By Uche Chris
Since 1980 when I began to follow government budget process – and even before then, especially with the military in power, as I have read in books –Nigeria’s budget has never made any sense, whether in terms of revenue projections or actual implementation. But year after year, a whole lot of energy, time and resources are devoted to preparing one, perhaps, with the uncanny knowledge of its futility. Yet of Nigerians put so much hope on it, only for such hopes to be dashed.
As a government dominated economy such attention on the budget is imperative; but its utility is really doubtful. Except for public servants, who implement the budget, and the political leaders, whether civil or military, the budget has always meant very little to the people, in terms of positive impact and improvement in their lives, although we are all driven into a frenzy over its preparation and passage.
What may be uncertain is whether this outcome of budgets is deliberate or coincidental; but having happened over this long period of time, it has assumed a cultural dimension and cultures are not formed accidentally; it may begin as one, but to become formal as we now have, there has to be some deliberateness and conviction about it.
Last week, another budget cycle began in earnest with the presentation of the 2022 budget by President Buhari, virtually everything about previous budgets characteristically turned up, but this time in their most ugly and dangerous dimensions. It does not make sense at all; yet here we go again without even any regard to the performance of the last budget.
For a budget that has the ambition of “Economic growth and sustainability” it is ironic that its high point is the unsustainable degree of its deficit. How can a budget that is promising economic growth and sustainability be based on such treacherously risk factor of borrowing, and for an economy that is already spending 98 percent of its revenue to debt service?
For a budget of N16 trillion to anticipate a deficit of N6 trillion is death sentence; it does not matter what sugar-coated words we use to couch it. This economy is in bigger trouble than we can imagine, because we are in a hole and digging deeper; what a sense. Nigerians have been deceived with the promised of building infrastructure; the fact is the infrastructure being built cannot repay the debt, whether by economic catalysation or revenue generation.
Debt is a function of deficit budget which is simply budgeting expenditure beyond actual and even expected revenue that has to be met through some debt obligations. So, the fact of deficit budget implies debt and borrowing, and there is nothing wrong with that. The problem is that we have done this for so long a time and very badly to boot that there is nothing to recommend it.
Since 1970, Nigeria has had only three balanced or non-deficit budget in 1971/72, 1977, and 1986, all periods of lean resources. As we grew more dependent on oil, so we became more addicted to deficit. Because deficit is based on expectations, more often than not, such never materialised and our plans never met, which is responsible for the failed economy and infrastructure deficit plaguing the country.
In the past, government used to be apologetic about deficit budget but that it has become a justifiable option today is a sign that we have entered a dangerous stage in our economic planning and the future is perilous. No country, organization or individual can built a future based on debt; it will be a future full of tears and sorrows, because debt are easily contracted, easily mismanaged but difficult to repay.
The United States provides a veritable for example for those who believe that debt is a positive option to future development. Just on Friday, the U.S. senate passed a law scaling the debt ration of the country to avoid possible debt default. This is the largest economy in the world facing the likelihood of debt default, because of its insatiable consumption appetite although it provides virtually everything under the Sun.
There is a vested interest in government obsession with building infrastructure, such as rail and road, as the British colonialist did; but it does not matter for whatever purpose they are built. But the real fact is that infrastructure is not a productive agent; it is ancillary in nature and its importance depends on the functionality of the active agents, such labour and capital; even power is more important than road and rail.
Today, Nigeria’s labour force is largely unskilled and illiterate in spite of its huge youth population of 64percent. How can an economy develop with a labour force that is underdeveloped in a technological era? China, South Korea, Singapore etc were driven to become industrial by the quality of their labour. China produces 30,000 science and engineering PH.Ds across the best universities in the world annually.
Access to capital has remained the major hindrance to industrial development in the country, especially among the SMEs. A recent report said that eight out of 10 SMEs start-ups in Nigeria die before two years, and the reason is lack of capital. Most government interventions have proved to be inadequate and misdirected. How is infrastructure going to improve or resolve such issues?
Much attention is focused on building roads and rail, while issues, such as power and energy are even more critical to economic development than these. Stable power supply alone can add additional three percent to the GDP, as it will galvanise and mobiliseNigeria’s huge latent artisanal energy that has been crippled by darkness over the years. Yet in all the government focus, little is being done in power. Without productivity infrastructure will count for little.
When will government deliver these projects after six years in office and with less than two to go and a debt of N35 trillion from N12 trillion, as only few such as Itapke-Warri rail, Abuja-Kaduna started by the previous regime, of the projects for which these loans were meant have been completed? Lagos-Ibadan road, Second Niger Bridge, East West rail, Mambilla Power plant, Lagos-Kano and Port Harcourt-Maiduguri rail lines are work in progress.
The relative ease with which the economy recovered from recessions seems to deceive our economic planners to the strength and productive capacity of the economy. The truth is that oil production alone gives Nigeria an average three percent GDP growth. This makes may be responsible for over-optimistic visioning of the future of the economy, which is evident in the 2022 budget in spite of the facts staring us in the face.
Even with the admission of the President of the deleterious effect of the subsidy regime on the economy, which is costing the country N900 billion annually, government is willing to continue with it, while resorting to borrowing. The reason is not social good or economic logic, but purely political; government wants to push the problem to the next government, and does not wish to provoke public backlash even if it is what the economy needs to avoid serious future complications – a typical populist government.
To be continued next week