President Muhammadu Buhari’s presentation of 2016 budget proposal to the National Assembly is drawing huge reactions in unexpected circles.
The reason, possibly, may be that the President’s move has succeeded in raising the hope of scores of Nigerians who are hit by the prevailing economic hardship to the extent that they are licking their wounds as Christians celebrate the historic birth of Jesus Christ.
The fan base of the president surely have been buoyed by his ambitious budget proposal, which is seen by many as a sharp departure from the past.
The budget is viewed by some Nigerians as the answer to their salient prayers. For the school child, it is a breath of fresh air. At least, free meals will now be made available. For the umemployed graduate, it is a huge sigh of relief. Their monthly stipend is sure. For the aged and elderly, it is a promise kept. They will also get their allowances. But for the politically-conscious Nigerians, there are many reasons to be worried. Their worries and unfounded fears are not borne out of their hatred for the president or his lofty budget proposal, but based on the prevailing global economic realities.
During the budget presentation, Buhari had noted: “By June 2014, oil prices averaged $112 per barrel. But as at today, the price is under $39 per barrel. This huge decline is having a painful effect on our economy. Consumption has declined at all levels. In both the private and public sectors, employers have struggled to meet their salary and other employee-related obligations. The small business owners and traders have been particularly hard hit by this state of affairs.
“Fellow Nigerians, the confidence of many might be shaken. However, I stand before you today promising that we will secure our country, rebuild our economy, and make the Federal Republic of Nigeria stronger than it had ever been.
“The answers to our problems are not beyond us. They exist on our farmlands; our corporations; in the universities in the hearts and minds of our entrepreneurs; through the gallantry of our Armed Forces; and the resolute spirit of Nigerians, especially the youths, who have refused to give up despite all the obstacles confronting them.
“This Budget proposal, the first by our Government, seeks to stimulate the economy, making it more competitive by focusing on infrastructural development; delivering inclusive growth; and prioritizing the welfare of Nigerians. We believe that this budget, while helping industry, commerce and investment to pick up, will as a matter of urgency, address the immediate problems of youth unemployment and the terrible living conditions of the extremely poor and vulnerable Nigerians.”
At the international market, the price of crude oil is dwindling. The United States of America has increased its oil production and export of shale oil, thereby becoming the largest exporter. Russia has similarly increased its production. With the relaxation of sanctions placed on Iran, they are going to flood the international market with its crude oil as well. In the end, Nigeria may become an insignificant or infinitesimal competitor among major oil producing countries.
Again, hear Buhari’s statement on the predication of the 2016 budget on $38 per barrel. “After reviewing the trends in the global oil industry, we have set a benchmark price of $38 per barrel and a production estimate of 2.2 million barrels per day for 2016. We have focused on non-oil revenues by broadening our tax base and improving the effectiveness of our revenue collecting agencies.
“Also, with the full implementation of the Treasury Single Account, we expect significant improvements in the collection and remittance of independent revenues. To further support the drive for increased remittances, we will ensure that all MDAs present their budgets in advance, and remit their operating surpluses as required by section 22 of the Fiscal Responsibility Act.
“We are determined to ensure that our resources are managed prudently and utilized solely for the public good. To set the proper tone, one of our early decisions was the adoption of a zero based budgeting approach, which ensures that resources are aligned with Government’s priorities and allocated efficiently. This budgeting method, a clear departure from previous budgeting activities, will optimize the impact of public expenditure.”
Unfortunately, the successful implementation of the 2016 budget or otherwise will be predicated on the prevailing price of crude oil in the international market. Nigeria is a mono economy and plans to diversify since the administration of former president Olusegun Obasanjo have not yielded any tangible results.
Already, the International Monetary Fund (IMF) has predicted that the price of crude oil may slump to as low as $20 per barrel in 2016. This information was made available in the ‘IMF Executive Board Concludes 2015 Article IV Consultation with Iran’ report. The body highlighted that the price of crude oil could drop by between $5 and $15 in 2016. On December 17, the price of crude oil in the international market fell to $36 per barrel. Ironically, the 2016 budget is predicted on $38 per barrel.
Experts are worried that if the IMF prediction comes true, the country would face harsher times as there will not be any fall back for the budget as crude oil revenue accounts for about 90 per cent of Nigeria’s foreign exchange earnings. Within the same period, Nigeria is projected to produce 2.2 million barrels of crude oil per day in 2016. If it sells at $38 per barrel, the federal government will generate around $83.6m daily or $30.51bn in the entire year. At $20 as predicted by the IMF, Nigeria will generate $44m daily or $16.06bn next year.
During the presentation of the 2016 budget to a joint session of the National Assembly, Buhari had noted that oil-related revenues will contribute N820 billion to the economy, while the budget deficit, which is projected at N2.22 trillion, will be funded by foreign and domestic loans. A simple breakdown of the domestic and foreign loans expected to be sourced by the federal government to fund the budget, shows that N6 billion will be borrowed daily in 2016. In a week, the borrowing will amount to N42 billion. In a month, borrowing to fund the budget will rise to N180 billion in 2016. Meanwhile, N1.3 trillion is expected to be expended on debt servicing in 2016 by the federal government.
“The deficit, which is equivalent to 2.16% of Nigeria’s GDP, will take our overall debt profile to 14% of our GDP. This remains well within acceptable fiscal limits. Our deficit will be financed by a combination of domestic borrowing of N984 billion, and foreign borrowing of N900 billion totaling N1.84 trillion. Over the medium term, we expect to increase revenues and reduce overheads, to bring the fiscal deficit down to 1.3% of GDP by 2018.
“In 2016, oil related revenues are expected to contribute N820 billion. Non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, will contribute N1.45 trillion. Finally, by enforcing strict compliance with the Fiscal Responsibility Act, 2007 and public expenditure reforms in all MDAs, we have projected up to N1.51 trillion from independent revenues,” Buhari had noted during the budget presentation.
There are other fault lines in the 2016 budget which experts are worried might not be fully implemented. Prior to the presentation of the 2016 budget to the National Assembly, President Buhari had sent a Medium Term Expenditure Framework (MTEF) to both chambers. It was hurriedly passed, with little or no fireworks from the opposition Peoples Democratic Party ( PDP).
But experts also believe that while the MTEF and the budget might appear good in papers, the government’s silence on how to generate revenues beyond its plans to borrow casts doubts on its readiness. For instance, Buhari was silent on the issue of fuel subsidy removal. He was also silent on the need to increase Value Added Tax ( VAT) and other related matters. These and many more are factors observers believe will hamper the successful implementation of the 2116 budget.
There is another aspect of the budget many consider to be unrealistic. N500 billion has been budgeted for school feeding programme initiatives, conditional cash transfer to most vulnerable and post-National Youth Service Corps (NYSC). Senate President, Bukola Saraki, during the unveiling of a letter from President Buhari to the Red Chamber said: “The Federal government will collaborate with state governments to institute well-structured programmes. These interventions will start as a pilot scheme and work towards securing support of the donor agencies and our development partners in order to minimize potential risks.”
Explaining the controversial aspect of the budget further, Minister of Labour and Employment, Dr. Chris Ngige said the federal government voted N500 billion to tackle unemployment and provide care for the vulnerable. He said the Federal Government was determined to face the menace of unemployment squarely, especially among youths in the country. Ngige said the government would fight spiritedly to solve the unemployment problem totally in the country. He also revealed government’s plans to engage the over 500,000 that graduate yearly from the nation’s institutions. He added that this would prevent them from engaging in untoward activities.
Again, experts are worried that this proposal may just be another way of ‘settling the boys’. Their argument is predicted on a number of things. First, they argue that the country does not have a database of the number of unemployed graduates in Nigeria. Similarly, the country does not have a clear knowledge of the number of vulnerable people that should profit from the scheme. More so, there is no available database detailing the number of school children in the country that will benefit from the scheme. According to the critics, the Buhari-led federal government is putting the cart before the horse.
Expectations are high. There is poverty in the land and the goodwill enjoyed by Buhari’s government is fast dwindling. People want their roads fixed, stable electricity provided, security improved upon, standard of living improved and their general wellbeing guaranteed. The All Progressives Congress ( APC) led federal government might be unable to fulfill all the 81 campaign promises it made during the campaigns, but Nigerians however expect a positive shift from the past.
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