‘You can’t address structural problems with knee-jerk approaches’
A development Economist, Dr. Chiwuike Uba, has picked holes in the proposed 2021 national budget, saying the estimates and sectoral allocations do not align with the theme of the budget.
He said the proposal lacks the potential to drive economic recovery and resilience.
He stated in Enugu on Sunday that the decision by the National Assembly to increase the budget from N13.08 trillion to N13.58 trillion has exposed the weaknesses of Nigeria’s fiscal framework.
Uba, who consults for the World Bank, noted: “The passage of the 2021 proposed national budget, after 74 days of ‘intensive’ deliberations and lobbying, is commendable. However, the allocations to key social and economic sectors are too poor to jumpstart or reposition the economy for recovery.
“The deficit of 3.64 per cent of GDP is also above the three per cent threshold set by the Fiscal Responsibility Law. In addition to the weaknesses occasioned by the non-specificity of the power of the legislature to increase the budget presented by the executive, the principle of transparency and accountability in governance are impaired.
“This is even more worrisome when the citizens are rarely and/or inadequately consulted and/or engaged in budget planning, implementation, monitoring, and evaluation. In most cases, the national and subnational budgets do not adequately reflect the expectations and aspirations of the citizens.
“Some of the budget parameters are realistic, while a greater percentage of the parameters/ estimates are overtly too ambitious and unrealistic. The oil price benchmark and oil production output are realizable. The inflation rate of 11.95 per cent, the exchange rate of N379/$1, a growth rate of three per cent, revenue and fiscal deficits projection appear very unrealistic, given the available data and trends.
“In fact, pegging the exchange at N379/$1 creates room for the black market, round-tripping, and multiple exchange rate regimes. More so, given the increasing cost of goods and services, the current inflation rate of over 14.89 per cent is expected to be on the rise till sometime June 2021. Therefore, even before the implementation commences, the 2021 budget is already showing signs of credibility issues.
“The revenue projection of N8.3 trillion is unrealistic given the previous years’ performances. Since 2015, the actual revenue of the Federal Government has only increased from N3.24 trillion in 2015 to N3.86tn as of 2019, representing an increase of less than 20 per cent. On the other hand, public debts and unfunded deficits have witnessed a steady increase.
“The budget deficit increased from N1.52 trillion in 2015 to N5.2 trillion in 2021, and public debt of less than N10 trillion as of June 2015 to N25.2 trillion as of June 2020. In the same vein, the debt service increased from N624 billion in 2014 to N3.3 trillion in 2021. Painfully, the budgeted 2021 fiscal deficit will increase at the end of 2021, with its attendant implications on debt servicing. Nigeria, therefore, is gradually heading towards a fiscal cliff with debt service to revenue ratio hitting over 90 per cent.
“This situation is worsened by the increasing cost of governance. The recurrent expenditure has continued to increase despite the hardship many Nigerians are subjected to by the government. Almost 50 per cent of Nigeria’s 2021 budget will be spent by less than 0.2 per cent of the population. When subjected to further scrutiny and analysis, the amount for recurrent expenditure may even be more, due to classification issues, or, administrative budget manipulations, or smartly inserted frivolous items as part of capital expenditures.
“In addition to over N200 billion frivolous items in the initial budget presented by the President to NASS, items such as the purchase of catering materials, computers, purchase of office buildings among others are still included in the 2021 budget. Unfortunately, some of the items classified as capital expenditures do not have any direct impact on the citizens. Economic recovery and resilience cannot happen in such an environment.
“The proposed sale of some of the national assets is not the solution to the revenue challenges facing the country. What happens when all the national assets are completed sold? Nobody solves fundamental and structural problems with a knee-jerk approach. It is the same reason the increase in budgetary allocations to defense and security has not solved Nigeria’s security challenges. In fact, evidence shows that the more money expended on defense, the more insecurity in Nigeria. Obviously, we misconstrue spending as budget performance. Nigeria’s annual real budget performance is less than 30 per cent when it is evaluated on the basis of value for money and cost-benefit analysis (including outcome and impact).
“Achieving the objectives of the 2021 budget of economic recovery and resilience requires real investment in key infrastructure – health, education, and other key economic and social sectors. Infrastructure financing through the Public-Private Partnership (PPP) vehicle as well as CBN’s funding to targeted sectors needs to be deepened. Instead of giving small amounts of money as grants/loans to millions of Nigerians, it is important to identify, at least, two key businesses/ entrepreneurs, with the capacity to scale up and employ more people in each State and fund their businesses, accordingly.
“Seventy-two big and solid corporations in each state are better than the millions of businesses funded by the CBN without any impact on the economy. Economic recovery and resilience require big and bold decisions. Economic recovery and resilience can only be guaranteed when there are enough good jobs to provide and maintain a standard of living.”