Wednesday, December 28, 2011

Nigeria's Budget 2012 in Perspective

Over the years, we have listened to very beautiful and impressive budget speeches eloquently delivered in this chamber. Unfortunately, the implementation has not matched the words as economic policies often lack continuity and projects are needlessly discarded or abandoned. Let this budget be the one that will say let there be light, and there is light; let there be roads and there are roads; let there be water, and there is water; let there be employment and there is employment; let there be Medicare and it is so; and let there be food and there is food." – Nigeria’s Senate President, David Mark (December 13, 2011)

On December 13, 2011, President Goodluck Jonathan presented a budget speech of 82 paragraphs spanning 27 pages to the joint session of the National Assembly. The 2012 budget has the theme: "Fiscal consolidation, inclusive growth and job creation", and rests on four main pillars namely, macroeconomic stability; structural reforms; governance and institutions and investing in priority areas.

The budget estimate for 2012 stands at the sum of N4.749tn which is an increase of six per cent over 2011 budget. The aggregate expenditure comprises N398bn for statutory transfers; N560bn for debt service; N2.472tn for recurrent (Non-Debt) expenditure while capital expenditure stood at N1.32tn, representing a 15 per cent increase over last year’s appropriation. The budget is predicated on an estimated oil production of 2.48 million barrels per day; benchmark oil price of US$70/barrel; exchange rate of NGN155/US$; projected GDP growth rate of 7.2 per cent; and projected inflation rate of 9.5 per cent. It is heart-warming that the Federal Government intends to streamline agencies with overlapping mandates as a way to realign public expenditure.

Speaking on the humongous infrastructural deficit, Jonathan in his budget speech (in paragraph 25) said government’s focus will be on the completion of viable ongoing capital projects while also taking on flagship projects already identified in the Transformation Agenda. However, the President was silent on what will happen to the unviable white elephants that past and present administrations have embarked on. Will they just be discontinued? Will government invite the private sector to take over and complete, operate and transfer under the private public partnership? Will they be sold off to enable government to raise additional revenue to complete the so-called ‘ongoing viable projects’?

It will be recalled that on June 2, the Presidential Projects Assessment Committee led by Ibrahim Bunu said in its report to President Jonathan that the Federal Government is currently executing 11,886 projects at the cost of N7.78tn, out of which N2.696tn had been paid to contractors. The report also stated that, "reckoned in today’s prices and allowing for unreported ongoing projects, the total cost needed to complete all the projects may well be as high as N8tn...As a matter of routine, contracts are awarded without securing the required funds in the annual budget to ensure their timely execution."

Guaranteeing 70 per cent of the principal of all loans made for supply of seeds and fertiliser by the private sector for this season; Subsidising of interest rate on agricultural loan to bring it down from 15 per cent to 7 per cent; the proposed zero duty on agricultural equipment by January 31, 2012; and the ban on importation of cassava flour from March 31, 2012 are commendable practical steps towards reviving the agricultural sector.

I, however, do not fully support the increased import duty imposed on rice and wheat. While we have few communities such as Abakaliki, Ebonyi State; and Ofada, Ogun State known for local rice production, these communities cannot yet produce sufficiently to meet domestic demand. I am not aware that wheat is grown in any part of Nigeria and that there is a wholly cassava bread. That being the case, we will need both commodities to still be cheaply imported until such a time that we will attain local self-sufficiency. This obviously cannot be done in the next one year; unless government is essentially saying that bread and rice should now become the menu of the rich and wealthy Nigerians only.

Though the President touched on his youth employment scheme in paragraphs 71 – 75 of his speech, he failed to mention how many Nigerians have been employed under the National Job Creation Scheme which he earmarked a princely N50bn for in the 2011 budget. How much of this N50bn has been spent was also not stated. He only said his Youth Enterprise with Innovations in Nigeria which he launched in October 2011 will generate about 100,000 jobs in three years.

The tax reform of the Jonathan administration is also commendable as it reduces the tax burdens of low income earners, grants tax rebates to companies that create jobs and tax incentives to those donating to social and community development causes while establishing a Tax Appeal Tribunals.

My major concern about this budget is its late presentation, its silence on the tapping of solid minerals to boost non-oil export, as well as the huge amounts budgeted by the Presidency for all manner of things such as stationery, fuel for generators, vehicles, repairs, food and other sundry items. Why purchase so many vehicles in spite of the monetisation policy of government? I also noticed that there was no provision for fuel subsidy which makes its removal a fait accompli. This is not good enough as the issue is still being debated. This speaks volumes.

The sum of N921.91bn budgeted for security at the expense of other equally very important sectors such as Education, Power, Health, Works, Agriculture, Science and Technology reflects a shallow thinking about how best to ensure national security. For me, human capital development, provision of social infrastructure and food are part of national security, not only the procurement of armoured personnel carriers and other instruments of law enforcement and coercion.

My other worry is the National Assembly’s penchant for budget padding. It will be recalled that on December 15, 2010, President Jonathan presented a budget of N4. 2tn to the lawmakers, by the time they passed the budget on March 16, 2011, they had increased it to N4.9tn. This caused an impasse between the Presidency and the Legislature as the President refused to sign the Appropriation Bill. Not until the budget was reviewed downwards to N4.48tn in May 2011, did the President eventually append his signature.

I fully endorse the view of the Speaker of the House of Representatives, Aminu Tambuwal, during the budget presentation ceremony that, "We are moved with the feeling of a new spirit to remove the annual budget presentation from the realm of sheer rhetoric to one of a comprehensive presentation of a workable document. I must, however, note that the budget proposal is again coming rather late in the day. Let me emphasise that selective budget implementation has no place in our constitution and the legislature shall not abdicate its responsibility in ensuring full budget implementation through the instrumentality of oversight. Nigerians deserve better living and this is only achievable through effective implementation of the budget. We expect nothing less, but positive impact of the 2012 budget on Nigerians on account of full implementation". Period!