Nigeria’s highly challenging 2016 budget
PRESIDENT Muhammadu Buhari’s N6.08 trillion budget started with a change from the envelope to the zero-based budgeting system. But its aggressive plan to achieve too much with too little too soon to repair the vandalised state of the economy it inherited is problematic. This contribution seeks to add value to its quality and implementation framework.
Its assumption of $38 benchmark price of oil is very risky (OPEC daily basket price was $31.15 22/12/15) despite the traditional premium of Bonny light over the heavy crudes, which experts forecast to possibly decline to $20 (it was $10 before!). This is in view of the economic wars of attrition between various global combatants, America’s becoming an oil exporting country, Iran’s return to the market and increased access to green-energy technology by many customers.
Instructively, IMF has backed this scenario following the recent release of the “IMF Executive Board Concludes 2015 Article IV Consultation with Iran” report. This can reduce the budgeted oil revenue by 47.4% to $16.060 billion from $30.514 billion and increase the deficit from N2.2 trillion to N2.59 trillion to compel either a reduction in the recurrent component of the budget or an increase in the expectation from other revenue sources. Even if IMF’s $20 forecast fails, $25 seems to be the realistic price with $30 as an optimistic posibility, beyond which is sheer utopia!
Such a scenario will compel a sharper focus of the budget on the most critical issues that promise the greatest immediate positive impact on the economy (Agriculture, Power, Works, Housing, Mines and Steel,Transportation/Aviation, Health and Education) with assured multiplier effects in the short/medium term. The possible consequence of increasing deficit-financing to N2.59 trillion ($20 assumption!) can increase the debt-servicing charges to N1.865 trillion ($9.47 billion) i.e 26.44% more than the budgeted N1.475 trillion ($7.487 billion) which is 56.42% increase over N943 billion ($4.787 billion) in 2015) to choking levels in the short term as in the pre-2005/6 period! The possibilities that oil price after 2016 may remain low and more time for re-development work may be required before increased revenue from solid minerals materialises, makes this scenario very daunting. But decisions on these hard options which may compel some undesired socio-political “costs” should be taken urgently in the overall national interest.
Such hard decisions may include an accelerated implementation of the Oronsanye report for reducing the cost of governance! While its non-implementation before the elections was understandable, the stringently austere 2016 budget may compel its implementation beyond the currently scratchy and tokenistic efforts. Similarly, scrapping the budget for the legislators’ “constituency projects” on which N7.78 trillion was already wasted on 11,886 of such abandoned “projects”, and reducing the NASS budget, may become inevitable.
In this scenario of critical resource inadequacy, it may also be expedient to consolidate some public infrastruture across all the MDAs for maximum resource output at least in the immediate term with special focus on rationalising the number of public tertiary institutions, especially the last group of politically motivated new federal universities since the older ones were/are under-funded. JKF did this in Ekiti state between 2010 and 2014 without which that state would have become bankrupt before now. Clearly the public sector’s competition with the private sector in areas where the latter is showing adequate capacity and competence is avoidably wasteful. Also it may be necessary to postpone or reduce the scale of the planned take-off of the politically innovative and sensational “Social Welfare Intervention Programmes Initiative” (SWIPI).
But beyond the challenges of budget size and sectoral allocation is the critical necessity for maximising resource productivity by “making every naira count” in order to achieve dramatically positive and faster growth of the economy. Hence, before PMB’s next meeting with Xi Jinping on the Lagos-Kano rail project, it is necessary for CRA to ensure that the project’s scope will include direct links with Apapa port, Tin Can island port, Badagry deep sea port, Lekki deep sea port and Dangote refinery to reduce the frequent and espensive repair of roads caused by heavy haulage trucks and oil tankers and to end the Lagos commuters’ nightmare on especially the Apapa-Oshodi and Lekki-Epe axes. Moreover, BRF should be concerned that whereas Nigeria spends billions of Naira annually for the repair and construction of new roads, these roads start to erode before completion, degrade after six months and collapse after 12 months. Yet Dr. Ebenezer Meshida’s (Abuad) ‘invention’ for solving this problem through his : “Solution To Road Pavement destabilisation by the Invention of Lateralite: a stabilising Flux for Fine Grained Lateritic Soils on laterite” with which he won the 2008 NLNG prize, remains unutilised despite its increasingly severe financial consequences and their opportunity costs.
Since Nigeria has become the trading outpost for several countries and a severe funding gap will be the key challenge in implementing the budget, every effort should be made to avoid/minimise increasing external loans because the projected oil revenues that traditionally served as the “guaranteed” collaterals for such loans have lost their values.
Finally, as the 2016 budget may become a key part of his socio-economic and political legacy, PMB should get tough in driving its successful implementation with the same zeal as in his anti-Boko Haram war through all possible manouvres of pragmatically matching fiscal and monetary policy decisions. Following-the-due-process “democratic” mantra will not be an acceptable excuse for failure. Hence, especially with regard to the cabalistic socio-economic vampires, he needs to constantly remind himself of the coach’s : “don’t-forget-your-left-hand” ringside pressure on Dick Tiger in his epochal fight with Gene Fullmer on 10/08/63!
• Raphael Okunmuyide wrote from Lagos.