President Muhammadu Buhari recently presented Federal Government’s budget proposal to a joint session of the National Assembly. The budget, put at N8.612 trillion, is 16 percent higher than this year’s and the largest in the history of the country. It is called, “A budget of consolidation.”
In preparing the budget, benchmark crude oil price was put at $45 per barrel, oil production estimate at 2.3 million barrels per day, and the exchange rate for 2018 was also put at N305 to $1. Other budget assumptions include Real GDP growth of 3.5 percent and inflation rate of 12.4 per cent.
Proposed total government expenditure was put at N8.612 trillion (16 percent above 2017 budget estimate), comprising recurrent costs of N3.494 trillion, capital expenditure of N2.428 trillion (excluding the capital component of statutory transfers), debt service of N2.014 trillion, statutory transfers of about N456 billion and sinking fund of N220 billion (to retire maturing bond to local contractors).
A recurrent expenditure of 3.494 trillion is rather too high for salary payment in a budget of N8.612 trillion. The civil service is rather too large. This accounts for why so high amount is spent on recurrent expenditure every year
The budget looks promising, especially in the area of spread of the capital projects to the various geopolitical zones in the country. For example, key capital projects and programmes to be implemented include N9.8 billion for the Mambilla hydro power project, including N8.5 billion as counterpart funding, N12 billion counterpart funding for earmarked transmission lines and substations, N35.41 billion for the National Housing Programme, N10 billion for the 2nd Niger Bridge and about N300 billion for the construction and rehabilitation of strategic roads. Also, N65 billion was budgeted for the Presidential Amnesty Programme, N53.89 billion as capital allocation to the Ministry of Niger Delta and about N17.32 billion for the completion of the East-West road.
However, the budget has many downsides. For example, the benchmark oil production estimate of 2.3 million barrels per day is too optimistic and unrealistic. In the current year, the benchmark oil production was 2.2 million barrels per day but government has been able to achieve only 1.9 million barrels per day. If up till now the government has not been able to produce 2.2 million of crude oil per day, there is no guarantee that it would be able to produce 2.3 million barrels per day in 2018.
Also, a recurrent expenditure of 3.494 trillion is rather too high for salary payment in a budget of N8.612 trillion. The civil service is rather too large. This accounts for why so high amount is spent on recurrent expenditure every year. It is a good thing that the Federal Government has put an embargo on recruitment of workers. Even then, it would still need to prune down its high staff strength.
But against the backdrop of the fact that a lot of people will be thrown into the labour market, spiking social insecurity and other vices, the authorities should rev up their economic diversification agenda, to provide more jobs and absorb those who would have to leave the main civil service.
In addition, at a time when the country is terribly short of medical doctors owing to brain drain and poor facilities in hospitals, the government ought to have declared emergency in the health sector to rebuild the healthcare facilities in the country. Instead, it is sad that the federal budget allocated less than one per cent to health. It is an indication that the health sector will continue to suffer setbacks; brain drain will continue, while the affluent and top public servants will continue to embark on health tourism overseas for medical treatment.
Also, with a total debt of N19.16 trillion ($62.9 billion) as first quarter 2017, the government should be seriously worried about increasing the country’s debt (foreign and local) and with the hindsight of the intractable trade accruals of $16 billion that snowballed into $33billion foreign debt hanging on Nigeria’s neck in the 1980s up to the time the country got debt relief, Nigeria should be wary about any form of debt and should stay away from it.
Government should also be concerned that its inclination towards foreign financing over domestic borrowing could backfire in future, especially given that at the time of repayment of the foreign loan, the exchange rate of Naira to dollar would have almost doubled what it is today. And, in the face of Nigeria’s poor history of debt management, the government must run away from such foreign loan to refinance maturing local loan. It must learn to cut its cloth according
to its size.
Also, government benchmark exchange rate is put at N305 to $1, but, we do know that market forces cannot get exchange rate in the market below N360 to $1. So, the N55 arbitrage being made by the government and the Central Bank of Nigeria must be wisely used to execute the budget and in paying matured obligations.
Meanwhile, statistically, Nigeria is out of recession, but the after effects of the recession are still with Nigerians. It will take another two quarters for the economy to adjust fully to growth measures put in place by the government and for the measures to have positive effects on the living standard of the ordinary Nigerian.
However, far more important is implementation of the budget. This is because over the years, implementation has always been the undoing of the country’s budgets. Many promising budgets have failed the country because of poor implementation, as many of them have not seen 50 per cent of implementation.
If a budget is not fully implemented, there is no way the country can enjoy the full benefits of the budget. With one month to the end of year 2017, the year’s budget has not achieved 50 per cent implementation. As such, the government must work assiduously to fully implement the 2018 budget and return the country back to the endearing culture of January to December implementation
of budget.
