2017 budget: Negative business as usual
But the MTEF objectives has been forsaken because, even before the 2017 Budget takes off, there are reports of some 19,000 uncompleted Federal projects across the country (an average of 24 projects per local government area or 174 projects per Senatorial district). Yet every annual budget promises to first complete such projects. What happened to the maxim of government is a continuum? Presidents, National Assembly members and federal political appointees since 2007 all share blame for the wasted national resources expended on the uncompleted projects and denial to the people of the benefits expected from the projects. The 2017 Budget should therefore reverse the gross insensitivity of the political class at the federal level.
A word concerning the budget assumptions. The crude oil price benchmark of US$42.50 barrel and the oil production volume benchmark of 2.2 million barrel per day are revenue projection tools. Notwithstanding an outturn of either benchmark, the significant matter is ex-post revenue and budget execution levels, namely, balanced budget, budget surplus or budget deficit. In this regard, government should exhaust realised revenue on approved budget execution before borrowing the short-fall in funds. The paradox of thrift principle discountenances borrowing to finance the budget while hoarding Federation Account oil proceeds in the so-called excess crude account. In 2016, the economy unfairly underwent severe dislocations which the Buhari administration insincerely attributed to the drop in oil output while there were funds in the excess crude account to ameliorate the situation to some extent. In any case, failure to meet the 2016 oil production benchmark was traceable to unnecessary delay in installing a productive political structure in the country.
When true (fiscal) federation comes (that outcome will accelerate economic development), the federating units may save surplus revenue (naira and/or forex) based on individual budgetary needs and efficiency level in budget execution. But the Federal Government as the exclusive monetary authority should garner national savings (naira and/or forex) differently. Relatedly, in the era of the Treasury Single Account and real time financial settlements, why does the Federal Ministry of Finance release funds from the safety of the federal treasury for budget expenditure items that are about to undergo execution or not mature for settlement? Some of the uncompleted 19,000 projects could well have obtained releases only to be abandoned.
The 2017 Budget is also based on average exchange rate of N305/US$1. Nigeria has a single currency, the naira whose value by virtue of the Appropriation Act (AA) should be determined using the managed float system in a single forex market within the band of N305/$1 plus /-3 per cent, the stable monetary range without recourse to the NASS to fix a fresh central rate. Accordingly, the unconstitutional dual currency signified by operators of domiciliary dollar accounts without time limit should be abrogated forthwith by a Presidential executive order. The depreciation by 35 per cent from the 2016 AA exchange rate of N197/$1 to N305/$1 by end-year 2016 arose from the improper sequestration of a big chunk of Nigeria’s forex earnings amounting to over $20 billion in unconstitutional domiciliary dollar accounts. The degree of depreciation was inconsistent with the actual fiscal deficit level below 2 per cent of GDP (as will be made clear soon).
With regards to the expenditure estimates, it is alarming that in 2017, debt service and matured repayments, that enjoy undeserved first-line charge, will swallow up all estimated federal non-oil revenues from companies income tax (CIT), Customs and Excise duties and various recoveries from past treasury looters. Because excess liquidity funds (which were merely sterilised instead of being expanded on government business) accounts for about 62 per cent of the debts and some 90 per cent of the service cost, the sterilised debt stock should be repudiated by Presidential executive order. That way, realised revenue from CIT, VAT, Customs and Excise duties and various recoveries will buoy receipts obtained from vagarious crude oil earnings and independent revenue sources for the settlement of genuine personnel and overhead costs. As a result, there will be increased funds left for capital projects, which are usually sacrificed for recurrent expenditure.
At paragraph 23 of the Budget Speech, President Buhari referred to the unusual discovery of fresh N2 trillion debts being owed to contractors and third parties with some of the debts dating back 10 years. What manner of contractor will sleep and loll over heavy outstanding debts for 10 years? Where are the physical structures on which the debts were incurred? Could this be a grand scheme to purloin public funds for 2019 political campaign? Buhari should let this sleeping doggish debts lie.
Also, against superior economic reasoning, OPEC best practices and public opinion, the soul of democracy, Buhari is employing tricks to sell off Nigeria’s most viable public asset. Clearly, the drop in projected Federal Government’s dividend from the NLNG from N95.5 billion in 2016 to N14.1 billion in 2017 in table 6.2 of the MTEF, signifies that a sizeable chunk of NNPC stake in the plant is to be relinquished. This underhand move against the national interest is another display of insensitivity by the political class at the Federal level. The Nigerian people should reject and resist the planned sale.
The ostensible reason for closing a dollar supply gap is a ruse as the present orchestrated dollar scarcity is artificial. By a Presidential executive order, the over $20 billion of the country’s forex earnings being held in dollar domiciliary accounts thus constituting the U.S. dollar into an unconstitutional second national currency, should be converted within specific time limit. As a result, the artificial dollar scarcity would cease and a naira exchange rate reflecting the entire economy’s total export receipts would emerge. (It is instructive to note that, despite its inequitableness, the existing Federation Account sharing formula is the product of a Presidential executive order).