How the debt crisis is negatively impacting counterinsurgency efforts

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Obviously, the fall in income would make it difficult to counter the rising violence of extremist groups that terrorize various parts of the country.

Today, Nigeria is now spending more than the money it earns just to service its debt, a crisis that raises serious concerns about the government’s ability to fund public infrastructure, pay the salaries of the civil service, to support the education and health budgets. It also has dire implications for the protracted war against the Boko Haram insurgency that has been going on for years.
The Department of Finance’s Government Revenue and Expenditure Performance Report for January to April 2022 released last month shows that the federal government’s retained revenues for that period were insufficient to service its debt. According to the Economist Intelligence Unit, the debt service-to-revenue ratio of 118.9% was the worst in the world.

Why revenues are falling
The survey shows that the causes of the revenue crisis are varied. They include the government’s reliance on oil exports since the production boom in the 1970s, unexpected external shocks such as Covid-19 and the ongoing Russian-Ukrainian war, corruption and the oil theft, as well as an economic structure incompatible with its rapidly growing population. Political choices such as the continued oil subsidy have also exacerbated the situation.

Insecurity indices

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 concerning, with three active factions, significant external support and an expansionist dynamic that has widened the reach geography 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 for ransom. In the south of the country, violent secessionists are straining the capacities and resources of security personnel.

According to official World Bank data, this shows that Nigeria’s defense budget has grown 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 that of the world by an average of 2% of GDP, its growth is set against a backdrop of falling revenues and growing debt, compounded by a heightened insecurity.

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. Failure to address these issues has fueled banditry in northwest and north-central Nigeria, threats that are now even deadlier than Boko Haram.
Thus, Nigeria’s income crisis would stifle not only 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 would 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 exceeded the combined allocations to health (7%) and education (5%).

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 crimes like kidnapping for ransom, which are sometimes carried out jointly 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 would put Nigeria’s public finances in a more difficult situation.

Alternative to improve income

Some options for improving Nigeria’s public finances in the short term include ending costly gasoline subsidy payments, curbing 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.

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

The current situation poses an existential threat to the capacity of the Nigerian state that could benefit insurgents and violent extremists.
According to Jihad analyses, Nigeria recorded the second highest number of attacks (304) claimed by 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 in West Africa.

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.
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