A Ticking Bomb Amidst Loud Music…

No one can hear a ticking bomb when the music is deafening. Even if the bomb is visible in plain sight, the wires connected, the detonator displayed, and the arms of the clock racing in the direction of the hour ‘H’. The surrounding cacophony can mask the inevitable danger. Then, there is more than the loud music! Look out for the ‘trompe l’oeil’ artists who are disguising the bomb to look like a weird robot, or an old pressure-cooker ware, or even some sort of a futuristic decoration that only the initiated could appreciate. When the eyes and the senses are distracted from a ticking bomb, the lesser are the concerns of people standing nearby. But ignorance of risk is no shield from it.

This bomb, if it goes off –and it will, unfortunately- will engulf an area of 10,452km2, and will ruin the lives of some 4 million people, not counting 2 million additional non-invited guests (or unskilled, dangerously armed or seriously angry refugees, for those who are politically correct).

This bomb is deeply seated into the banking and monetary system of the country. Its nature is no mystery to wit, a mountain of ‘bad debts’ with no chance of repayment. Relative principles of public finance apply to corporate finance. If your assets are less than your liabilities, you are in trouble. If your cash flow cannot cover your debt repayments, you risk default. If you are borrowing to service your existing debt –whether public or private- you already are technically insolvent. Now, at the opposite of private sector entities, a State has few privileges. One is that the government can create new sources of revenues either from selling some of its income-generating assets (this process is called privatization), or from raising taxes (this process is called legalized theft, especially in countries where taxation is totally divorced from any public services offered in exchange to the taxpayers.). However, when your income-generating assets (e.g., airline, telecom companies, casino, tobacco monopoly) are being used by the political class to fill its coffers and employ its clients-voters, a sale of such assets is out the question. We turn to taxes. In a country where taxes are levied on an ever smaller portion of taxpayers, adding new ones would not solve the issue. Theft, corruption, smuggling of goods, and wastage of public funds are further ailments capable of sucking-in any additional funds, or taxes or revenues that the State can muster. But wait a minute! The government has proven energy resources that it can explore and exploit. So does Nigeria, but the funds end up with the multinationals and with the political class that is paid-off to ensure an uninterrupted and unchallenged flow of energy out of the country without necessarily a reverse flow of revenues.

Finally, one could counter that a State –unlike a company- cannot go bankrupt, be liquidated or disappear! True, but it can become insolvent, its currency cheapened by ultra-inflation, its assets fully depleted and its most valuable resource: young, energetic and talented humans, migrating to more prosperous lands.

Wait a minute, say the nay-sayers, this system has worked through thick and thin and never got a serious dent, or faced a national crisis level, or brought the collapse of the entire monetary and economic system!
We have regulators of the highest caliber, tried and tested bankers, the most conniving politicians in our region by far, a track record of both civil and regional wars, ethnic cleansings, refugees’ fluxes, power and water shortages, and (a bit of) terrorism, and nothing has been able to shake the foundations of this great country. We have been doing very well so far, thank you.

Funny that it is a fellow countryman who wrote a book called the ‘Black Swan’, where one of its most interesting quotes should make us pause and think. The quote says “It has been more profitable for us to bind together in the wrong direction than to be alone in the right one.

No one can hear a ticking bomb when the music is deafening. Even if the bomb is visible in plain sight, the wires connected, the detonator displayed, and the arms of the clock racing in the direction of the hour ‘H’. The surrounding cacophony can mask the inevitable danger. Then, there is more than the loud music! Look out for the ‘trompe l’oeil’ artists who are disguising the bomb to look like a weird robot, or an old pressure-cooker ware, or even some sort of a futuristic decoration that only the initiated could appreciate. When the eyes and the senses are distracted from a ticking bomb, the lesser are the concerns of people standing nearby. But ignorance of risk is no shield from it.

This bomb, if it goes off –and it will, unfortunately- will engulf an area of 10,452km2, and will ruin the lives of some 4 million people, not counting 2 million additional non-invited guests (or unskilled, dangerously armed or seriously angry refugees, for those who are politically correct).

This bomb is deeply seated into the banking and monetary system of the country. Its nature is no mystery to wit, a mountain of ‘bad debts’ with no chance of repayment. Relative principles of public finance apply to corporate finance. If your assets are less than your liabilities, you are in trouble. If your cash flow cannot cover your debt repayments, you risk default. If you are borrowing to service your existing debt –whether public or private- you already are technically insolvent. Now, at the opposite of private sector entities, a State has few privileges. One is that the government can create new sources of revenues either from selling some of its income-generating assets (this process is called privatization), or from raising taxes (this process is called legalized theft, especially in countries where taxation is totally divorced from any public services offered in exchange to the taxpayers.). However, when your income-generating assets (e.g., airline, telecom companies, casino, tobacco monopoly) are being used by the political class to fill its coffers and employ its clients-voters, a sale of such assets is out the question. We turn to taxes. In a country where taxes are levied on an ever smaller portion of taxpayers, adding new ones would not solve the issue. Theft, corruption, smuggling of goods, and wastage of public funds are further ailments capable of sucking-in any additional funds, or taxes or revenues that the State can muster. But wait a minute! The government has proven energy resources that it can explore and exploit. So does Nigeria, but the funds end up with the multinationals and with the political class that is paid-off to ensure an uninterrupted and unchallenged flow of energy out of the country without necessarily a reverse flow of revenues.

Finally, one could counter that a State –unlike a company- cannot go bankrupt, be liquidated or disappear! True, but it can become insolvent, its currency cheapened by ultra-inflation, its assets fully depleted and its most valuable resource: young, energetic and talented humans, migrating to more prosperous lands.

Wait a minute, say the nay-sayers, this system has worked through thick and thin and never got a serious dent, or faced a national crisis level, or brought the collapse of the entire monetary and economic system!

We have regulators of the highest caliber, tried and tested bankers, the most conniving politicians in our region by far, a track record of both civil and regional wars, ethnic cleansings, refugees’ fluxes, power and water shortages, and (a bit of) terrorism, and nothing has been able to shake the foundations of this great country. We have been doing very well so far, thank you.

Funny that it is a fellow countryman who wrote a book called the ‘Black Swan’, where one of its most interesting quotes should make us pause and think. The quote says “It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. Those who have followed the assertive idiot rather than the introspective wise person have passed us some of their genes. This is apparent from a social pathology: psychopaths rally followers.”

But if we pause and think, we risk hearing the bomb ticking, and that in turn would force us into either defusing the bomb or containing its damage, either being a difficult decision. Still, many prefer the deafening music over the deafening truth.