- Promises to review subsidy regime
By Adedayo Akinwale in Abuja
The presidential candidate of the Peoples Democratic Party (PDP), Alhaji Atiku Abubakar, yesterday picked holes in the 2019 financial estimates presented to the National Assembly last week by President Muhammadu Buhari, saying it was flawed and incapable of enhancing the development of the country.
The former vice president in a statement declared that the proposed budget was built on very shaky foundation and makes very generous, often wild and untenable assumptions.
Buhari had proposed in the budget an aggregate expenditure of N8.83 trillion for the fiscal year out of which N4.04 trillion is for recurrent, N2.31 trillion for capital and N2.14 trillion would be devoted to debt service.
Atiku stressed that the planned spending is lower than the 2018 budget by N300 billion, allowing for 11 per cent inflation rate, its real value is N7.95 trillion.
According to him, “The proposed budget as presented is fundamentally flawed. It deliberately ignores and fails to address current realities and pretends, as Mr. President asserts, ‘we are on the right direction.”
Atiku added, “On the contrary, the 2019 budget is built on very shaky foundation and makes very generous, often wild and untenable assumptions, which pose significant risks to its implementation. It will be a disservice to the country if we ignore these fundamental flaws.”
He said several inaccurate claims, which litter the budget document, was an attempt for the president to whitewash the regime and hide its monumental failure to improve, even minimally, the welfare and living standards of much of the population.
The PDP presidential candidate described the rhetoric of ‘inclusive, diversified and sustainable growth’ as no more than an amplification of the All Progressive Congress (APC)-led government’s renewed propaganda to hoodwink the citizens into believing that there is ‘light at the end of the tunnel.’
The former vice president faulted Buhari’s claim that his administration has recorded several successes in economic management, and that the economy has recovered from recession; while he also claimed that foreign capital inflows, including direct and portfolio investments, have responded to improved economic management.
Contrary to the claim, Atiku stated, “In reality, the economy is yet to recover from the 2016/2017 recession as it remains severely stressed, extremely fragile and vulnerable to external shocks. GDP growth declined from 2.11 per cent in 2017 to 1.9 per cent in Q1 and to 1.5 per cent in Q2 of 2018. In Q3 of 2018 there was only a marginal increase of 0.3 per cent to 1.8 per cent.”
“In its current form, the local economy is not dynamic enough to journey to their so-called Next Level.”
For the year 2019, Atiku stressed that a general slowdown in the real growth rates of economic activity in both the oil and non-oil sectors has been projected at 1.9 per cent by the World Bank.
This rate, he said, is well below the 2019 budget projection of 3.01 per cent and is not enough to create the needed jobs for the growing population of the country or for the attainment of the SDGs.
Atiku explained that as a sign of the weakness of the economy, the rate of unemployment has increased from 18.8% in 2017 to 23.1% in Q3 of 2018, adding that today, close to 20 million people are unemployed compared to 7.2 million people in 2014.
He pointed out that these high rates of unemployment represent both a significant distortion in the economic system and a lost opportunity for critical national development and could potentially threaten social stability.
Atiku noted, “Sadly, Foreign Direct Investment (FDI) is limited and is declining. In Q3, 2018 capital inflows were US$2.855.21 billion showing a decrease of 48.21% compared to Q2 2018 and 31.12% decrease compared to Q3 2017.”
“Indeed, its current level is the lowest since Q2, 2017. Value of Foreign Portfolio recorded at US$1.7 billion represents a decrease of 58.2% compared to Q2 2018. It also represents a 37.7% decrease compared to the Q3 of 2017.
“Finally, it is very significant to note that capital importation in 2014 (Q3) was US$6.5 billion and in 2018 (Q3) US$2.9 billion. This shows US$3.6 billion or 55% decline since the regime came into power.”
Atiku said contrary to president’s assertion, capital importation actually shrinks, saying in reality the president should expect no less, as it was under his watch and resulting from his actions or inactions, investor confidence in the economy has waned like never before in Nigeria’s history.
The former vice president posited that Nigeria remains an uncompetitive economy as demonstrated by the recent World Economic Forum (WEF), Global Competitiveness Index, which positions Nigeria as 115th of 140 countries.
He said the report showed that Nigeria has moved three places down, contrary to Mr. President’s claim that the country is moving in the right direction.
Atiku said while the country has witnessed increases in gross reserves, he contended that the so-called ‘successes’ recorded did not emanate from any coherent and comprehensive economic policies of the federal government.
He stated categorically that the ‘sustained accretion’ to foreign exchange reserves resulted from increases in international prices of Brent Crude and foreign borrowing, stressing that giving the country’s total dependence on the oil sector for foreign exchange earnings, any turbulence in the international oil market would lead to reversals.
This, Atiku noted, cannot be counted as ‘success.’ The acclaimed ‘success’ was simply by the Grace of God.
The presidential candidate, however, gave six reasons why the 2019 budget cannot place the economy on the path of inclusiveness and lift significant numbers of the citizens out of poverty.
Atiku said, “Firstly, the 2019 is built on a very shaky foundation. It seeks to consolidate on the ‘achievements’ and ‘successes’ of the 2018 budget. However, the 2018 budget was itself poorly implemented. Actual revenue collected was only N2.84 trillion (as at September 2018) against projected revenue of N7.17 trillion.
“This implied that as at September 2018, only approximately 40% of projected revenues were realized by the federal government. Similarly, by December 14, 2018, only N820.57 billion was released for capital spending out of a projected expenditure of N2.652 trillion. This implied that only 31% of the capital budget was implemented.
“This would impact negatively on growth, jobs and poverty. With such a dismal budget performance, the economy would not have had the capacity to grow, generate wealth and jobs.
“Secondly, the 2019 budget is a business as usual budget. The federal government keeps repeating the same mistakes but expects different results. For example, although the current resource position remains precarious, government does not intend to introduce significant fiscal restructuring. Thus, in spite of dwindling revenues, subsidy on PMS will continue (US$1 billion is budgeted for that);
“Government does not intend to introduce any reforms in the foreign exchange market as multiple exchange rates will be maintained – thus giving away between N300 billion and N800 billion to opportunists, rent-seekers, middlemen, arbitrageurs, and fraudsters; and finally, the budget is overwhelmingly recurrent, with capital spending taking the back seat.
“Thirdly, 2019 Budget is based on grossly exaggerated assumptions. They are not able to put in place any coherent and comprehensive policies to give hope that these assumptions can be met. The most laughable assumption is that real GDP will grow at 3.01 per cent. When indeed, GDP growth has been sluggish, with a projection of 1.9 per cent in 2019. The government cannot cut spending and expect the economy to grow.
“Fourthly and very fundamentally, 2019 Budget is very small. The size of the budget is not sufficient to stimulate growth of the economy, create jobs and alleviate poverty. The planned total expenditure of N8.83 trillion is lower than 2018 budget by approximately N290 billion. The federal government is contracting the economy whereas in a period of recession, governments must spend more to have meaningful impact on jobs and poverty.
“The budget is also very low in relation to the size of the Nigerian economy, which is estimated at approximately N150 trillion. This means that the 2019 budget is barely 6% of GDP. (Compare Bangladesh 15.30%, India 12.74% and Afghanistan 11.9% in 2017). Again, this will have no meaningful impact on jobs and poverty.”
Fifthly, Nigeria’s fiscal crisis persists and fiscal position of the federal government, and by extension, the states and local governments remains precarious. First, projected revenues of N6.97 trillion are three per cent lower than 2018 and second, the oil sector continues its dominance as it contributes 54% of the budget revenues. The non-oil sector is expected to contribute only 20 per cent of the budget revenues. There are no coherent and comprehensive plans to expand the resource horizon of the federal government.
“Six, as has been with previous budgets, recurrent costs and debt service will take a lion’s share of the budget as against capital expenditure. Capital expenditure will be only 23 per cent of planned expenditure. On the other hand, 24 per cent of the budget will be spent on debt service and 46 per cent on overhead and personnel costs. Thus over 70 per cent of the budget will be devoted to recurrent costs and debt service. This will not grow the economy and create jobs.”
Atiku said, “It is therefore putting it mild to say that the 2019 proposed budget is not developmental, will not pull Nigeria from the abyss and may, indeed accentuate the misery and hopelessness the Nigerian people have lived with since 2015.”
He therefore said that an Atiku presidency, in 2019, would present to Nigerians a people’s budget that will prioritise and focus on the twin challenges of unemployment and poverty.
The former vice president noted that the-Atiku-Plan would accelerate growth rather than contract the economy to steer Nigeria out of recession and to create opportunities for our youth to be self-employed.
He added further that Atiku presidency would improve the budgeting process to facilitate more effective budget impact on the economy by increasing, significantly, the share of capital expenditure in the budget to a minimum of 40 per cent in the first instance.
According to him, “The-Atiku-Plan recognizes that Nigeria’s current unprecedented fiscal crises, characterised by rising debt levels and revenue short falls, have resulted largely from APC-led government’s poor management of resources.
“We shall therefore undertake significant fiscal re-structuring including a review of the current subsidy regime and of the monumental losses to the economy arising from leakages from the operation of the foreign exchange market, in order to channel resources into the critical sectors of the economy.”