Despite the
glut in the international oil market, the loss of exports to the US, as well as
frequent reports of pipeline vandalism and unsold crude oil cargoes, (all of
which should depress oil output and export figures), the actual oil production
level as at September 2015 and the projected production for 2016 are
surprisingly robust. It stands at over two million barrels per day. Has
government been under-reporting oil production and export data all the while?
Well, the numbers portend a little hope.
Given full
transparency and subject to the Treasury Single Account (TSA) system, actual
oil receipts should surpass projections. Although improper management by
policymakers turned the period of high crude oil price to an oil curse era, yet
there is need for proper handling of receipts from the oil sector. For example,
budget revenue projections should include another category detailing Federal
internally generated forex revenue.
Notwithstanding
the manifest desire to spend heavily on capital projects, it is noteworthy that
projected recurrent expenditure represents 70 per cent of the proposed
aggregate spending. That is understandable because budgets contain provisions
for the upkeep of already existing structures as well as for recurring
activities inherited from earlier periods. It is noted that the Budget address
assures that the recurrent projections are based on good cost estimates.
Away from
the budget revenue and expenditure projections, of real interest should be the
actual budget implementation level, which may be on target or higher, or lower
than the initial budget size. The implementation of the approved budget items
depends on their order of priority, the inflow of revenue and the efficiency of
the execution machinery. Over the years, this machinery has not worked
satisfactorily, particularly with respect to the implementation of capital
projects even though this is usually blamed on revenue shortfall.
Considering
the mass unemployment and infrastructural shortfall, the plan to accord prime
priority to the servicing of the national domestic debt (NDD) is misplaced.
Both the NDD’s blossoming and accelerated dissipation of Federation Account
(FA) dollar allocations began following the forced or presidential suspension
of the Central Bank of Nigeria (CBN) proposal on August 14, 2007 to have
the allocations properly converted to non-inflationary realised naira revenue
via deposit money banks.
The Monetary
Policy Committee had in May 2009 reinforced an earlier decision in 2007, urging
the CBN “to issue short-term instruments to be synchronised with the Debt
Management Office issuance of FGN Bonds to mop-up excess liquidity in the
system”. All FGN Bonds were subsequently regrouped under varying tenors and
coupons.
Therefore,
the NDD is non-contractual, non-investable and fraudulent and should be
dishonoured and voided by the National Assembly as it considers the 2016
Federal Budget. The debt service provision for the NDD should be used instead
to fund the graduate teacher employment programme and accelerated execution of
critical infrastructural projects and thereby reduce the level of planned
borrowing.
Since the
return to the democratic dispensation, the public has been treated to the
singsong of a private sector-led job creation drive in the annual budgets. This
is actually the heart of the budgets; it is the bounden duty of every administration
to actualise the dream. That takes cognisance of the fact that the private
sector accounts for far greater volume of economic activity and much larger
proportion of the national workforce than the entire public sector across the
tiers of government.
The 2016
Budget address chorused the singsong but it was mere lip service because of the
misinformation contained in Paragraph 9, namely, that there existed
macroeconomic stability which the Buhari administration would continue to
maintain.
To put true
macroeconomic stability in place is not a government favour but an essential
for the private sector to operate optimally and play its vital role.
Thankfully, the Ministry of Budget and National Planning differed in the
2016-18 MTEF & FSP document where it bemoaned ‘the volatile macroeconomic
situation.’
Is that
volatile situation not identical to the condition that gave rise to the MPC
proposal of 2007? Is the lack of macroeconomic stability not responsible for
the piling-up of the avoidable and costly NDD, among other economic ills?
The Buhari
Administration should, therefore, immediately lift the counter-productive
presidential suspension of the CBN plan. Upon the implementation of the proper
conversion of FA dollar allocations by beneficiaries to non-inflationary naira
revenue via deposit money banks, many of the seemingly difficult issues in the
2016 Budget will dissolve.
For then
actual fiscal deficit will fall within the set limit of three per cent of GDP
and there will prevail true macroeconomic stability characterised by inflation
below three per cent, middle single digit band lending rates (4-7% which are
positive in real terms) and a stable realistically valued domestic currency
that commands public confidence.
And so,
practically every aspect of the 2016 Budget can be handled with aplomb. We are
convinced that, whatever the price of crude oil, Nigeria can self-finance rapid
inclusive growth and development. (Source: Guardian)
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