Published On: Wed, Dec 20th, 2017

Budget 2018: High hopes, low prospects

By UCHE CHRIS

The 2018 budget will go down in history as the most vilified and repudiated by the legislature that is supposed to give it a stamp of authority. Last week, the two chambers of the National Assembly took a perfunctory appraisal of the budget and consigned it to the rubbish heap of history, dismissing it as a bad product from an unprepared and unserious team.

No invectives and adjectives were spared in denouncing the budget by the lawmakers, suggesting that the country is in for a rough ride economically in the coming days and months. It had no supporters as members lined up behind each other in condemning the spirit and letters of the financial document.

Words such as ‘unrealistic’, ‘fictitious’, ‘imaginary and creative imagination’, ‘wishful thinking’, ‘weak foundation’ etc, were effusively and generously used to qualify the budget as members strained to find any substance and rationale to justify its economic and financial assumptions and projections. Particularly annoying to the legislators is the ignominious indignity meted out to the 2017 budget by the executive, a treatment they perceived as insulting to them and negligent for the people.

Budget making is traditional in government and is expected to be a routine practice that should not cause much concern or controversy over its preparation or approval. Putting together how to earn and spend money should not be a rocket science that does stand even the most elementary scrutiny.  Ordinarily, the budget is prepared by the executive and approved by the legislature.

Both chambers of the National Assembly berated the Federal Government’s 2018 budget proposal, saying its assumptions are unrealistic. The debate started on a dramatic note when Senator EnyinnayaAbaribe dismissed the 2018 budget proposal as being “fictitious.”

His position though extreme could be justified given the fact that there has not been real budget implementation since the coming of this government as a result of inconsistencies in expenditure proposals and revenue projections. According to the government 2018 budget was designed to consolidate on the achievements of the 2016 and 2017 budgets. What then was done in 2017 when only less than 15 per cent of that budget was released only 60 percent of it is being carried over to 2018?

“In what sense will this 2018 budget be predicated on assumptions that have already been destroyed? For instance, you are assuming N11trillion revenue, yet you are getting less than N1tn. How does that happen? That is why I said, with all due respect to my colleagues, that it is imaginary. I am saying that rather than continuing to debate this (budget) that has no basis in reality”, he said.

This was the line of discussion that followed and all the senators had one opinion to give: The country is being taken for a big ride. Some first examined the performance of the 2017 budget, which they described as “very abysmal to say the least,” and referred to the proposed 2018 budget as “wishful thinking.”

Concerned and anxiety over the assumptions and projections in the budget are germane and understandable if one is purged of the overoptimistic and propagandistic pastime of partisanship. The budget assumes that all is already well with the economy and every expected revenue will be met. From recent experience and emerging economic trends this is a far cry from reality.

First the government is trying to impress the country with its huge ambitious plan and programmes without reference to the financial capacity of the economy to sustain and support the expenditure involved. This has happened throughout the life of the administration that it is becoming habitual and deliberate. Common sense instruct that receivable should determine expenditure and not otherwise.

Although the economy has exited recession which dogged it for six quarters, the economy is still fragile and faces major challenges of development. It is still a mono-product economy depending significantly on oil revenue as all the grandiose government talk for diversification has remained tendentious and inconclusive.

Already the budget has run into the first road block in its presumptuous grandstanding as OPEC, the oil producing cartel, has put a cap on Nigeria’s production output to 1.8 million barrels per day, mbpd, which is our top production level in 2017. Now, the Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Papers, projects oil output for the budget at 2.2 mbpd, creating a revenue gap of 400,000 bpd.

At the projected growth rate of 3.5 percent, the economy may be in serious danger of another recession given the burgeoning problems of unemployment at 26 percent, population growth at 3.2 percent and failed public infrastructure requiring over $100 billion or over 10 years annual budget a present level. Inflation is at 15 percent and interest rate at over 20 percent with MPR at 14 percent.

These are not pleasant pictures of an economy to be consolidated; the economy is in distress and requires an emergency treatment. Instead we are getting a political jamboree that may eventually end in disappointment and more distress and hardship. With recurrent expenditure (administrative costs and debt service only) at N5.5 trillion or nearly 70 percent of the N8.4 trillion budget it is obvious that this budget cannot deliver on its promise.

Compounding an already bad situation is the fate of capital expenditure which is he real budget for the economy because of its direct impact of the people. Recurrent only caters for the 2.4 million people who work in government while the rest of the over 170 million Nigerians lie on handouts and crumbles. It is an unjust and inequitable system that government should have tried assiduously to change.

Capital expenditure in 2017 budget was 1.9 trillion about 34 percent of the N7.3 budget, but only N450 billion was released, with a shortfall of N1.45 trillion, which has been forwarded to the 2018 fiscal year. In actual fact, the N2.4 trillion capex for 2018 is consists of only N900 billion new expending in addition o the unspent 2017 appropriation.

Worse still is the fact that N2 trillion of the capex is not based on accruable revenue but expected borrowing, the fate that befell the 2017 capex. How it will be accomplished given the sad outcome in 2017 is anybody’s guise, but the truth is that there are too many loose ends and imponderables in the assumptions.

“We have a population of 180 million people, India has 1.3 billion. Then, if we are going to have more people in poverty than India, then we have to create jobs,” said Senate Ben Bruce.

At present 29 states in the country owe between three and 13 months salaries of workers and are depending on budget support from the federal government. In view of all these, it is obvious that we will be building the 2018 budget on a “very weak foundation.” So from where does the confidence and hope that the budget is an elixir come?

Nigeria’s non-oil revenue fell by 74 per cent in 2017, adding, “This is very disturbing and alarming indeed, especially when you consider the fact that the 2018 budget is predicated heavily on non-oil revenue.” Non-oil revenue was supposed to contribute N4.165tn, which is almost 50 per cent of the N8.6tn budget.

“If something goes wrong and we don’t realise this N4.165tn, it means the budget will be as good as dead.

“While we are happy that the foreign reserves are rising as a result of increase in oil prices, this budget will only be implemented if the federal administration is efficient. It is still inefficient because the revenue institutions are not performing to the expectation of the budget.

According to Senator Ben Bruce, while it was called a budget of consolidation, it is rather a budget of ‘active imagination’. So, we have 2.4 million people consuming 60 per cent of the recurrent expenditure of Nigeria. It doesn’t make any sense.

“For you to diversify and rely on non-oil revenue, that sector must be developed. The proposed non-oil revenue cannot be realised. People don’t believe in our budget.

There is no need to raise the hope of Nigerians to say we are estimating N8.6tn whereas the execution is zero. If we say the budget is N3tn and execution is N3tn, it is better than N10tn and the execution is revenue shortfall.”

However, the current 2017 budget of N7.441tn is still running, with only N450bn so far released for capital projects. The 2018 budget has a capital provision of over N2.2tn. The implementation of the budget had commenced in June with an extension granted till May 2018. But this only happen now if the 2018 budget is passed before the end of the year as anticipated by government because it has become part of the 2018 budget.

President Buhari had promised to raise capital implementation to at least 50 per cent (N1.1tn) by December this year. But, with barely 33 days left to the end of the year, it could only release N450bn, especially with the unlikelihood of getting the budget passed before the end of the year since the 2017 budget has been collapsed into the 2018 budget.

 

 

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