BUDGET DON KPAFUKA AGAIN
BY HENRY BOYO
In keeping with our regrettable tradition of late enactment of Appropriation Bills, the 2014 budget was belatedly approved by the legislature, in April; i.e. well over three months into the fiscal year. In this event, this year’s budget, just like previous ones, will only be partially implemented, despite the adverse social impact of partial implementation.
However, late passage is not our only challenge with annual budgets.Nigerians must be disappointed that the Honourable Finance Minister and the Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, is obviously unable to fulfill her promise to steadily tilt government's expenditure in favour of capital development. Indeed, with the relatively paltry value of the 2014 infrastructure budget of N1.12tn, government's expressed intentions to improve social welfare and create jobs may now appear to be mere propaganda to our countrymen, especially when the total expenditure budget was also reduced despite the urgent need to stimulate demand and create more employment opportunities, with increased government spending.
Indeed, the primary objectives and policy thrust of government can usually be discerned from the size of sectoral allocations in each year's budget. For example, in view of the critical significance of human capacity building to economic growth, the recommendation of the United Nations Educational, Scientific and Cultural Organisation (UNESCO), is that, about 26 percent of a nation’s total budget must be devoted to the education sector. Regrettably, however, the consolidated sums of N373bn and N51bn allocated for recurrent and capital expenditures respectively, for the education sector, is still below 50 percent of UNESCO's recommendation.
Furthermore, the 2014 increased budget allocation of N712bn for servicing our debts is disturbingly high at 70 percent of the total allocation for capital expenditure. Worse still, actual debt service charges may exceed this monstrous value, if the cost of servicing CBN's expensive borrowings to remove systemic “surplus cash” from the economy is also captured. Indeed, despite the oppressive debt service charges, the recently rebased higher Gross Domestic Output figure of $510bn may induce complacency that we are still under-borrowed, and such a flattering perception may unfortunately instigate increasing debt accumulation that will further crowd out the real sector from funds and also impoverish our people.
Unfortunately, unlike the tangible impact and the easy optical presence of the infrastructural interventions from the erstwhile Petroleum Trust Fund, one may need to strenuously look out to identify the benefits of the high vote of over N268.3bn for SUREP programme in 2014. Curiously, the SUREP allocation is not technically appropriated in the budget figure, and the disbursement remains solely the prerogative of the Finance Ministry. Indeed, if the SUREP vote is also captured as expenditure, the value of the projected 2014 deficit will rise and also increase government borrowings at atrocious rates of interest. Furthermore, besides the frequent allegations of lack of transparency and equity in the management of SUREP funds, some observers have recommended that the huge sum of N268.3bn would have been better applied for funding local manufacture of domestic gas stove and cylinders, which would be steadily distributed free of charge, to all households in Nigeria. Not only would the masses enjoy cleaner domestic fuel for cooking, Nigeria would also save hundreds of billions annually from the abolition of the very wasteful current kerosene subsidy!
Nonetheless, in spite of the above observations, the legislature also discountenanced the cogent reservations of the Minority Leader, Honourable Femi Gbajabiamila, that the House should not rubber-stamp a budget that seeks to borrow more money at ridiculously high rates that will further impoverish the country. It is regrettable that the House out-rightly rebuffed the Minority Leader’s passionate plea that: “We cannot, in good conscience, support a budget that comes with a benchmark that siphons away 30 percent of the country's revenue into an illegal excess crude account, in violation of the provisions of Section 162 of the Constitution, with the resultant effect of short-changing the state, which we individually swore to defend."
Nonetheless, the most significant predicators of failure in the 2014 budget are the adopted monetary benchmarks; for example, the projected Inflation rate of 9.5 percent is already about 2 percent higher than the 2013 disenabling rate of 7.5 percent, a level which was already clearly antagonistic to sustenance of social welfare, as static incomes, particularly those of pensioners, for example, would lose almost 40 percent of purchasing value every five years, alongside deepening poverty nationwide .
Furthermore, if the naira exchange rate continues to depreciate below the budget benchmark of N160/$1, fuel prices will invariably also rise and further increase current subsidy payments of trillions of naira by at least 5 percent; ultimately, wasteful subsidy payments may exceed 50 percent of the consolidated 2014 expenditure budget of N4.6tn.
Surprisingly, however, the 2014 budget does not also seem to recognize the critical impediment of high cost of funds to the growth of the real sector, job creation and improved social welfare; in reality, interest rates will remain above the oppressive and destabilizing rate of over 20 percent, so long as banks have to borrow from CBN at the high monetary policy rate of 12 percent. Consequently, the real sector will continue to struggle, while unemployment will remain distressingly high, so long as CBN's evidently failed Monetary Policy strategy continues to engender an unusually wide disparity between savings/deposit rates of 5 percent against much higher commercial lending rates above 20 percent. Besides, the curious contradiction of alleged systemic surplus cash, which is inexplicably taboo for funding real sector growth, also appears inconsequential to the legislators.
Furthermore, the lawmakers disturbingly seem to be inappropriately comfortable with the ugly practice in which government keeps its money at zero per cent with the banks, only to return to borrow back the money at over 12 percent for the sake of reducing perceived surplus cash from the system; it is unlikely that the lawmakers would so eagerly adopt such a careless strategy for their own individual or corporate investments, and nothing suggests that this is best practice management to grow an impoverished economy.
Nonetheless, as an act of “patriotism”, according to the House Committee Chairman, Honourable Zakari Mohammed, and the House agreed to pass the budget, in spite of protestations by some members that the Appropriation Bill be rejected “until parliament received details of the spending proposals of government ministries, departments and agencies, in line with section 21 of the Fiscal Responsibility Act”. When, we may ask, does it become patriotic to violate our laws? The answer must be blowing in the wind!
SAVE THE NAIRA, SAVE NIGERIANS!!