubtedly, enviably blessed, with abundant natural endowments; for example, actual crude oil revenue and other incomes often exceed projected annual estimates. Curiously, however, despite our fortuitous revenue base and favourable balance of payments, we have, inexplicably found ourselves, needlessly compounding our debt burden in recent times. Regrettably, the Managers of our Economy, often, adopt very conservative benchmarks for crude oil price and output and thereby deliberately, understate actual receipts annually. Furthermore, government thereafter proceeds to also finance the projected budget deficit, based on the understated budget benchmarks, by borrowing at oppressive rates often above 15 per cent.
“Curiously, despite the huge and expensive loans acquired to fund the predicated “ghost deficits” in annual budgets, the actual surplus revenue in excess of budget benchmarks, is ironically hounded into a so-called “Excess Crude Account” or alternatively in a savings account designated as a Sovereign Wealth Fund; the yield from either account is often below 3 per cent; instructively, however, the excess crude account will still be shared by the Governors’ Forum, in the same year without appropriation. Instructively, however, the Constitution does not recognise either of these accounts, which are clearly discordant with the spirit of true federalism!
“It is bewildering that in the last three years our respected Economic Management Team, sustained a deficit financing strategy and succeeded to critically double our domestic debt burden, despite the existing surplus revenue which still attracts minimal interest in both accounts!
“It is disturbing nonetheless, that the same banks that are custodians of Government revenue with minimal yield, are predominantly also the same source of government’s borrowings. Pray, why borrow back your own money with such excruciating costs?
“Ironically, the banking sector which presently posts hundreds of billions of naira profits annually, are also the same beneficiaries of the over N5tn Government bailout funds, doled out by AMCON between 2008-2010; furthermore, notwithstanding the trillions of Government interventions to these banks, the expected revitalization of the real sector, with the expected robust bank support, has remained elusive, while the Public Corporation’s trading loss had conversely risen well in excess of N2.5tn by 2012!
“So, as it is with the misguided recklessness of the Elders’ Council in our earlier story, so it is with the mismanagement of Nigeria’s economy. It is no wonder, therefore, that deepening poverty, presently exists side-by-side with a modest excess or surplus in an idle excess crude Revenue Account, even when there is very little on ground to show, nationwide, for Government’s concurrent bourgeoning debt profile. Inexplicably, however, the Economic Management Team continues to extol the wisdom of a fiscal strategy, which is taking us nowhere fast!
Indeed, in May 2008, in an article titled “National Assembly Fiddles as Debt Burden Cripples” http://www.lesleba.com/260508.doc, this writer cautioned parliament to restrain the frenzied debt accumulation by the DMO and CBN; regrettably, the Legislature remained unperturbed, even though our economic security and that of future generations will be invariably compromised!”
The above is a summary of an article, earlier published in December 2012! Anyone in doubt on the credibility of the prelude of, the above riches-to-rags story of the rich man’s family, may observe how the family drama loyally mirrors the reckless management of Nigeria’s economy by Government and its distinguished and acclaimed Economic Management Teams, even while poverty deepens nationwide. However, in 2013, none other than former Central Bank Governor, Lamido Sanusi, belatedly conceded, as regularly canvassed by this writer for over a decade, that it does not make sense to continue to liberally fund the cash base of banks with government’s free deposits, only for CBN and Government to return to the same banks to borrow with between 12-18 per cent interest rates, just to sterilize (or keep idle) perceived surplus funds, from use, in order to reduce the inflationary consequences of too much money in the system!
However, by July 2013, in response to negative product of the threat of inflation, from persistence excess money supply the CBN directed that only 50 per cent of government deposits in banks should count as part of the existing 12 per cent Cash Reserve Ratio of these banks! Not surprisingly, despite this directive, the burden of surplus cash and steeply rising debt still remained problematic. Consequently, in 2016, CBN raised the CRR to the present 22.5 per cent; notwithstanding however, the cost of funds has remained steadfastly in double-digits to the chagrin of businesses and millions of desperate job-seeking youths. Indeed, since 2015, the CBN and DMO have, cumulatively borrowed well over N5tn annually, to primarily simply sterilize systemic surplus cash from use, in order to keep the funds idle and reduce money supply in the economy and thereby reduce the non-discriminatory ‘terrorist’ threat of spiraling inflation. Worse still, for the same reason, the CBN would deliberately instigate disturbingly high interest rates between 12-18 per cent to also reduce consumer demand and further stall inflation. Undoubtedly, a self-serving Elders’ Council may actually be in charge of our economy!
Instructively, however, the scourge of evidently systemic excess money supply and increasingly oppressive debt has not been stemmed by the introduction of the Treasury Single Account for the custody of public sector revenue between 2015-2016.
Lately, however, by 2019, Nigeria’s debt burden has exceeded $70bn while 50 per cent of aggregate revenue is now also annually, dedicated, to servicing outstanding debts!! Some would say we may have just fallen squarely into a debt trap, like the family in our prelude; however, our public office holders and associates now own substantial private equity in Nigeria’s public sector wealth even when Nigeria has now become the World Champion producer of poor people!!