Sunday, March 13, 2011

Review of Nigeria’s 2011 Budget

The president and Commander in Chief of Nigeria’s Armed Forces, Dr Goodluck Ebele Jonathan on Wednesday, 15 December 2010 presented the 2011 Appropriation Bill to the joint sitting of National Assembly. According to the President, the 2011 Appropriation is a budget of fiscal consolidation, inclusive economic growth and employment generation. The president went further to say that the “Budget proposal is underpinned by four pillars that are drawn from our Economic Growth Strategy. These are to foster inclusive growth and job creation; optimise capital spending by rationalising recurrent expenditure and maximising Government’s revenues; accelerate the implementation of reforms to enhance the quality and efficiency of public expenditure; and reinstate greater prudence in the management of the nation’s financial resources.”

While giving account of happenings in 2010, the president said “Despite global challenges, Nigeria’s economy has remained resilient as a result of this administration’s efforts to maintain macroeconomic stability and promote socio-economic development. Real GDP growth is robust, increasing from 7.36 per cent in the first quarter of the year to 7.86 per cent in the third quarter. While the non-oil sector remains the key driver of our economic growth, the oil sector has recovered significantly in recent times, with oil production rising due to the favourable investment environment fostered by the Niger Delta Amnesty programme. Overall GDP growth for 2010 is projected at 7.85 per cent. Inflation has fallen from 13.9 per cent in December 2009 to 13.4 per cent in October 2010. External reserves at US$33.13 billion as at the end of November remain comfortable and the foreign exchange markets have been relatively stable in recent times.” This is old story. How has these figures impacted on the standard of living of Nigerians? Negatively, I would say.

The President presented a budget estimate of N4.2 trillion as total expenditure for the year 2011 out of which N1.005 trillion is for capital expenditure, while N2.481 trillion is projected for recurrent (non-debt) expenditure, debt service is to get N542 billion with N196 billion for statutory transfers. Key economic assumptions in the budget provide for an oil production of 2.3 million barrels per day at a benchmark oil price of $65 per barrel. Exchange rate is put at N150 per USD$ while Joint Venture Cash Calls is $5.4 billion with a projected growth rate of 7 percent. Projected budget deficit is 3.62 percent of GDP.

My take on the 2011 budget is that giving the experience of the past, it stands the risk of low implementation. My pessimism is derived from the fact that the budget was submitted late to the National Assembly, even though the 2010 budget has been extended till March 2011. The other challenge is that it’s a budget being presented in an election year when high wired politicking has taken the centre stage. Concomitant to this is also that in the event of a new government being voted in during the April 2011 elections, the new government’s focus might change. This was experienced when late President Yar’Adua took over from Chief Olusegun’s Obasanjo’s government on 29 May 2007. This happened despite the fact that the two administrations are rooted in the same political party. Even as it were, immediately after the demise of President Musa Yar’Adua in May 2010, we have ceased to hear 7 point agenda as well as the promise of 6, 000 megawatts of electricity.

The 2011 budget is not inspiring; it’s full of rhetoric which Nigerians have been fed over the years. There is still poor implementation of 2010 budget akin to what was experienced in 2009 and previous years. As earlier observed, the major distraction for the consideration and implementation of the 2011 budget will be politics, as it will be a year of trade off and payment of political IOUs by whoever wins the 2011 elections, even if the incumbent wins.

The new budget has N1.005 trillion set aside as a capital vote out of a total of N4.2 trillion budget, this is still unhealthy given the deplorable state of many of our social infrastructures. Nigeria is still largely import dependent and mono-culture having to depend on crude oil. Why can’t government do something strategic and substantial with our solid minerals? All the stolen wealth recovered from the looters as well as huge recovery from the $180 million Halliburton bribe scandal, how are these monies being expended? How much of this budget is coming from taxes and other internally generated revenue sources? I fully support the demand by the national assembly for the budget of all the 31 government agencies to be attached to this year’s budget. The impunity of having government agencies running independent budget without legislative appropriation must stop forthwith. As it has been pointed out, it is against section 21(1) of 2007 Fiscal Responsibility Act. I wonder why the parliamentarians have condoned this infraction for this long, only to start barking after the Central Bank Governor accused them of consuming 25 percent of the recurrent expenditure of government.

I concur with the Senate President in his submission for the downward review of the recurrent expenditure. It is clearly an albatross on the fragile economy. Perennial running of deficit budget is also very uncomplimentary. The 2011 projected budget deficit is 3.62 percent of the Gross Domestic Product (GDP). Government must find a creative way of cutting down on budget deficit. One of such is to diversify the economy by grooming the non-oil sector such as the manufacturing, agricultural and solid-mineral sectors. To effectively do this, there must be enabling environment for private sector participation in these sectors. There is need for the provision of good policy framework, moratorium, abolition of multiple taxation and availability of basic infrastructures such as adequate and affordable electricity, good road network, revival of rail system, provision of potable water as well as adequate security of lives and property. These are the major attraction to foreign direct investment (FDI). With the provisions of all the aforementioned, the small and medium scale enterprises will flourish and as such help to reduce unemployment and concomitantly poverty.

Policy inconsistency on the part of government is also unhealthy for the economy. The recent lifting of ban on some non-essential products such as toothpicks, furniture, cassava, vehicles that are 15 year old and below, matches, energy and health drinks as well as textile materials will do more harm than good to the economy. Even though government intends to make money on the importation of these merchandises through custom duty etc, yet since these goods can largely be produced locally, efforts should have been geared towards protecting the local manufacturers of the products rather than exposing them to unhealthy competitions from outside. Moreover, it will lead to the depletion of our foreign reserves as there will be overwhelming demands for foreign exchange for the imports.

The initiative of establishing National Job Creation Scheme (NJCS) with seed funding of N50 billion in the 2011 Budget is commendable even if the focus is largely on the unskilled workforce. At least, a faithful implementation of this scheme will take away the teeming army of unemployed workforce from the street and pre-empt their being used as hooligans during the forthcoming elections.

All said, even though this is a period of high level politicking arising from the forthcoming elections, I urge our parliamentarians to be very professional and patriotic in the consideration of the 2011 budget. It also behoves the executive arm to move beyond the annual ritual of lamentation of poor budget implementation and demonstrate serious commitment to fully execute the budget not only for national growth but for national development. In the event of a new party or another person rather than the incumbent winning the April 2011 polls, effort must be made by the new administration to see to faithful implementation of the 2011 budget so that the long-suffering compatriots of this blessed nation called Nigeria will have something to cheer.