By OKEY ONYENWEAKU
This is not the best of times for the federal government. The country is in dire need of funds to run its affairs. Unfortunately, this is at a time when the economy is very clearly in a quite bad shape. First evidence: the N13.7trillion budget for 2021 is laden with a most sobering N5.2trillion (3.6% of GDP) budget deficit. At this rate how can government fund its infrastructure drive and other related operations?
Indeed, the economic survival prospects of the country are becoming increasingly difficult by the day. The nation has barely survived two recessions in the last six years. The first recession lasted for 12 months in 2016 and then there was another brief one in 2020. This spate of set backs have in fact, been blamed on the plunge in the price of crude which is sold for about $77.13 pbd now and the fatal blow of Covid-19 that sank many economies.
The revenue target of the federal government in 2021 was N7.9 trillion. This represents 30 percent higher than the amount projected for the 2020 budget. Unfortunately, the Federal Government had at the same time projected the sum of 9.9 trillion expenditure for 2020, and spent about N10.08trn representing a 101 percent performance.
While debt servicing for the year 2020 stood at N3.2 trillion, the sum of N3trillion was released for payment of salaries and pensions.
In critical terms also, the FG’s projected revenue will further be depleted in 2021 because of the Value Added Tax (VAT) controversy.
Rivers State and Lagos State are already in the Supreme Court seeking to be allowed to collect the VAT that accrues from their states. Oyo was on its way to being joined in the suit as at press time. While other States are planning to sign laws to be allowed to collect VAT that accrues in their states, reports say that the Federal government has already lost billions. In summary, over 65 per cent of VAT collection comes from Lagos State. Tax payers are now confused whether to pay to the FG or to the States.
Analysts note that revenue generation remains a big challenge for the country in the face of fluctuating crude prices and volumes of production which is beyond its control in the face of economic contraction. There is also growing concern of an increasing budget deficit and rising debt.
So troubling is the situation for many an analyst as they have repeatedly observed that while the country owes N35trillion debt as at June 2021, the federal government spends over 90 per cent of its revenue to service debt. But the fiscal authorities remain insistent that they still have the control buttons in a good place.
The GDP only recorded a paltry growth of 5.1 per cent in half year 2021from a negative position of -6.10 in second quarter 2020. What this means is that even when there is an on paper growth, in real terms this really matters zilch as the indicators across all fronts continue to underscore..
Recent statistics also reveal that the rate of unemployment, the second highest in the world is 33%; Underemployment rate stood at 22%; inflation which stood at 18.6 per cent has just eased to 17.01 per cent; diaspora remittances inflow in the country fell by 24 per cent from $5.6billion in 2020 to $4.2billion in half year 2021.
Remittances had plunged 27 per cent year on year (YoY) to $17.2billion in 2020 from $23.55billion in 2019.
Many have not forgotten that the operating environment last year was choking for almost all the business sectors including banks.
The major revenue earner for the country, crude oil price, which hovers between from $72 pbd and $75.46 pbd as at September 30, 2021 still fluctuates.
Insecurity has not only hobbled agriculture, many parts of the Northern part of Nigeria have been taken over by bandits that not much business activities can subsist.
With the fearful scenario above, economic trajectory of the country is still uncertain.
This is because even the apex bank has warned that care must be taken to galvanize and push the economy out of slumber. The Apex regulator reportedly even warned its staff against unnecessary outings in Abuja, the capital of Nigeria for fear of kidnappers and bandits.
Whereas the federal government said recently that it would require about $2.3 trillion cumulatively or $150 billion annually to upgrade the poor state of Nigeria’s infrastructure, its revenue continues to shrink.
The capital expenditure budget of N3.85tn represents an increase of about 43% compared to 2020, and about 29% of total 2021 expenditure. The President indicated that there will be focus on completing ongoing projects across different sectors.
Analysts fear that the country is headed for a crisis if the economic policies are not fine-tuned to reposition and grow the critical sectors in the interest of every citizen.
Intervening in this matter, Managing Director/CEO of Financial Derivatives Company limited, Mr.Bismarck Rewane who is also a member of the economic advisory council said the country’s economy was headed for a crisis if the nation does not become deliberate with policies that would yield results.
Speaking at Alpha Morgan Capital’s quarterly presentation on the Q3 & Q4 prognosis, Rewane said, ‘’Nigeria is facing a major economic crisis. The data you have is correct but it is not complete. It is what we call selected data that can justify certain things’’
He noted that electric cars would soon dominate the roads and reduce the carbon powered vehicles insinuating that crude which is the main income earner of Nigeria may no longer attract much forex in the near future.
According to him, investor are weary and worried of high inflation adding that more economically stable countries now raise foreign loans at lower rates than Nigeria. The signs are ominous. But are we reading the lines