Budget 2019 and Economic Prospects for the Coming Year

On Friday 21 December, just two days before their recess, President Muhammadu Buhari presented Budget 2019 before a joint session of the National Assembly.  The bedlam was exceptional, if not unexpected. The president was interrupted several times by booing and heckling from the floor. It was such an unseemly spectacle. Senate President was later to dismiss Budget 2019 as “hopeless”.

Let’s look at the figures first.

The total figure for Budget 2019 estimates is N8.833 trillion. This contrasts with the Budget 2018 figure of N9.120 trillion, representing a -3.1 percent deviation from the new estimates. The total government revenues accruable, oil as well as non-oil, are put at N6.970 for 2019, as against N7.166 for the previous year. This amounts to a decrease of -2.7 percent. Of the ball park figure for 2019, capital expenditure will consume some N2.031 trillion, as contrasted with the higher figure of N2.873 for the previous year, representing a whopping fall of -29.3 percent. Recurrent non-debt expenditure for 2019 stands at N4.400 trillion, as contrasted with N3.513 trillion, representing an increase of 25.2 percent. Debt service costs amount to N2.140 for 2019 as against a marginal decrease of N2.014 trillion, representing a 6.3 percent improvement. The total budget deficit for 2019 stands at N1.860 trillion as contrasted with N1.954 for 2018, representing a marginal decrease of -4.8 percent.

The assumptions underlying Budget 2019 are also quite unrealistic. The oil benchmark is being pegged at US$60 per barrel,  at a time when Brent crude has gone down to US$52.72 pb from a peak of US$88 pb. Even though the production benchmark of 2.3 mpb can be said to be fairly realistic,  the exchange rate of N305/US$ and projected growth of 3.01% and inflation expectations of 9.68% may not.

Some of the notable elements in the new budget estimates include: provisions for fuel price subsidy, Niger-Delta Amnesty programme funding and minimum wage increase. The administration has set up a committee to advise possible options for funding the increase in minimum wage without at the same time incurring additional borrowing. In addition, some N45 billion is being budgeted for recapitalisation of the Bank of Agriculture to subsidise loans to farmers to ensure single digit interest rates for agricultural credit.

It is evident that Nigeria's growth prospects remain quite fragile. Despite the significant increase in global oil prices and revenues accruable public finances remain in dire straits. For example, some N2 trillion remain hoarded in ministries, agencies and departments of government (MDAs). As of 31^st December 2018, these funds are yet to be remitted to the federation account as part of the funding for the 2018 budget. As we enter the New Year, the total implementation for budget 2018 has not exceeded 50 percent.

And here we are, with a much reduced budget 2019. The reduction of the ball park figure from N9.12 trillion in 2018 to N8.83 trillion for 2019 means that the train is in reverse gear. Our population increases annually by a rate of 3.1% and with an inflation rate of more than 11% annually, it means that our actual budget provision has shrivelled considerably. What is even worse, the fall in capital expenditure to recurrent expenditure from 27% in 2018 to 23% in 2019 means that growth will reduce while poverty and unemployment will increase. The most critical elements that make for growth are capital investments that increase value and expand economic opportunities.

One of the biggest challenges facing our country is geopolitical uncertainty. A friend sent me a video clip a few days ago about the killings in Zamfara. Hundreds of poor defenceless farmers were mowed down in broad daylight. The trigger-happy killers went over the dying, moaning people, taunting them to “get up if you man enough”! The gory sight was too much for me to bear. Zamfara is not alone. People are being slaughtered in Borno, Adamawa, Birnin Gwari and the Middle Belt.

I am not particularly a great fan of Amnesty International, even though I was once a student volunteer . But we would be fools to overlook their recent report on Nigeria. It paints a frightening, damning picture of what appears to be genocide, with tacit government connivance, against an unarmed and defenceless people. The president, during his budget address to national assembly, did not say anything that persuades me that he is truly bothered.

From what we know about our electoral-political cycles, such geopolitical tensions are likely to intensify in the coming two quarters. What that could mean is lower productivity in agriculture and the real sector, pressure on the exchange rate as the rich dive for cover by exchanging naira for dollars, capital flight and general despondency. Domestic and foreign investors will prefer to stay action until the dark clouds pass.

This will also mean additional pressure on the exchange rate, which a politically controlled CBN will apply its reflex action of maintaining or even upping the Monetary Policy Rate (MPR). There is a deep public distrust of our key economic and financial institutions: NPA, FIRS, CBN and others. Nobody believe they are any longer working in the public interest. The government has no credible economists to advise them. They are all groping in the dark like disembodied spirits wandering about aimlessly in ancient, haunted cemeteries.  Many are no longer sure that the president that addressed the national assembly and the nation on Friday 21 December is even the same compassionate and loving man that we voted for in 2015. It is, clearly, not well with the very soul of our republic. We should therefore brace ourselves for more storms in 2019.

Be that as it may, I am persuaded that the long-term prospects for our country are humongous. We need a new crop of leaders who understand the imperatives of building a trillion dollar world-class economy that is hooked on to the global knowledge economy.  I strongly believe that we are pursuing the wrong policies and that we don’t even an economic strategy.

We need a new development strategy for the country anchored on an agriculture-based mass industrial revolution. We must also design a five-year economic development plan. We must reinvent government as a developmental servant state driven by a professional and merit-based civil service. I would advocate having a zero-based budgetary process that avoids sinking public funds into pork barrels. Rigorous implementation must be the watchword, linked to accountability for impact and results. Government must be run as a scientific enterprise – with panache, passion and creativity. And peace must be its foundation. Nigeria can be made to work. This is our calling and our destiny.

Happy New Year to you all!