By OBINNA EZUGWU
Three months to the end of the year, and ahead of Tuesdays scheduled presentation of the 2020 budget by President Muhammadu Buhari, many Nigerians who have barely survived the economic shocks and storms of 2019 are wondering what the next year would be bringing their way.
While there is an overall belief that there would be a seeming symbolic improvement in the turnaround time for the final coming into force of the critical nation-shaping fiscal document, there is however little faith in the fact that the budget would bring a marked improvement for the lives of the people.
Last month, the Buhari administration took the first step in the budget process when it submitted the Medium Term Expenditure Framework, MTEF and the Fiscal Strategy Paper, FSP, to the National Assembly.
According to the estimates the administration plans an estimated N9.12trn deficit budget for the fiscal year 2020.
Though the provisions of the Fiscal Responsibility Act, FRA mandate the president to submit the document four months to the end of the year, NASS says it is willing to work with the document as presented.
The MTEF as spelt out in the Act is the basis for the preparation of the estimates of revenue and expenditure and it is customarily prepared and laid before the National Assembly under Section 81 (1) of the constitution.
Details contained in the document show that the Government is budgeting to spend N9.12 trillion in 2020. However, total projected revenue for the year is N7.17 trillion, meaning that there is already a gross deficit of almost N2trillion.
Personnel costs (read, wage bill), according to the document comes to 2.67 trillion. The figures for the preceding years had been 2.11 in 2018 and 2.28 in 2019.
Part of the explanation for the spike according to the Minister of Finance and National Planning, Ahmed is the creation of new ministries.
While not much is expected to be markedly different between what is already in the public domain and what Buhari would lay down before the National Assembly, analysts say that the critical factor to consider would be the nations real earning capacity. This is more so when there are critical expenditure demands that just have to be met. And one of these critically has to do with the wage bill.
In the build-up to the 2019 General Elections, the Buhari administration and the Labour Movement had finally settled for a new minimum wage of N30, 000.00, up from the previous figure of N18, 000.00. Meeting this obligation has been a worrying ache for the administration since the ink dried on the paper.
Till date, it has tried to largely bluff its way around the challenge. First, it set up the Rewane Commission to negotiate the fine-print of the implementation process. Then it commenced a system of paying the lower ranks the new rates and leaving out their seniors. Now, it has gone into fresh negotiations with labour, pleading that they need to make some sacrifices in the national interest.
But not much progress is being recorded here as labour has already put an October 16 lid on the subject: pay what we have agreed or face our wrath.
To help it navigate the clearly muddied economic waters, the administration recently empanelled an Economic Advisory Council, EAC that business and industry may be more amenable to work with. But then there is one little caveat: how much real elbow room does the team have? Well, the days would tell.
And given their capacity and exposure, members of the team are apparently not content with just being named, listed and hushed up. In the last week for example, at least two members, Bismarck Rewane and Chukwuma Soludo, had at different occasions continued to publicly express themselves on the crisis of the Nigerian economy. While doing everything to, as Soludo put it, stay outside the remit of matters on which our views may be sought as members of the EAC, they however said enough to indicate that the nation clearly needed more than private counsel being passed through presidential handlers to a President that may really not be constrained to do much with their fecund exegetical submissions. We are more than decoration pieces, they seemed to be implying.
Back to the hard bases; on the substantial challenge of raising revenues to finance the 2929 budget, the administration seems to be looking in four directions. These are sustained crude oil revenues, improved Customs revenue, domestic and external borrowing and increased tax receipts through capturing more contributors in the net as well as new revenue from the recent VAT rate hike proposal. And here indeed is where things even get messier.
If the only challenge coming from labour had been the issue of wage hike; that may have been more bearable. But it is more than that as organized labour is interpreting the move to increase the VAT rate as another way of ensuring that the gains of the hike would practically go up in flames.
Labour is not alone in its opposition to the new VAT numbers as the Nigerian Employers Consultative Association, NECA and the Manufacturers Association of Nigeria, MAN have equally raised their voices to protest the increase. For them, it would place more burdens on their members who would be hard-pressed to meet the new obligations while also dampening overall spending capacity in the real economy.
And while we are on this, there is another incoming hike of energy tariffs as it has to do with the newly proposed Multi Year Tariff Order, MYTO that is expected to come into effect from the beginning of the new fiscal year.
When a budget is real tight
When the 2020 budget is described as a deficit one, it may not fully convey the full impact to the Nigerian. So let us use the pidgin expression, it is tight!
And the details bear us out. First is the range of tough calls that must be met. We have already talked about personnel costs; but there are some more.
Interest payment on debt is one. Put at an estimated N245 billion, it is one charge that cannot be evaded. Provision for the Sinking Fund to retire mature bonds to local contractors is another. That comes to an equally princely N296 billion. Add these to the provisions for personnel cost and pension costs which are put at N267 billion and N536.72 billion and you can see that we have very little elbow room.
So where would the funding come for the critical infrastructure, education and health projects and costs? The answers would not come on Tuesday.