When you analyse a budget assumed to have been painstakingly drawn up by compatriots, you risk being regarded as wilfully attempting to knock down someone else’s sandcastle. Anyway, howbeit might be said, President Muhammadu Buhari’s 2016 budget proposal doesn’t quite “sock,’ but it is not completely ‘it’ either.
As a recognisable public works document, the budget, says President Buhari, aims “to stimulate the economy, … focus on infrastructure,… prioritise the welfare of Nigerians,” and achieve 4.3 per cent GDP growth rate. Olisa Metuh, National Publicity Secretary of opposition Peoples Democratic Party, correctly identifies the Keynesian credentials of the budget, but thinks it’s the wrong way to go.
The undisclosed source of Metuh’s argument that “Studies have proved that Gross Domestic Product rates decrease by 50 per cent when debt goes from low to moderate, to high,” is suspect. If he understands leveraged financing, he’ll know that appropriately utilised loans should increase profit – all things being equal. In addition to 100 per cent profit from own funds, one can rake in additional profit, after paying the cost of using other people’s funds.
But if Metuh can prove that the money that the Buhari administration plans to borrow will be used to pay the All Progressives Congress huge campaign debt, and stock up another political war chest, Nigerians, especially those prosecuting Col. Sambo Dasuki (retd.) and co, must start watching the government hand and foot, to avoid another Dasukigate. But seriously, Metuh needs to be serious and not trivialise the serious responsibility of an opposition party.
The aspect of the budget financing that particularly riles the PDP seems to be the foreign debt. The PDP thinks that former PDP President Olusegun Obasanjo should not find a way to reduce foreign debt, only for Buhari to pile it up again, especially now that there is no freebies oil money to repay underperforming loans. That’s a good argument.
But if the government faithfully expends the debt on infrastructure or capital assets, as promised, one needs not sweat it. Basic Accounting textbooks teach that an asset is capable of generating future income. The responsibility of the PDP, the media, civil activists, and the electorate, is to monitor, with an eagle eye, the way government spends the facility.
The N6.08tn budget will be funded by N3.86tn revenue and N2.22tn deficit. The revenue element will be funded by N820bn crude oil revenue from selling 2.2 million barrels per day at a $38 benchmark; N1.45tn non-oil revenue, a euphemism for tax from Company Tax, VAT, and Federation Account levies; and N1.5tn of revenue remittance from government corporations, like Nigerian Ports Authority, Nigerdock, Nigerian National Petroleum Corporation refineries, etc.
Unless something is amiss, the math of N984bn local debt and N980bn foreign debt does not add up to the N2.2tn budget deficit; it is N1.84tn as the President correctly identified. As analysts try to figure out if government will make up the perceived shortfalls from savings, the President’s speechwriters must check their typos or the math from the Ministry of Budget and Planning.
You may like to note that budget deficits occur when government plans to spend more than expected revenue, and could apply debts or savings to ante up. Analysts however, worry that Nigeria already has a $63.8bn debt profile, nearly half of which is foreign. Foreign loan is cheaper though.
It is probably a tall order to expect the biggest chunk of the budget revenue to come from increased “Internally Generated Revenue.” Some wonder aloud how the acting chairman of the Federal Inland Revenue Service, Babatunde Fowler, the maestro who wrought the feat for Lagos State, will pull it off for the Federal Government, despite the nation’s huge infrastructure deficit, and a real sector on wounded knees.
As a pastor, Fowler will understand Exodus 5:6-8: “Pharaoh commanded… the taskmasters… saying, Ye shall no more give the people straw to make bricks as heretofore… And the tale (or number) of the bricks, which they make heretofore… ye shall not diminish thereof,” and Verse 22, wherein “Moses returned unto the Lord, and said, LORD, wherefore has though so evil entreated this people?” Enough said.
The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, claimed the budget has no fuel subsidy provision. But at the twilight of 2015, the Petroleum Products Pricing Regulatory Agency reversed this claim by revealing a N6.45 petrol subsidy. Its Estimated Open Market pricing template set product, import and local costs, and profit element at N93.45, and pump price at N87.
But in less than one week, the PPPRA presented a new EOM at N84.78 and N85.10 for the NNPC and other fuel marketers respectively. It also set petrol pump at N86 and N86.50 for the NNPC and other marketers respectively. The price differentials, claims the PPPRA, arise because the NNPC imports at cheaper rates. Apart from the inconvenient policy flip-flop, this parallel pricing may fail like the one introduced by the Babangida administration for private and commercial vehicles in the late 1980s.
The idea that the price will be reviewed quarterly, to reflect fluctuations in international crude oil prices, actually socks, and is not good for business planning. It probably confirms the suspicion of the Nigeria Labour Congress that evil-eyed International Monetary Fund has advised this strategy to sneak in future removal of fuel subsidy. The 2016 budget looks like a work-in-progress with many rivers to cross.
Meanwhile, the daily sessions of the parliament holding in the nation’s various pepper-soup joints are having difficulty in reconciling what they regard as excessive housekeeping votes for the President and the Vice-President, and the stated intention of the zero-based budget to reduce waste.
Some recall Minister for Finance, Kemi Adeosun, saying, “No amount of fiscal innovation, financial engineering, or other well-intentioned economic policy will deliver the desired results, for as long as the manner in which government money is expended is not carefully controlled.”
Though the international crude oil price inched up by $2 last week, the round robin of the cash crunch has however landed in America, which hardly buys Nigeria’s crude. After about a 40-year ban, America recently shipped its first sales stock from its Strategic Oil Reserve – to raise cash!
Saudi Arabia, leader of the Organisation of Petroleum Exporting Countries cartel, in a clear departure from decades-old generous welfare system, has reduced fuel subsidy. Finance Minister, Ibrahim al-Assaf Said, says, “Petrol is increasing by 80 per cent to 0.90 riyals or $0.24 per litre.”
King Salman, hoping that Saudi non-oil revenue will increase to $53bn in 2016, declares, “This (2016) budget represents the beginning of a comprehensive programme to build a strong economy with various sources of income.” That’s doublespeak for increased taxation. By being vague on the exchange rate regime, Mr. President is probably keeping the door of a supplementary budget open, “when” the naira slides as industry watchers expect.
But you must commend plans to employ 500,000 graduate primary school teachers; grant free tuition to education, science, and technology undergrads; provide one free meal daily to primary school pupils; subsidise agriculture; train and advance loans to artisans and traders. At the risk of over-flogging the issue, one must say it is a good thing that the debt facilities will be tied to power, works, housing, and transport infrastructure projects.
PUNCH
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