By Gerald Nwokocha
“On November 18, 2015, President Muhammadu Buhari, sent a supplementary appropriation bill for the 2015 fiscal year to the Senate for approval. The president, in a letter conveying his request, which was read Wednesday, November 18, 2015 during plenary, by the Senate President, Bukola Saraki, submitted a supplementary appropriation bill of N465.64 billion along with a request to borrow N2.103 trillion for the financial year, 2015, ending in six weeks time. He explained that the N882 billion loan earlier proposed by the past government to finance the budget had to be raised to N2.10 trillion, due to emerging realities in the country. The source of the loan, according to the president, would be from both local and foreign.”
The Senate on Tuesday, December 1, 2015 approved N574 billion Supplementary Appropriation Bill, approving N521 billion for the payment of subsidy claims. The approved budget was increased by N108 billion.
The important question I want to ask is what is the performance level of the 2015 budget? How many projects have been executed?
This was what I projected it to be if the fuel subsidy elephant in the room is not addressed. Simple mathematics! Goodluck Jonathan’s administration never included subsidy in the 2015 budget. N222billion was paid earlier in the year. We are about to pay N416 billion now, after which we will still owe about US$2 Billion (N400billion) to the marketers.
Money is fungible so whatever they say they want to pay for we have to look at the root cause on why there is such a major difference in the budget projection. The N416 Billion that is past due and the circa US$2 Billion that is also being owed, then we have meals at unity schools, arrears of payments to legislative aides, etc. That and salaries and wages of the Federal Civil Service plus Debt Service. Numbers don’t lie.
Borrowing money to pay salaries, borrowing money to subsidize “imported” consumption and indirectly creating jobs overseas while our people are jobless..
The current amount for deficit funding is high because government revenues have fallen short of the level envisaged in the original budget prepared by the past administration before leaving office even to fund already approved expenditure items.
However, it is pertinent to note that the original budget had circa N600Billion for Capital Expenditure. I suspect that Recurrent Expenditure has even consumed that. Unless the Goodluck Jonathan’s government spent the entire Capital Expenditure Budget before they left office.
The crude oil price benchmark was US$53 per barrel so if the drop was the only problem then it could have been remedied. The budget was dead on arrival because of oil subsidy removal politics and our refusal to cap the expenses of the NNPC and rationalize our Federal Civil Service.
The All Progressive Congress (APC) led federal government, did not have the moral high ground to challenge the non-inclusion of oil subsidy payments in the 2015 budget because ‘oil subsidy is a scam’ was part of their mantra during the electioneering campaigns.
For the Jonathan’s administration not to include petroleum subsidy in the budget, means that they intended to remove it but could not risk it before an election.
The first thing President Buhari on assumption of office should have done was to remove the subsidy. Yes, Nigerians would have cried and called names and even feel the pains but it would have just been for a moment. The government wasn’t advised well on this.
Now we are talking about increased borrowing. Do we also consider how we intend to pay? How are we going to repay? Has anyone looked at the numbers, the amount of money the government intends to borrow? Nigeria’s Non-Debt Recurrent expenditure alone (excluding oil subsidy) is almost gulping the entire revenue. If we continue to do this, won’t the country completely crash? Isn’t this larcombs arithmetic?
My friend Lilian Iloabanafor asked me, “Why are we borrowing this huge amount when we have N1 Trillion from MTN alone, and N1billion from Guinness, which they are to pay to NCC and NAFDAC respectively? Why are we talking about borrowing when the government said the Treasury Single Account (TSA) has enabled them recover stolen money? This is still on recurrent expenditure and I just wonder why we need to take this much. Lest I forget, what about all the leakages plugged, all the looted funds voluntarily returned by Jonathan’s men through El-rufai, Kaduna State Governor? In as much as the above money mentioned may not be injected directly into the system due to inflation but rather be injected into our foreign reserve, I feel she’s making a point.
Most Nigerians genuflect rather than read to gain knowledge of their peculiar political economics. This put the government in very difficult situation because the average Nigerian economics ends in the stomach. Has anyone bothered to explain to the average Nigerian why government is borrowing so much to finance recurrent expenditures? When shall we begin to borrow to fund capital projects? If we borrow to pay subsidy arrears, is that not a death knell for the economy? Why is government bent on sinking with subsidy on petroleum products? Even if the government has morally mortgaged herself, I guess we can forgive them knowing our penchant for short memories!
The purpose for this borrowing is rather worrisome. We cannot borrow to fund consumption in perpetuity. To maintain the same high level of consumption pattern funded by debt in the face of dwindling revenue is rather suicidal. We need to cut the crabs and seek capital investment in income generating activities that will sort us out of the woods. We need the political will to make these critical adjustments and the foresight to prioritize our capital investment. That’s the CHANGE Nigerians need. We can’t keep doing the same thing over and over again and expect different results. It’s like expecting one divine miracle that would turnaround our fortunes but continuing business as usual while it tarries. It’s like the government is borrowing and hoping for the price of crude to increase soonest.
All Nigerians should understand that Nigeria has never been a rich country. Our Politicians create the illusion that we are rich as an excuse for their conspicuous consumption.
They say the Treasury Single Account (TSA) implementation has led to the recovery of N2.4trillion then why are we about borrowing N2.1trillion? ‘Thank God, TSA has made provision so I don’t think borrowing is needed’. What we are looking for outside is already within our premises.
“If you do not allow relative prices to adjust when faced by a terms of trade/real sector shocks, then you put the full burden of adjustment on real variables or quantities (especially output and employment)— and they will adjust with vengeance because you cannot fix price and quantity. Both economic theory and evidence from around the world are relatively unambiguous: faced with terms of trade shocks, countries with flexible exchange rate adjust faster and better and with less negative impact on growth and employment than those with fixed rate. Put differently, countries that allowed relative prices (including exchange rate) to become the key “adjusters” during terms of trade shocks have almost always done better than those that resorted to price (exchange rate) and other distorting controls”.
My keen advice;
I advice that budget deficit should be approximately N2Trillion as against the circa N800 billion in the 2015 Budget. This will show up in the 2015 Supplementary Budget. The figure approximates 50% of the 2015 Budget (50% of our budget is to be funded by local and foreign debt). Also note that Public Debt size (amongst other factors) has a direct impact on the value of Naira.
Government should do away with petroleum subsidy stuff and sell off these dead refineries.
Cap NNPC’s expenses by an immediate review of the Nigerian National Petroleum Corporation Act, Chapter 320, Laws of the Federal Republic of Nigeria 1990. Particularly Section 4 b. Recall that section 4 states as follows;
(4) The Corporation shall maintain a fund which shall consist of-
(a) such moneys as may from time to time be provided by the Federal Government for the purposes of this Act by way of grants or loans or otherwise howsoever; and
(b) such moneys as may be received by the Corporation in the course of its operations or in relation to the exercise by the Corporation of any of its functions under this Act, and from such fund there shall be defrayed all expenses incurred by the Corporation. This will immediately ensure predictability of the country’s oil revenues. Going by the letter of NNPC’s enabling act, there is nothing in law that stops the NNPC from spending more than it generates, thus in an era of falling oil prices there may come a time when the NNPC will operate at a loss. To achieve this, government has to work with the National Assembly to achieve this speedily. Fortunately, the NASS has an APC majority. It’s an easy ride.
Government should also look into reducing the number of Presidential Air Fleet. Sources said, they are numbering about 10. By so doing, she would save cost of maintenance and reduce the overburden on the economy.
Have we forgotten so soon that Governor Nasir El-rufai has been saying that some aides of the former Ministers want to return some stolen money through him? Then what are we waiting for? Government should ask Mallam Nasir El Rufai to release all the money he claimed that Jonathan’s men returned. By so doing, we will even have enough balance. Then we could use the N1trillion naira MTN is to pay to NCC, those money recovered by EFCC, and the N1billion fine Guinness Nigeria Plc is to pay to NAFDAC, and add to the $6bilion Governor Adams Oshiomole recovered then use it as foundation for 2016 budget.
That’s revenue made easy.
End of Discussion!
Gerald Nwokocha, is a purpose-driven Nigerian young writer, Media Strategist and Principal Author of “The Metamorphoses of Nigeria”. He is resident in FCT, Abuja.
08089243045 (SMS only)