Budget 2018 and the power of fiction
Question 1 – Let’s say your budget estimated you to earn N4trn from non-oil revenue in 2017 but in reality, you only managed to collect just over N2trn, how much should you budget to collect in 2018? The correct answer is N4.2trn.
Question 2 – Let’s say you budget to earn N2.4trn from oil in 2018, how much of that should you spend on servicing your debts? The correct answer is N2trn.
If these numbers don’t make sense to you, it’s because you don’t really understand how fiction works. Our existence on earth is in many ways restricted by rules we really have no control over. For example, we humans cannot fly (at least not yet) because the law of gravity truncates our hustle in that regard. But we can create a world on paper (and film) where the law of gravity does not exist, and human beings are thus able to fly. Fiction allows us to escape inconvenient or impossible rules. To be clear, this is not the only function of fiction – it also allows people say things that would be dangerous to say otherwise.
From 2012 to 2016, the numbers the government collected from non-oil revenues were N2trn, N2.2trn, N2.6trn, N2.4trn and N2.6trn. This is the reality of how raising revenues works for governments – it increases incrementally and not geometrically (except maybe in times when a country is at war) and is often linked to how the underlying economy is performing. To go from a peak collection of N2.6trn to N4.2trn, you have to deploy the powers of fiction. And it’s just as well since the budget is a written document – you just write it down. The law of incrementalism can be suspended to set the numbers free to move in the direction you want them to go.
A key component of non-oil revenues is something called ‘independent revenue’. In the 49th paragraph of the speech the President delivered along with the 2018 budget to the National Assembly, he said “a key revenue shortfall was from Independent Revenues; only N155.14bn was remitted by September 2017 as against the projected pro-rated sum of N605.87bn” In other words, the government planned to collect N821bn for the whole year but after 9 months it had only hit 26% of its target. Miracles have been known to happen at Christmas but surely it is unlikely in this case. So, what is the best response to this? Well, for 2018, the government has raised the estimate to N848bn. This is how fiction works – reality can be brushed aside when it is inconvenient.
But anyone will be entitled to wonder why the powers of fiction are being used in a budget that contains numbers. This brings us to the answer to the second question we began with. Without using fiction, the budget will look – to quote former President Jonathan – ‘wan kain’. Nigeria has run up so much debt that the cost of debt servicing has doubled in only a few years – it is growing so fast that it is now eating into everything else that looks like revenue in the budget. As the popular rapper, MI famously put it in his ‘Money’ song – money slow to enter/money quick to go. Debt and its consequences are now pre-eminent in the budget and it’s not a pretty sight.
Without fiction, the reality is that the government is simply taking ALL the money earned from oil and using it to service debts. And while the budget benchmark price of crude oil seems realistic and prudent at $45/barrel, this is almost cancelled out by the high stakes of 2.3 million barrels per day production estimates. It is not impossible but as we approach elections, we can expect all kinds of agitation by all sorts of people. We have seen in the recent past that it only takes one pipeline going down for production volumes to be knocked sideways. That is reality. But one can deploy fiction to say pipeline explosion is not our portion in 2018.
How did we arrive at this sorry pass where a document as vital and important as a national budget is now full of obfuscation, elision and outright lies? The budget now carries a giant caveat emptor sign because the numbers cannot be relied on at all. But even worse is that the country is now on a debt runaway train that it cannot seem to get off. As such, only fiction can work – we must pretend that the train is actually stationary or that we are fully in control of it. In reality, someone is going to have to deal with this problem and it might fall to the government that is elected in 2027. But if that 2027 government decides to deploy fiction as well, then it will fall to the government elected in 2031. And so on.
So, what can a nation do? The first thing is that while fiction can be very useful as a way of predicting the future (when the Tom Cruise movie ‘Minority Report’ was released in 2002, the idea of touchscreen computers and predictive policing was fiction), reality is also very important. When you confront reality, and are well aware of your own limitations, you are forced to innovate within hard constraints which can produce spectacular results – when you are in an airplane for hours, does it not feel like magic to you? In this case, the hard constraint is government spending that is completely out of control with the money being spent to run an incredibly unproductive government machine. The government has chosen to avoid confronting this problem by deploying fiction against it.
Another good thing about fiction is that it gives us pleasure. It allows us to escape our problems, if only temporarily, into a world where those problems do not exist. In that case, we know it’s fiction and we enjoy it that way.
When you read the 2018 budget, are you not entertained?
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