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Akintujoye Ayo Bankole in this article identifies the pitfalls in the 2018 budget
The 2018 budget is important to Nigeria in two major ways: 1) It is the last full-year budget to be implemented by this administration, one that rode to power on the back of tremendous goodwill and popular vote, but has largely failed to meet the expectations of the majority; 2) It is the first budget after the recovery from the recession which hit hard into Nigerians’ living standards in 2016/Q1’17. So, to the average Nigerian, this is the last hope that government may still deliver on some of its campaign promises.
It was therefore with high-hopes that Nigerians listened to President Buhari’s budget speech to the National Assembly, I was particularly looking out for pointers to drastic transformation and strategic spending to curtail excesses and send strong message that 2018 won’t be business as usual. But many were largely disappointed, both with the budget, and the lacklustre speech of the President. Largely indifferent from previous budget speeches, with little or no reason to show that 2018 will be different, or to jolt the overwhelmingly corrupt public service that 2018 is the year to sit tight and deliver the President’s mandate. I struggled to extract a few takeaways from the budget, and broke them down to basic implications for the ordinary Nigerian:
- Budget tag – ‘Budget of Consolidation’ – Though the budget, at ₦612trillion (16% higher than 2017) is regarded as the ‘largest ever’ budget, a conversion of the budget to real-currency makes a joke of it. There is very little to consolidate with a budget of a meagre $24billion in 2018; in an economy of over 180million people, when Angola, a similar oil major, as at 2017, had a budget of $44billion with a population of 30million.
- It appears the major objective of the Budget, from the President’s speech, is to ‘reinforce and build on recent accomplishments; and sustain reflationary policies’ – there were little or no accomplishments since 2015 in the first place, so this implies the budget will have to build on little or nothing.
- The two major success claims by Buhari – movement on the 2018 World Bank’s ease of doing business and peace in the Niger Delta – were achieved when he ‘stepped aside’ for medical treatment in the UK – this rubs off badly on the administration, and the President must quickly change this baba go-slow perception, while his Vice-President was quick to record measurable achievements in his absence, or we may achieve nothing again in 2018
- Increase in external reserve to $34billion, extra $500million in Sovereign Wealth Fund, and an increase in our trade surplus – while all good macro-indicators, have almost zero-impact on most Nigerians who work in the informal sector. These majority require ONE major thing to drive their economic activity – infrastructure, and this can only be achieved by a focused and firm government, that is totally committed to budget implementation, devoid of corruption, to ensure every naira allocated/released is spent. As it appears, we still expect the likes of Ameachi, Ngige, Dalung, Ogbeh & other political jobbers to execute the 2018budget– so, fellow Nigerians, another dead end.
- Infrastructure: With the massive deficit, only 30% was budgeted to Capital Expenditure, that’s $7billion! I assume that’s campaign costs in 2018, because that amount won’t scratch the surface if this government intends to make any impact before 2019 elections
- FX: FX rate at ₦305/1US$, when the economy runs on the parallel-market of ₦363/1US$ and the Investors’&Exporters FX-Window is ₦46/1US$ shows one thing – continued currency peg – this tells the world that our leaders are still very ignorant about economic realities, and market-determined exchange-rate.
- Revenue forecast: Oil production of 2.3million bb/pd, when average crude oil production in 2017 has been less than 2million bb/pd – we have over-estimated revenue again, then next year, we’ll be back with stories of low income. What’s wrong with doing a worst-case scenario planning?
- Personnel and Overhead costs: To increase by 12%. This is unjustifiable. Government should be investing heavily in projects that will drive employment in the private sector. Any increase above 5% here shows we haven’t learnt anything from history
- Power: Budgeted ₦12billion for transmission lines and substations to address challenges with power transmission and distribution networks – First, most of the allocated funds may be diverted, second, $33million is grossly insufficient to fix the Transco and Disco end of the power value chain. More importantly, government failed to address the fundamental regulatory issues that impedes on the growth of the power sector. Throwing money at power has repeatedly failed to solve the problem. So, darkness again in 2018.
- Agriculture: 6staple-crop processing zones to be established to support investors and boost crop production, processing and storage – as usual, nothing will come of this. Certainly not under Ogbeh. Even the brilliant Akinwunmi Adesina couldn’t end the food crisis, how much more Ogbeh
- Budget deficit: ₦2trillion; to be financed through new borrowing of ₦7trillion, and balance of ₦306billion from privatisation of non-oil assets – we are already spending 23% of 2018 budget on debt service, 7% less than our CAPEX, so as it is, our borrowing is already impeding our development. And we are sinking deeper into the debt hole. Debt-service-to-revenue ratio is also uncomfortably high. While borrowing is inevitable for development, we must quickly balance infrastructural growth with rise in debt profile, otherwise, we’ll be back to 1999, begging for debt pardon, which may not come.
- Given that it is the same government that has foot-dragged since 2015 that will implement this budget, a large part won’t be implemented (less than 60% in 2017). Some funds will be diverted, especially as elections are fast approaching. So effectively, Nigeria is expected to survive 2018 on less than $15billion. Absolute disaster.
- Finally, elections are here. Nigerian politicians have better things to think about than fixing roads and providing electricity. They’ll rather share bags of rice. Stomach infrastructure, poverty perpetuation.
- 2018 Budget new name – The budget of consolidated struggle. Aluta continua Nigeria!
- Ayo-Bankole Akintujoye is a Political Economist and Strategist. He has worked with some of the world’s biggest consultancies to advise organisations and governments in the areas of Strategy, policy formulation, transformation, and process improvement. He holds a Master’s degree in Political science. He tweets from @AyoBankole
