Can Nigeria finance its war against the insurgents?

Nigeria is now spending more than it earns on debt servicing alone – a crisis that raises serious concerns about the government’s ability to fund public infrastructure, civil service salaries, education and healthcare health. It also has dire implications for the protracted war against the Boko Haram insurgency.

The Department of Finance’s government revenue and expenditure performance report for the period January to April 2022, released last month, shows that the federal government’s retained revenue for that period was insufficient to service its debt. . According to the Economist Intelligence Unit, the debt service-to-revenue ratio of 118.9% was the worse in the world.

The causes of the income crisis are varied. They include the government’s reliance on oil exports since the production boom in the 1970s, external shocks such as COVID-19 and the Russian-Ukrainian war, corruption and oil theft. , and an economic structure incompatible with its rapidly growing population. Political choices such as ongoing oil subsidies have exacerbated the situation.

Nigeria has struggled to overcome the threat of Boko Haram since it turned violent in 2011. The current dynamics of the conflict are even more worrying, with three active factions, significant Supportand an expansionist conduct which widened the geographical reach of the insurgency.

To make matters worse, the shepherds’ dilemma is getting worse. Some have turned into violent criminal gangs, or bandits, who kill and kidnap Nigerians and sometimes foreign nationals. In the south of the country, violent secessionists strain the capabilities and resources of security personnel.

According to Business Day, World Bank data shows that Nigeria’s defense budget has increased by 262% over the past five years, from $1.72 billion in 2017 to $4.5 billion in 2021. Although Nigeria’s defense spending is still well below the global average of 2% of GDP, their growth is occurring against a backdrop of falling incomes and rising debt.

Boko Haram

Military spending alone will not be enough in Nigeria to win the fight against insurgencies. Long-term solutions require a systematic resolution of their underlying causes, which include relative deprivation, unemployment, lack of education, and inadequate primary health care and other public services. The failure to address these issues has fueled banditry in northwestern and north-central Nigeria – threats that are now even deadlier than Boko Haram.

Thus, Nigeria’s income crisis will not only stifle the government’s ability to wage kinetic warfare, but also its ability to improve the conditions for conflict to emerge. And recent gains made by the military will require resources to prevent their reversal.

Although government revenues may increase slightly during the rest of the year, high debt service payments will force policy choices that affect security and development. The federal authorities have allocated 15% of their 2022 budget to defence. This outmoded combined allowances for health (7%) and education (5%).

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Beyond insurgencies, civilian police also need to be strengthened to help deal with rising crime, which, if left unchecked, could intersect with violent extremism. This includes offenses such as kidnapping for ransom, which are sometimes jointly perpetrated by Boko Haram factions and other attackers.

However, reforms will be difficult in a low income environment. The government currently finances its budget deficit through external and internal debt. But this approach quickly turns out to be unsustainable. A default will put Nigeria’s public finances in a more difficult situation.

Some options for improving Nigeria’s public finances in the short term include ending costly gasoline subsidy payments, tackling oil theft, and improving tax collection. President Muhammadu Buhari appears unwilling to scrap gasoline subsidies, despite alternative solutions that can be explored. The subsidies prevented Nigeria from benefiting from the recent oil boom when prices rose above $100 a barrel.

READ ALSO: EDITORIAL: Buhari’s incompetent leadership and the escalation of the insurgency in Nigeria

Oil theft is arguably more complicated, requiring significant political will to deal with perpetrators who are often highly placed in the public and private sectors. Taxation is just as tricky. Many Nigerians are already paying high informal taxes. Inadequate public services and weak accountability have damaged the social contract, causing resistance to more taxation.

The seat of the Federal Ministry of Finance [PHOTO CREDIT: @FinMinNigeria]
The seat of the Federal Ministry of Finance [PHOTO CREDIT: @FinMinNigeria]

The current situation poses an existential threat to the capacity of the Nigerian state that could benefit insurgents and violent extremists. According to Jihad Analytics, Nigeria had the second the highest number of attacks (304) claimed by the Islamic State between January and June, with Iraq in first (337) and Syria in third (142). An underfunded government may be unable to stop the ongoing expansion of the Islamic State West Africa Province.

Tough decisions are needed. Ending fuel subsidies may be painful in the short term, but it is essential for sustainability. Austerity measures must start at the top and the excesses of elected and appointed officials must be curbed. Economic reforms that spur private sector development are key to creating a stronger foundation for revenue generation.

Although Buhari is nearing the end of his term, it is not too late to tackle the current crisis and leave a good legacy. The stakes are high and there is no silver bullet. To produce short-term returns, reforms must be implemented immediately.

Teniola Tayo, Researcher, Institute for Security Studies (ISS) Regional Office for West Africa, the Sahel and the Lake Chad Basin

Research for this article is funded by the governments of the Netherlands and Norway.

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