How then does The FGN pay salaries? simple it borrows by issuing FGN Bonds and Treasury Bills. These borrowing in the fiscal year are reflected in the deficit figure which represents the difference between income and expenditure in that period. In 2017 for instance the deficit figure was N3.8 trillion…yes Trillion with a T. The FGN cannot just pay salaries, it builds roads, pays fuel subsidy, buys arms for the Armed Forces, fuel for cars, pays rent etc if you take away these expenditures from Grand Total incomes stated above then the deficit implicit in the budget rises.
Has the Federal Government borrowed funds since 2015 to pay salaries?
Simple answer; Yes
Kalu please show workings
First of some disclosures, all data shared here are from the Federal Budget Office document titled 4th Quarter and Consolidated Budget Implementation report and data from Office of Account General of the Federation. We are using fiscal year 2017 because that is the latest year with 4 Quarters of Income and Expenditures.
1. Total Income earned by Nigerian Federal Government from sale of Oil and Gas is N1.125 Trillion.
2. Total Income earned by Nigerian Federal Government from Non Oil revenues, is N956 Billion
3. Grand Total income earned by Nigerian Federal Government including NNPC refunds, Exchange Rate difference etc as at December 2017 becomes N2.657 Trillion
4. Personal Costs as at December 2017 is N2.765. This includes Salaries, Pension, Allowances, Service Wide Votes and Overhead costs. As you can see this figure is higher than the Grand Total Income earned of N2.657 Trillion.
Hold on Kalu, we are not interested in overhead costs, please what is salary component? Compare the salaries and pension to Income earned
5. Salaries and Pensions earned by the Federal Government as at December 2017 were N2.056 Trillion. This is greater than income earned from oil and gas. this means the total income from oil and gas goes to pay ONLY salaries and Pensions of Federal Workers.
Ok Kalu, we still do not accept these figures, can you show us ONLY salaries, no Pension
6. Salaries expenditures as at December 2017 are N1.865 Trillion. Again this is higher than the total income Nigeria made from sale of Oil and Gas in 2017 of N1.125.
So we have now determined that total income earned by the Nigerian Federal Government CANNOT cover Salaries, Pension and Allowances. there was as at December 2017 a deficit between Grand Total Earnings and Personal Cost, Allowances and Pension.
Higher Incomes usually lead to consumption which boost economic activity and creates wealth, Higher incomes for Nigerian workers will have a stimulating effect on the economy, but how will the FGN fund the salary increases? from crude oil? from VAT how? if you raise taxes on 180m Nigerians to pay for salary increases to less than 500,000 federal workers, that tax hike will act as a damper not a stimulant.
The solution is for the Federal Government is not mounting “diversification” but to to expand its revenues sources by increasing opportunities for her citizens to generate wealth. Nollywood for instance was created without Government support, the policy makers should now ask themselves how they can double the size of that industry to attract more productivity and innovation thus expanding ability to earn revenue from taxing incomes generated.
The job of the government is to create the conditions for her citizens to create wealth in a safe, legal and gainful manner.