Architects of Nigeria’s budgets have cultivated an incongruous humdrum for doing things the same way and expecting different results.
In the last seven years, the budgeting process has become a boringly repetitive routine of throwing scarce resources at the mindless sustenance of an outrageous cost of governance and building up a mountain of budget deficit and unsustainable cost of debt service while expecting the economy to grow.
It has only succeeded in growing poverty as the federal government labours inexorably to keep its inglorious crown as the world’s headquarters of poverty.
The 2023-2025 medium term expenditure frame work recently presented to the finance committee of the House of Representatives depicts a 2023 Appropriation Bill with harrowing deficits as Nigeria’s revenue crisis sails precipitously close to catastrophic financial asphyxiation.
The federal government plans to spend N19.7 trillion during the year. Ironically, it expects to earn a miserable N8.4 trillion during the period. Budget deficit therefore stands menacingly at N11.3 trillion or about 130 per cent of the expected revenue.
There is a worrisome growth in budget deficit as federal government revenue declines precipitously. The 2021 budget had a deficit of N5.6 trillion. The deficit climbed to N6.3 trillion in 2022 budget and has almost doubled in the 2023 Appropriation Bill.
In civilized climes, governments tackle budget deficits either by cutting the cost of governance or by beefing up revenue. Nigeria does neither. It has defiantly maintained a stupendous lifestyle funded by a mountain of debts that is now serviced with 119 per cent of revenue.
The recent donation of 10 Toyota Land Cruiser sports utility vehicles (SUVs) to impoverished Niger Republic is a classic case of a bankrupt debtor nation borrowing to donate to please its neighbours. At its parlous state, Niger Republic may not be able to fund the maintenance of the luxury vehicles donated by its bankrupt giant neighbor.
The federal government has persistently ignored the Babel of voices at home and abroad calling for a deviation from funding budget deficits through massive debts.
It has refused to try the private sector participation in infrastructure development which could ease the mounting debt burden now pushing the country perilously close to bankruptcy.
The decline in revenue has attained catastrophic proportions in the 2023 Appropriation Bill. With a budget estimate of N16.3 trillion in 2022 the federal government expected to raise N10.1 trillion as revenue. Economy watchers thought that things were really bad with a budget deficit standing menacingly above 50 per cent of expected revenue.
The 2023 deficit has silenced every critic. The year’s budget deficit is close to 130 per cent of revenue. Government shamelessly blames crude oil theft and low tax revenue for the revenue decline behind the yawning deficit.
There are claims that MV Heroic Idun, a giant marine tanker impounded by Equatorial Guinea Navy for trying to steal Nigerian crude oil was arrested on a tip off from Nigerian Navy.
The navy is yet to tell the world why the crew of an unarmed rogue ship defied its arrest order and fled into international waters.
The picture being painted by the arrest of the rogue ship by Equatorial Guinea Navy is that the Nigerian Navy is powerless. That is dangerous.
It probably explains why the federal government is helplessly complaining that oil thieves have ruined the economy. It means that no one can stop the thieves.
The 2023 Appropriation Bill is as usual, a senseless consternation of unattainable projections and grossly misaligned priorities hurriedly slapped together to divert attention from Nigeria’s catastrophic revenue crisis.
The budget inflation rate of 17.1 per cent is not only impracticable but grossly misleading. It is either the architects of the budget are incurable optimists or they are lethargic day-dreamers. Even a blind man knows that inflation rate will only rise during the year. The exchange rate of the budget is a key factor pointing to higher inflation rate during the year.
The 2022 budget was predicated on inflation rate of 12.5 per cent even as the rate at the time the budget was on the drawing board was well above 15 per cent. Now we have leisurely crossed the 20 per cent mark even as the end of the year is three months away.
The exchange rate for the 2022 budget was N410 to the dollar. Today the naira has depreciated close to N430 to the dollar at the official window of the Central Bank of Nigeria (CBN).
That probably informed the decision to set the exchange rate of the 2023 Appropriation Bill at N435 to the dollar. The message from that projection is that architects of the budget expect the naira to depreciate remarkably during the year.
Market prices in Nigeria’s import-dependent economy are dictated primarily by the exchange rate of the naira. Ironically, the parallel market rate, rather than the official rate, determines what happens in the market.
That is because the official rate is used only for government transactions. It therefore follows that if architects of the budget expect the naira to depreciate to N435 at the official window, the parallel market rate would leisurely cross the N750 mark during the year.
With such projections, we may be looking at inflation rate of 25 per cent during the year.
The truth is that besides government ineptitude in reining in oil thieves, lingering factors fueling food inflation in the economy are grossly ignored.
For instance, a medium size tuber of yam leaves the farm in Benue State with a price of N400. It sells in Lagos at N2, 500. That is because surging transport cost, bribes at scores of check points, extortion by illegal market unions and profiteering retailers all contribute to price the yams out of the reach of households in the lower end of the middle income bracket.
The truck driver spends a minimum of N300 at each of the estimated 100 illegal toll gates mounted by the police, army, FRSC and vigilantes.
Like the market unions, hawkers make more profit on each tuber of yam than the farmers who toiled to cultivate and harvest it. Government does nothing about that.
An effective rail system will circumvent the extortionist toll gates and deliver the yams at cheaper prices. Government has developed a sanctimonious attitude towards the evil extortionists in the market. The summary is that prices will continue to rise beyond the budget inflation rate projection.
The organised private sector knows that hard fact and does not use government figures in planning for the year. They plan with inflation rate well above 20 per cent while the parallel market exchange rate remains their guide.