Wednesday, 21 September 2016

THE UNFEASIBLE MEDIUM TERM EXPENDITURE FRAMEWORK (M-TEF) PREPARED BY LAZY THINKERS

The Medium Term Expenditure Framework (MTEF) presented annually by countries is designed to provide nations, especially the investment community and the international institutions – World Bank, International Monetary Fund, African Development Bank and others – more scope than the annual budget can afford. It is usually a three- or five-year document, depending on the ambition of the Ministry of Planning.

Nigeria had adopted the three-year MTEF since Dr. Ngozi Okonjo-Iweala became Federal Minister of Finance. Incidentally, she prepared the last one in 2014 – covering 2014 to 2016. The update last year was not carried out because President Buhari delayed in appointing ministers until October. By then all that the Ministry could achieve was the 2016 budget – which, being hastily prepared, has turned to be a mess now.

So, the good news is: there is now an MTEF from the Buhari administration. At least Nigerians and the international community have a glimpse into the minds of the nation’s economic managers. By this time last year, we were in the dark while those illiterate in economic matters praised the President for wasting valuable time in appointing economic managers.

The bad news is: the MTEF just delivered to the National Assembly (NASS) is as defective as all the others since 1999. Certainly, on this score, there is no “change”. It is a fact that no budget submitted to the NASS since 1999 had been fully implemented – even when the previous governments had all the time to prepare them.

The 2016 budget on which the MTEF is based suffers horribly from the rush job that produced it. Consequently, with eight months gone in the year, it is on course to be the worst executed budget in seventeen years. With that budgetary problem as the foundation for 2017, it is obvious why the document before the NASS can, at best, be described as a salad bowl of illusions.

Two items on its basic assumptions would help to illustrate the departure from reality to fantasy which this particular MTEF represents. The first is the assumption that Nigeria will export 2.2 million barrels of crude oil per day next year. That is lazy thinking. The same figure had been adopted for budgeting for more than ten years. Yet, the records would show that not even in the halcyon days of Obasanjo, Yar’Adua and the early months of Jonathan were 2.2 million barrels per day successfully exported.

Today, the global crude market has been altered. There are more competitors, the global economic growth has slowed, our former number one customer (USA) has now become an exporter and competitor, Iran has returned to the market, Angola is now the largest African producer and militants hold us to ransom. Shell had forecast that the current global glut would last till the end of 2017. Can anybody seriously expect Nigeria to achieve 2.2 million barrels per day?

Second is the projection of N7.78 trillion expenditure for the period under review. Experienced budgeters start from the expected result for the current year; then they add a reasonable percentage to arrive at the forecast for the next year. Against this time-tested approach, the Federal Government of Nigeria is presenting estimates for next year which are totally at variance with the experience this year.

In the current year, with a budget of N6.02 trillion, the country has so far achieved less than 60 per cent of revenue projection. Nothing in the economic horizon suggests that the full year’s result will be different. So, at best, the revenue for 2016 will be about N4 trillion. Can anybody seriously suggest that the revenue next year will double that of the current year?

Where will the money come from? Certainly not loans or crude oil or non-oil exports. Finally, the Gross Domestic Productivity (GDP) growth of four per cent is assumed. The same was assumed for 2016. Yet, Nigeria has entered into a recession and registered minus 2.6 per cent growth for the first half of the year. There are no prospects for a reversal by December.

Meanwhile the IMF had predicted 1.6 per cent growth for sub-Saharan Africa. Can anyone really expect Nigeria to grow at more than double the regional average and based on what? We call on the NASS to return the document to the President for more work. It will amount to a monumental waste to consider it. Otherwise, they would have to totally rework it themselves. (Vanguard)