A Financial Analysis Firm, Africa Check, Which Prides Itself As Sorting Out Facts From Fiction, Says Claims That Goodluck Jonathan Left A N7 Trillion Deficit Cannot Be True
Claims that former president, Dr. Goodluck Jonathan, handed over a N7 trillion deficit to his successor, has been punctured as untenable by a financial analysis firm, Africa Check.
The firm, which has offices in South Africa and United Kingdom, said it was not possible for the former administration to leave a N7 trillion deficit given Nigeria’s budgetary realities. In an analytical report posted on its website www.africacheck. org, and authored by Tolu Ogunlesi, the firm made a critical examination of Nigeria’s debt profile, income and expenditure ratios concluding that a N7 trillion deficit was not possible.
It noted that rather, what was possible, given the 2015 budget projections, was a N1.075 trillion deficit. According to Africa Check, Ahmed Joda, who led President Muhammadu Buhari’s transition committee, had claimed that “Jonathan left N7 trillion deficit”. It noted that Joda had also followed up the claim with a newspaper interview wherein he said: “We were told at the beginning of the exercise that the government was in deficit of at least N1.3 trillion and by the end people were talking about N7 trillion; everything is in a state of collapse.” Reviewing the claim, Africa Check said it wondered if it was possible for Jonathan’s government to leave Nigeria with a deficit worth nearly 150 percent of the country’s 2014 budget.
First, the analysts wondered if what was under reference was “deficit or debt” as according to it, even people in the United Kingdom and United States of America, hardly knew the difference between both. “Confusion about the terms “deficit” and “debt” is common. A 2012 study in the United Kingdom found that most Britons did not understand the difference between debt and deficit and, in 2014 US fact-checking website PolitiFact found similar levels of confusion in that country.
“So what’s the difference? Essentially it’s a matter of timing. A deficit is annual, and occurs when a government’s expenditure exceeds its revenues in any given year. Debt is long-term buildups year on year when governments run multiple deficits, and is the total sum of monies owed”, it said.
Applying that to Nigeria’s situation, Africa Check stated that “according to Nigeria’s Debt Management Office, the country’s total debt –foreign and domestic debt owed by the Federal Government and all the 36 states– was N12.1 trillion ($63.8 billion) at the end of the second quarter of 2015. At the end of 2014, it had stood at N11.2 trillion.
“At a press conference on May 23, a few days before her tenure as finance minister ended, Ngozi Okonjo-Iweala said Nigeria owed $63.7 billion in debt, but only $21.8 billion was incurred while Goodluck Jonathan was president between May 2010 and May 2015. “Nigeria has a National Debt Management Framework that sets a selfimposed limit that debt should not exceed 25 percent of GDP.
Debt relief brought the ratio down from 28.6 percent in 2006 to 11.8 percent in 2007, rising to 19 percent by 2013 until the 2014 rebasing of Nigeria’s GDP brought it down to 11 percent”. Africa Check therefore stated that “the deficit anticipated for 2015, as set out in the budget passed by parliament in May, is N1.075 trillion.
This amounts to about a quarter of the total budget of N4.493 trillion, and 1.12 percent of Nigeria’s current GDP. This is below the 1.24 percent projection in the 2014 budget” adding that Okonjo- Iweala, had, in her speech presenting the 2015 budget to the public in December 2014, noted that the “deficit is well under the 3 percent of GDP encapsulated in the Fiscal Responsibility Act, 2007, which is also the international norm.”
Africa Check also said it was shown relevant sections of an as-yet-unpublished report by Joda’s Transition Committee, which has also been published in part in other newspapers. “In it the committee claimed that, apart from the approximately N1 trillion deficit officially anticipated for 2015, an additional N3 trillion may be required during the course of this year to offset obligations incurred since the beginning of 2015, but not budgeted for by the previous government.
“These would include arrears of salaries for federal and state government workers, a fuel subsidy bill, monies owed contractors, the national oil company’s “Joint Venture” contribution to oil exploration expenses, and funding for a “Marshall Plan” for the insurgency-hit northeast. However the report also emphasised the sums that make up the N3 trillion claim are merely estimates, requiring verification.
“In the sections shown to Africa Check the committee also said that it is unsure about the actual age of the contractor debts, which leaves open the possibility that part or all of it may already have been captured in the total public debt figure as captured by the Debt Management Office”. It concluded that the N7 trillion deficit for 2015 was misleading.
Africa check said: “The deficit anticipated for 2015 in the budget passed by parliament in May is N1.075 trillion, not N7 trillion. Even if we were to assume that the entire additional N3 trillion deficit which the Joda committee anticipated occurs –and that is currently conjecture– it would leave the deficit for the year at N4 trillion, not N7 trillion.
In summary, which ever figure proves right, the claim of a N7 trillion deficit in 2015 does not add up”. Africa Check also referenced Dr. Bongo Ali, a development economist at the Lagos Business School, who it quoted as saying that “running a balanced budget is not always a good thing; there is a permissible level of deficit that governments are allowed to run.”