The Debt Management Office recently indicated on its website that Nigeria’s total debt is currently about N7.93tn ($50.92bn); domestic debt accounts for almost $44bn, while external debt just falls short of US$7bn.  Thus, our consolidated national debt may currently exceed N13tn (i.e. about $80bn!), if AMCON’s proxy debt of about N5.7tn is also captured!  

Paradoxically, however, the current stupendous over twofold increase in the national debt level, since the 2006 payment of $12bn for debt exit is often mischievously favourably reported by our Economic Management Team as still well below the ceiling of 40% stipulated in the 2007 fiscal responsibility Act by about 5%!

In the light of the preceding choking debt scenario, discussions on the 2014-2016 expenditure framework must recognize the oppressive burden of the double-digit interest rate on these huge debts, in spite of their risk-free sovereign nature!  The subtle official propaganda to encourage a massive shift in favour of much cheaper external debt should also be recognized as an attempt to, once again, mortgage the interest of future generations to modern day neocolonialists!  A more patriotic and progressive strategy would be to adopt a plausible monetary strategy that can bring down domestic cost of borrowing to the benign level of external loans!    

Consequently, a responsible government should keep a lid on, and prevent even a one-kobo increase in the current oppressive debt level, while the medium term plan must also accommodate a much more realistic framework for benignly managing the current debt burden.  Regrettably, the recent feeble consolidation of a N100bn annual sinking fund for debt repayment certainly does not provide any realistic assurance of capacity to service and repay our debts of about N13tn when due.

A realistic and progressive fiscal strategy that recognizes the unduly heavy burden of the current debt crisis must, therefore, necessarily be predicated on the platform of balanced annual budgets within the lifespan of government's Medium Term Expenditure Framework (MTEF), which must be squarely founded on realistic revenue projections, so that there will be no need for additional borrowing, which will increase the already obnoxious debt level; in short, there must be no provision for deficit financing!

Furthermore, in the light of the significance of crude oil revenue, the price and output benchmarks must be realistically projected; for example, it should not be set below $80, as in recent years, when in actual fact, prices constantly remained above 25% of benchmark at $100/barrel, while cumulatively, over the same period, output may have fallen just below an average of 10%!  Inexplicably, however,  in spite of the expected revenue surpluses, which actually funded the Executive’s contrived designated Excess Crude Account, government still resorted to borrowing over 10% of its annual budget of almost N5tn at oppressive rates, just to fund what some critics have described as ghost deficits!

In addition, a plausible MTEF must totally eliminate fuel subsidy as a component of expenditure, and must indeed, also consider a realistic arrangement to actually earn a minimum of 10% sales tax from each litre of fuel sold in Nigeria, as is the case in other successful oil resource endowed nations like the UK and US.   

It would equally be inapplicable to expect the desired positive outcome from an MTEF that does not recognize the catalyst functions of monetary variables, particularly, inflation and interest rates!  Indeed, except in recent months, the annual year-on-year inflation rate has consistently hovered around 10%.

Consequently, a responsible and sustainably progressive MTEF must be underpinned by a benign inflation rate below 3%, as in successful economies everywhere!  Similarly, in order to ensure reasonable cost of funds to support real sector growth, we must adopt best practice of such successful economies, and therefore ensure that Central Bank’s Monetary Police Rate (which governs commercial lending rates) does not also exceed 2% of LIBOR (the international benchmark for cost of funds).  . 

The other critical factor for consideration in a viable MTEF is the applicable benchmark exchange rate; for example, since 80% of current revenue comes from crude oil dollar revenue, the naira amount available for spending, therefore, will significantly be influenced by the applicable dollar exchange rate, since the dollars are unconstitutionally substituted with naira allocations by the CBN.  However, it will be self-defeatist to attempt to increase revenue by continuous reduction in the naira exchange rate, as this would only instigate and sustain an oppressive inflationary spiral.

Furthermore, apart from its adverse inflationary impact, if, for example, the naira depreciates from N160 to N320=$1, fuel subsidy payments will correspondingly double, to over N4tn annually, with grievous impact on revenue provisions for social and infrastructural needs.  

Evidently, therefore, the first object of a socially responsible exchange rate policy in the 2014/16 monetary strategy would be to ensure that the naira exchanges at a rate that would immediately eliminate any form of fuel subsidy.  Thus, if for example, the dollar conversely exchanges for N80=$1, the price of premium motor spirit would immediately fall to below N70/litre, from the erstwhile market price of about N140/litre price before subsidy. 

In addition, a stronger naira would significantly increase the purchasing value of the paltry incomes of all labour; such increased purchasing power will in turn stimulate demand and drive productive industrial growth with increasing job opportunities.

In conclusion, in the light of our impoverished infrastructural base, a realistic and sustainable MTEF must progressively skew capital expenditure from the current level of about 30% to over 50% of total expenditure!  Thus, any indication that the current MTEF accommodates more than 50% of budgeted projected revenue as recurrent expenditure must be seen as a clear signal that a certificate of failure awaits us as a result of failed fiscal strategy in the MTEF!

Besides, it is no mark of responsible fiscal strategy, if the fundamental assumptions underlying the 2014/16 expenditure plan are still yet to be resolved between the Executive and Legislature by November ending 2013, as ultimate Presidential assent may not be realistically expected until beginning second quarter 2014, with disastrous implications for successful budget implementation!