Money Illusion: Question of who earned more in Akwa Ibom By Kufre Okon @Koophreh


Nigerians are often quick to point at government earnings as the basis upon which government should meet public expectations. We compare revenues of previous and present administrations creating fiscal analogies that lean on both weak and compelling premises to draw conclusions on which administration earned more and ought to perform better.
Comparisons like this would be right except that they are often faultily leveraged by the tendency to think of money in terms of its normative value rather than its real value. Economists refer to this tendency as money illusion. And almost every ‘social commentator’ and ‘social critic’ becomes susceptible to the money illusion bug as they tackle government on its fiscal conduct.
For instance, nothing in recent times better typifies money illusion than the devious conjectures authored by Senator Ita Enang in the comical document “Ediyarade Udom”. Published on the eve of the just concluded governorship election in Akwa Ibom state ostensibly to launch what would turn out to be one of the most pernicious propaganda against a sitting governor in the state yet, the document by Sen. Enang, President Muhammadu Buhari’s aide, attempted to “expose” the allocations to the state government and local councils from federal treasury. Besides the illogic in painting the disingenuous picture of the All Progressives Congress-led federal government as being magnanimous in their “gift” of federal allocation to Akwa Ibom state as if the state was undeserving of it, Sen. Enang has severally attempted to push to the fore of the discourse the claim that the Udom administration has earned more money than previous governments in the state. He, like many other opposition elements, is often quick to reel out figures in billions of Naira to drive home his point.
But the prevarication and dishonesty in the comparison is often manifest in the deliberate refusal to weigh the claims against factors like the foreign exchange realities of the years from 2015 compared with that of past fiscal years. Also usually schemed out of the analysis is inflation which has remained on the upward curve since 2015.
The question of which government has actually earned higher since the state entered the ranks of Nigeria’s highest earners in 2007 is better answered within the realms of the relative value of the Naira.
Nigeria’s economic misfortune became acutely visible in the 4th quarter of 2015, with our Gross Domestic Product falling to 2.11% compared to more than 5% in the same quarter of the previous year. It was one of the many horrific signals of what were to come with the Buhari presidency. By 2016, the once very fecund and largest economy in Africa had fallen into full blown recession. Of course, subnational economies are not often spared when things like this happen to a nation’s economy. Nigeria’s case is perculiar, no thanks to our defective federal system, our centralised fiscal regime, and our mono economy and import-dependent status. But perhaps much more frustrating to government and investors was the unabated weakness of the Naira against major currencies, particularly the dollar which rules our financial system.
Our economy is effectively tied to the apron string of the dollar. As one economist noted, when the dollar sneezes, the Naira catches cold and the citizens immediately feel the impact in the prices of goods and services. In effect therefore, the real value of the Naira is expressed in terms of its exchange power to the almighty dollar. And so long as Nigeria remains a commodity dependent economy with federal and state governments importing most of their services, especially as they seek to drive their infrastructure development ambition deeper, the dollar remains king.
A comparative analysis of earnings between two administrations would therefore make zero sense without considering the real value of Naira in the periods analysed. Take the 2013 and the 2018 fiscal years for instance. The Godswill Akpabio government had received N260b by the end of 2013 amounting to $1.7b at the time, and the Udom administration has reportedly received about N424b by the end of the 2018 fiscal year amounting to $1.1b. In the analysis of the real value of money received by both administrations therefore, the immediate past government received more money in 2013 than what was gotten in 2018 by the current government given today’s value of the naira as expressed in the prevailing exchange rate of N360 to one dollar against N150 in 2013.
This implication is practically visible in government expenditures on capital projects. Take Uyo-Ikot Ekpene Road for instance. The Akpabio administration had awarded the 25km road contract to Julius Berger for just over 473.3m dollars equivalent to about 71billion Naira in 2013. But by current exchange rate, if Governor Udom Emmanuel were to award to Julius Berger the construction of a similar 25km road in 2019, he would have to set aside over 170b Naira to do so. It is not also rocket science to understand that the 96m dollars (about 18.2b Naira at that time) paid to Julius Berger for the construction of the Akwa Ibom International Stadium in between 2012 and 2014 will amount to over 34.5billion Naira by today’s exchange rate.
This comparative analysis imperatively underscores the point that not only does today’s administration earn far less than the one which it succeeds, it cannot execute a capital project in 2019 with the same amount of money it would have executed the same project before 2015 when the economy went aground and the Naira depreciated badly. It would be spending at least 40% more money to do so. And this is not to talk of inflation which now stands at a crying 11% against 4% of 2014-2015. Herein lies the huge difference between the incomes on both administrations. But interestingly, the money illusioners and critics feign ignorance of this elementary mathematics of money.
A classical example of how the forex regime has been a setback to government’s development effort is in the now suspended car assembling plant project in Itu local government area of Akwa Ibom state. The state government in one of its early major efforts to stimulate Foreign Direct Investment as part of its industrial revolution in the state had entered into partnership with an Israeli firm, MIMSHAC Merkavim Transport Technologies, to construct a car assembling plant. Luxury cars, fire trucks, ambulances and other utility vehicles were to be assembled in the plant. A ground breaking for the plant was done, Akwa Ibom youths were sent to Israel for training as part of the manpower development component of the project, and all paper work was in place. This was in July 2015 and the Naira was just around the N195 mark relative to the dollar. But by December of that year, the currency had depreciated drastically to over N320 per dollar against projected rates. By early 2016, we were already seeing an exchange rate of over N350 per dollar
The implication of this forex volatility was the stalling of the car assembling project. Investors simply took to their heels amidst the volatile exchange rate.
But can government abandon critical projects such as road constructions owing to the weakening of the Naira as the narrated case? The answer is certainly, NO. Government will have to still pay Julius Berger the dollar equivalent to construct roads whether one dollar jumps to 400 Naira or not. Government will have to find a way to industrialise the state amidst the yearly depreciation of the Naira.
The many failings of the national economy despite, the Udom Emmanuel administration has tried to take a once solely civil service state to the status of an industrial hub. The administration has remained fervently on the industrialisation track, attracting over 18 industrial projects already running across the state, prominent among which is the Jubilee Syringe Factory which produces more than 350million syringes annually, making Nigeria a major exporter of syringes in Africa.
Rather than make banal comparisons and gloat over the state’s allocation, answers should be given the begging questions of what was done with the billions which flowed into the state when Naira had greater value than it has today. What did we do with the billions which accrued from oil revenue at a time when one dollar was exchanging for 150 Naira? How did we expend yearly revenues which exceeded the annual budgets of Ghana and 4 other African countries put together? We should ask how the 25km Uyo-Ikot Ekpene road contract managed to be reviewed 3 times from an initial N23b to N71b and N68b was drawn with less than 15km of the road constructed at the time of commissioning. What happened to the N1b drawn in 2012 for Ibom Air without a single paper work done? How come we had so much yet not a single cottage factory was sited anywhere in the state? Amidst all the billions accrued to the state in the famed oily years, how did the administration of 2007-2015 manage to leave a completely dilapidated health and education sectors that required billions of Naira in intervention to bring back to life? How did we end up with an empty monument called Ibom Specialist Hospital that became a burden on the new administration? Who benefitted from the bloated figures of the uncompleted Ibom Tropicana which stands today as a memorial of one of the worst thieveries by a state government administration?
In the final analysis, it does seem that Akwa Ibom people do appreciate the priorities set by the current administration in the state. And that sense of appreciation was effectively expressed in the last election where the people reelected the governor against the prevailing political tide overwhelmingly. This did not come as a surprise in a state where vision has redefined the essence of governance in more practical ways than one. By the time the Ibom airplanes hit the skies this month end, Ibom Airline Company would have been the 19th successfully established enterprises of the Udom Emmanuel administration, enterprises which represent accountability and real growth. Kufre Okon, a media manager, writes from Uyo
08026838392

Be the first to comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: