A budget of misplaced priorities

In the face of massive decay in infrastructure, the strange thing about the 2020 Appropriation Bill is that a token of about $800 million out of a budget estimate of $33.8 billion would be used to fix deplorable roads, dilapidated airports, comatose rail system and epileptic power supply. What is being set aside for capital expenditure amounts to a paltry 24 per cent of the proposed budget.

The balance of 76 per cent or $33 billion would be used to pay the salaries and overhead costs of a parasitic bureaucracy and a bunch of unproductive politicians. The 2020 Appropriation Bill has no focus.  It has not made any attempt to deviate from the age-long tradition of merely allocating funds for bread-and-butter projects without a determined effort to develop the economy.

It is a huge celebration of misplaced priorities.  A disproportionate chunk of the budget is deployed to unproductive ventures.  The 469 members of the National Assembly would consume N120 billion for doing a part-time job which attracts one of the highest pays in the world.

Debt service would consume N2.46 trillion or 23 per cent of the Appropriation Bill.

The cost of servicing Nigeria’s debt is mounting by the day. In 2011 the sum of N542.38 billion was allocated to debt servicing.  That was when Nigeria’s national debt was a scant N4.2 trillion. Eight years down the line the nation’s debts have crossed the  N25 trillion target, pushing debt service cost perilously close to N3 trillion.  The sad thing is that even when oil price was above $100 per barrel and oil production at 2.3 million barrels per day, Nigeria was still borrowing to feed the rapacious appetite of its rulers.

In the 2020 Appropriation Bill, the sum of N450 billion is allocated to petrol subsidy. 

Government appointed the Nigerian National Petroleum Corporation (NNPC), the sole importer of petrol to curb petrol subsidy fraud. Now, between NNPC and the private marketers, no one knows who is more fraudulent.

NNPC uses clever tricks to swindle government by exaggerating consumption figures from 30 million to 50 million litres per day.

Nigeria has no business subsidizing petrol consumption. The federal government is responsible for the imported inflation that pushes the open market pump price of imported petrol perilously close to N200 per litre. It has clung tenaciously to ownership of the cash-guzzling refineries that diverts public funds into private pockets without increasing Nigeria’s refining capacity.

As usual, the basic economic indices of the 2020 Appropriation Bill are predicated on grossly unrealistic assumptions. The gross domestic product (GDP) growth of three per cent is unattainable in a year when providers of goods and services would pass the 50 per cent increase in value added tax (VAT) to consumers who would respond by cutting consumption, stifling production and slowing down economic growth in the process.

Even the budget oil production quota of 2.1 million barrels per day is a huge joke. In the last four years Nigeria has never hit an average oil production of 2 million barrels per day.

The reality in Nigerian oil fields suggests that even if OPEC was generous enough to waive its quota restriction, Nigeria cannot meet that target. 

In 2018, the inability to meet production quota was compensated for with the upward trend in oil price which averaged at close to $65 per barrel as opposed to the budget reference price of $60.  This year Nigeria may not be that lucky.

The senseless trade war with China declared by Donald Trump, America’s made-in-Russia president would slow down global economic growth and douse the oil consumption appetite of industrialized nations thus exerting downward pressure on oil prices.

The revenue projection of the 2020 Appropriation Bill is even more ambitious.  In the last three years, the federal government has never met any of its revenue projection targets.  Government missed the revenue projection target in the first half of this year by 41.6 per cent. Only 55.3 per cent of the 2018 revenue target was met.  Architects of the Appropriation Bill are the only ones who understand the intricate logic behind the doubling of 2020 revenue target despite the calamitous drops in previous targets.

Nigeria’s unattainable revenue target is the product of an odd combination of corruption and government’s inability to diversify the economy. The truth is that no country develops its economy on commodities. Nigeria does not add value to the commodities it exports.  It exports crude oil at rock-bottom price and imports refined petroleum products at four times the price of the crude oil it exports. That is recipe for eternal poverty and unemployment.

Besides, Nigeria is a bad tax collector. Less than 25 per cent of the taxable adults in the country are in the nation’s porous tax net.  Worst still, government does not get maximum value from the few in the tax net. The tax collectors are incorrigibly corrupt. They tax into their pockets.

If a company has a tax liability of N400 million, the tax man would demand N50 million for his pocket and reduce the tax to N150 million. Even with the projected 50 per cent increase in VAT, no one expects the federal government to meet the ambitious revenue target of the 2020 Appropriation Bill.

The Federal Ministry of Works and Housing owes contractors a staggering N306 billion.  Ironically it has to grapple with a pocket-size budget of N262 billion during the year. It therefore follows that Nigeria’s bad roads would get worse. Airports would remain dilapidated.  The east-west rail link would never be built. Worst still, education and health services would remain at their primitive levels.  Unemployment would reign supreme until the federal government diversifies the economy and allows the private sector to handle what government is incapable of doing. 

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