The 2020 Appropriation bill, was laid before the National Assembly, on October 8, 2019,by President Muhammed Buhari, who, also instructed all Heads ofMinistries and key Departments and Agencies, to make themselves available to defend their respective budgets before Parliament;meanwhile the National Assembly Leadership have suggested thatthe budget should be ready for the President’s assent, before 31stof December, so that implementation can commence, promptly, from January 1st 2020; evidently, such timely enactment of the budget would be an unusual feat in recent years!
However, not withstanding, the possibility of timely budget assent, the critical question is whether or not the social welfare, particularly of the 100million plus Nigerians, who are poor, can be redeemed from their severe deprivations they. Instructively, however, any reasonable projection of success, must be guided bythe potential impact of the strategic mix of variables in 2020budget. These variables will, hereafter, be discussed ininterrogative prose, to facilitate comprehension. Please readon.
Ques: TheN10.33trn 2020 budget, is arguably Nigeria’s largest budgetso far, should we therefore expect that Government will havemore money to spend, to address our huge infrastructuraldeficit?
Ans: The N10.33trn2020 budget is nominally, the highest budget so far, but it isby no means the highest in real value terms; the N6.08trn 2016 budget, for example, which waspassed, before Naira’s crash from N160=$1 to N305=$1 in 2017, isprobably much higher, in real value terms, than the presentN10.33trn, which is predicated on a Naira rate of N305=$1;consequently, the clearly bloated, proposed 2020 budget, is whatmay be described as money illusion!
Ques: Are yousaying that we may not expect significant enhancement incritical infrastructure and social welfare from such a ‘huge’ budget?
Ans: In retrospect, ifthe N6.08trn budgeted in the 2016 budget did not elevate thequality and spread of infrastructure, it would be unrealistic toexpect that the lower real value of the 2020 budget will havemeaningful impact, especially when Nigeria’s population hassince grown by over 10million.
Ques: CapitalExpenditure, was N2.652tn last year, butdecreased unexpectedly to N2.46trn in 2020 budget. Does thismean that Government is not seriously committed toaddressing the huge infrastructural deficit?
Ans: You are right, itis inappropriate to reduce Capital Budget, particularly whenthere is a crying need, nationwide, for better roads, betterschools and hospitals, free flowing portable water, steady powersupply, etc, etc; regrettably, the net real value of the modest2020 Capital Budget will further reduce from N2.42trn to lessthan N2.2trn, if the current inflation rate of about 11 per centpersists!
Government could,however, demonstrate its commitment to rapid and consistentprovision of quality, social infrastructure, if consumptionexpenditure, which has remained around 70 per cent of annualbudgets, since 1999 is significantly reduced. Inexplicably,however, despite the adoption of the IntegratedPayroll and Personnel Information System (IPPIS) and thealleged elimination of tens of thousands of ghost workers fromGovernment payroll, recurrent expenditure has, inexplicably,consistently remained very high and will become irrepressiblewith the adoption of the new Minimum Wage!
Unfortunately,therefore, the popular expectation for equity in the provisionof social infrastructure will remain, just that, unlessGovernment, sensibly begins to allocate at least 50 per cent ofannual budgets to Capital Expenditure and provision of criticalSocial Welfare Programmes.
Ques: Do you agreethat the present debt burden is sustainable?
Ans: Although theFinance Minister has suggested that revenue consolidation ratherthan debt level is our real challenge, Government must restrainitself from further debt accumulation, particularly, now, thatover N50 out of every N100 aggregate revenue is consumed by debtservice! This year (2019), for example, total debt servicecharge was N2.14trn, while debt service has increased toN2.45trn in 2020 budget. In practice, external debts, aregenerally more hazardous in fragile economies, like ours, and itis therefore disturbing that total foreign debt doubled to about$22.08bn in the last 4 years; foreign debt will, invariably,further spike with the latest $2.5bn IMF loan for powerinfrastructure. Ultimately, we may compromise our sovereignty,with wide open eyes, with an oppressive external debt burden.
Ques: Despite thesignificant shortfall in projected revenue in 2019,Government still expects to collect a higher sum ofN8.155trn in 2020. Why is government so optimistic about itsrevenue sources for next year?
Ans: Surprisingly, theconsistent shortfalls, in revenue projections, in earlierbudgets, have never seemed, to advise, the wisdom of,constructive and realistic revenue estimates. Consequently,allocations for critical infrastructure projects will stillremain inadequate; the alternative recourse is that, Governmentwill become, compelled to overload an already, very heavy debtburden, which future generations will, unfortunately, inherit.
However, in its questfor rapid increase in revenue, Government proposes to increasethe 5 per cent VAT rate by 50 per cent to 7.5 per cent; anadditional tax will also be levied on beverages and phone calls.Conversely, some critics would suggest fiscal prudence andadvise that the present bloated and disproportionate cost ofrunning Government, should be significantly pruned to makepolitics unattractive as a business.
Other critics havesimilarly, decried the increasing tax burden on Nigerians,particularly, when victims of poverty, have steadily increasedbeyond 100million. In order to reduce this yoke, perhaps,Government will be better advised, to actively concentrate onretrieving the hundreds of billions of dollars which have beenstolen and continue to be, reportedly, stolen from Government’sporous treasuries annually; such potential revenue sources,include the alleged $100bn outstanding debt owed by some oilmajors operating in the Niger Delta; there are also reports ofover $60bn stolen oil cargoes from Nigeria which have beentraced to ports of Discharge in the USA and elsewhere.
Furthermore, theliberated loot from corrupt politicians and civil servants, isalways, also hard to trace in annual budgets; similarly,hundreds of millions of dollars recovered from Swiss Banks andother safe havens, for example, have not been publicly accountedfor, while another $7bn, untenured interest-free advance to someNigerian banks in 2006 still also remain outstanding!
Ques: Curiously,there is no allocation for petrol price subsidy in the 2020budget. Does this mean fuel subsidy will be abolished?
Ans: Fuel subsidyvalues ranging from N1trn to above N2trn have, for years, beenaccommodated outside annual budget provisions; clearly, if thishuge expenditure is also captured, the 2020 budget deficit willswell outrageously and either significantly, increase our debtburden or conversely, further erode the modest N2.46trnallocation for critical infrastructure and social welfaresupport in 2020.
Furthermore, despitethe desperate strategies to raise revenue, Government isreportedly, still indirectly, subsidizing between 10-20millionlitres of petrol that our ECOWAS neighbours, smuggle across theborders daily!
Ques: Are thebudget bench marks of $57/barrel and 2.18 million barrels ofdaily oil output realistic?
Ans: In retrospect,higher crude prices and output, arguably, instigate higherinflation rates and have, so far, never significantly improvedinfrastructure nor reduce poverty; conversely, lower crudeprices and output will reduce reserves and may compel furtherNaira devaluation, which will in turn trigger higher fuelprices, to sustain higher petrol subsidy values.
Ques: Is the 2020budget benchmark exchange rate of N305=$1 realistic?
Ans: The budgetbenchmark rate may be 305/$1, but, only favoured candidates canaccess this rate. The sustenance of multiple rates between305-360/$, evidently, creates distortions in the marketplace.Notwithstanding, if external reserves also dwindle while thecurrent level of insecurity persists, with steady clampdown onfree speech, portfolio investors would hastily reverse thedollar inflow and threaten the Naira rate. However, theresultant weaker Naira rates would also be a bad dream, as itwould drive higher inflation rates and higher cost of borrowingto reduce any possibility of economic recovery to ultimatelyeclipse any hope of diversifying our production base.
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