If we don’t borrow to invest in reducing our huge infrastructure deficit to expand and upgrade it, especially in such presence of oil revenue and tax revenue along with our low savings-investment rates, are we not telling ourselves to halt economic diversification and economic growth necessary to achieve import substitution and create millions of jobs? Of course, we should be worse off than we would have been if we borrow today to fix infrastructure and reduce the cost of doing business in the country so that private sector should easily drive the economic growth and diversify the economy and create jobs.
Why is our debt-to-GDP ratio at about 12 per cent remains one of the lowest in the world, even when we face such high infrastructure deficit, and we think that the problems would eventually solve themselves? For example, South Africa’s debt-to-GDP ratio is as high as 44 per cent notwithstanding that it has today a world-class infrastructure than us. It is 107 per cent in the US, 66 per cent in Brazil and 68 per cent in India. That is why if we truly intend to address the current infrastructure gap, which is the secret of economic development; we too should boldly increase our debt-to-GDP ratio to as high as 40 per cent during the next four fiscal years. After all, why Alexander Hamilton, the first US Treasury Secretary, appearing before the first US Congress in 1791, told them, “A national debt – will be to us a national blessing – a powerful cement to our nation [and] will be a spur to industry.”
What we should insist by law is that no borrowing should go into financing recurrent expenditure, but must be purely for capital spending purposefully for investment in the expansion and upgrade of our social and industrial infrastructure. Also, rather than borrowing at our high interest rates, we should increase external borrowing which besides being far cheaper has longer term duration, and most important, because unlike domestic borrowing external borrowing does not crowd out real sector firms from both the money and the debt markets.
For example, the private sector cannot lead investment in areas such as building nuclear reactors which are not only capital intensive but also require government economic and energy diplomacy at a global level. Yes, I have been one of those calling for government to bring back tolls so that private sector firms could finance the country’s primary interstate highways with the goal of expecting high ROI, using possibly e-payment and e-collection, but, then, government still should build some critical auxiliary roads.
I completely agree that the fiscal year should begin the month the budget is signed into law and then run 12 months. I will go further to suggest that henceforth, our fiscal year should become June to June, with the 2016 fiscal year to start from June 2016 to June 2017. This has become inevitable given the need for zero-based budgeting, which given its project prioritisation in an effort to meet critical needs of government’s drive to efficiently manage its scarce revenue resource requires adequate time for the preparation and approval of procurement plan.
This is good because it will provide an ample opportunity for lawmakers to exhaustively deliberate on the budget and harmonise the differences emanating from the two chambers. It provides enough time for the planning of procurement, implementation, monitoring, and evaluation. High level of transparency should accompany public participation in budget preparation and prioritisation of citizens’ needs.
The budget should as a result come with clear templates on monthly cash flows, milestones, and deadlines, which means the presence of Annual Cash Plans and Disbursement Schedule as mandated by sections 25 and 26 of the Fiscal Responsibility Act to bring to an end the abysmal budget implementation. In other words, with cash flow template accompanying our annual budgets through the MTEF, there is no doubt that the weekly Federal Executive Council rather than being reduced to mere weekly lobbying ground for discriminatory budget implementation, becomes truly where national economic policies and strategies are sharpened and fine-tuned along with implementation appraisals.
Our lawmakers should do a thorough work by making sure that they help fine-tune this budget proposal by the President. This time round, I will advise that lawmakers desist from either padding the budget by either increasing MDAs’ budgetary allocations or padding the budget with the so-called constituency projects which besides being a channel for corruption are illegal and unconstitutional because such projects lack proper execution monitoring and oversight. Unless, of course, they who still want to indulge in this illegality want to invite the EFCC to their lives in a way that will open the cankerworm of their involvement in this fraud in the past.
Let me personally congratulate the President on starting this way. But I will advise that implementation should be fully done with the kind of patriotism and zeal this budget has shown on the part of our government. Our lawmakers should do everything possible to make sure that this budget is not only thoroughly scrutinised but also passed as soon as possible, which means that members should forgo their vacations so as to make sure that latest January 30, the budget is before the President for signing. I should also advise that we make sure that Section 12(1) of the FRA which pegs fiscal deficit at 3.0 per cent be amended to peg it at not less than 8.0 per cent being most common around the world so that government can borrow a lot. Let’s also increase our tax-to-budget ratio presently from below 12 per cent to not less than 25 per cent and increasingly to 50 per cent by 2019.
Next, I will suggest that this government drives down the current high cost of debt service by either borrowing externally at the London Interbank Offer Rate and use it to pay off at least 50 per cent of our current domestic debt or drastically reduce the country’s MPR to as low as six per cent in a way that drastically reduces the current arbitrage that has led to the current undue advantage being taken by banks and their foreign connivers who smuggle in cheap money into the country to lend to government at high interest rates, thanks to the fact that it is at the Bankers’ Committee meetings that our exchange rate policy is unfortunately decided. Doing this will no doubt reduce our debt servicing from the estimated N1.6tn in 2016 to at most N1tn, especially if government accompanies that with a quantitative easing by printing at least N6.5tn and use it to pay off 50 per cent of our estimated N13tn domestic debt.
PUNCH
END
Reading Tru the federal government plan shows that someone is finally thinking in leadership. No recurrent expenditure involved in the proposed lending….thats so fantastic