With the hope of the passage of the national budget still uncertain, stakeholders worry this may have a rippled negative effect on the economy,
No doubt there has been a long wait for the passage of the national budget. But for how much longer the wait would be is what many stakeholders are worried about.
One such stakeholder who has raised his voice above the din is the top echelons of the Chartered Institute Bankers of Nigeria (CIBN), Dr. Uche Olowu.
At a public forum recently, he decried the incessant delay in the passage of the national budget, saying it impacts negatively on national productivity even as he called on the Federal Government and the National Assembly to close ranks in order to release the budget on time.
According to CIBN President, there was need for a new approach to the nation’s budget. “The country needs to rethink its strategy of handling some of its economic activities. For instance, according to the African Development Bank, ADB, Nigeria needs to re-orient its federal budget currently dominated by recurrent spending towards more capital expenditure and accumulating savings to sustain social spending.
“Besides, delays in budget approval and signing have become predominant that it is not available for implementation in most cases in the first quarter and rare cases a better part of the second quarter over the past 15 years. Incidentally, this year is not an exception. This has led to uncertainty in the system, affecting the delivery of projects which has profound impact on productivity in the economy. I, therefore, wish to implore the executive and legislative arms of government to close ranks to release the budget on time,” Olowu said.
President Muhammadu Buhari presented the 2019 budget to joint session of the two chambers proposed a total of N8.83 trillion last month.
Details of the proposed budget showed that it was based on crude oil benchmark price of $60 per barrel of oil and 2.3 million barrels per day. The budget is further predicated on an exchange rate of N305 to $1, a real Gross Domestic Growth of 3.01 per cent and inflation rate of 9.98 per cent.
The proposed budget shows that about a quarter of the sum (N2.14 trillion) will be used for debt servicing while capital expenditure is expected to gulp N2.031 trillion.
Further breakdown presented by the president shows that proposed recurrent expenditure is N4.04 trillion, statutory transfer is N492.36 billion, there is a sinking fund of N120 billion, while capital expenditure is N2.031 trillion.
Mixed reactions trail 2019 budget proposal
Apparently wary of the performance of the previous budget, a lot of stakeholders have expressed concern that the 2019 budget need to address a lot of grey areas.
Firing the first salvo, the Director General of the Lagos Chamber of Commerce and Industry (LCCI) Muda Yusuf in a statement made available to The Nation while noting that the latest Gross Domestic Product (GDP) statistic released by the National Bureau of Statistics (NBS) shows that the Nigerian economy grew by 1.81% year-on-year in the third quarter of 2018 amongst others, he observed that this performance is lower than the LCCI, IMF and Economic Recovery and Growth Plan (ERGP) growth forecasts of 3.5&, 2.1% and 4.1% respectively for 2018.
The managing director of Cowry Asset Management Limited, Johnson Chukwu, on his part, said the projected revenue from crude oil, based on production and price, was cause for worry.
“I think the oil price benchmark is too optimistic. We have never reached 2.3 million barrels per day production in the last four years. And now, the oil cartel has cut production level. If you cannot achieve your revenue projection, it becomes difficult to carry out capital expenditure plans. We would surely overshoot our deficit projections again and as usual, we would borrow more.”
In the view of Gabriel Ikese, a public affairs commentator, “Presenting the 2019 budget proposals in December should not be an excuse to delay the passing of the bill within reasonable time. 2017 and 2018 budgets were presented November, fairly reasonable time frame but still lingered for over 5 months at the National Assembly.”
Members of the legislature, he stressed, “should be patriotic enough to put aside personal interests and frivolous allegations from any quarters for the overriding national interest in passing the budget expeditiously. With commitment and adequate capacity, the budget can be passed in 30 working days.”
The 2019 budget proposal should be expeditiously considered and passed in record time as a test of integrity and attestation of a responsible legislature. This would change the negative perception of lawmakers and the hallowed institution of the National Assembly.
Also speaking in an interview with The Nation, Sola Fijabi, Managing Director/CEO, Brookes and Blakes, a media relations company with expertise in the emerging economies, said the sign at the macroeconomic level hardly shows any promising except in the microeconomic levels.
Worries over budget delay
In the view of Prof. Sheriffdeen Tella, Professor of Economics, Olabisi Onabanjo University Ago-Iwoye, Ogun, “The delay in budget approval in the last two years has affected the growth of the economy because such delay will not allow for the implementation of the capital part if the budget to a large extent and the implementation of capital budget is what engineers growth in every economy.”
Pressed further, he said, “The delay is very bad and it has been affecting the economy in the last three or four years because in the last three or four years budget has not being passed earlier than May or June which is very bad for the economy so the current delay will also bring about the same thing.
“The last report states that the economy grew in the last quarter of the year but in the first two quarters of the year there was no such growth, when you have that kind of situation it means that if the budget is not passed in time; that growth that we witnessed in the last quarter of the rest will start growing down by the first, second quarter of the year so if the budget is passed in time definitely that growth will continue and it will help us to get out of the economy problem that we are in now.”
According to him, “The problem is not with the government but the legislature, the government has submitted the document but also the government didn’t send it to the nearly 2017 the government submitted the budget early enough on October 7 but was not passed. Now the government submitted late but it is not good for the legislature to delay especially because of the period that we are in. The election period; they ought to have done everything before they embark on a full scale politicking. So now that that has happened one will implore them that as soon as they come back, they should not focus on the out one of the election anymore but on how to pass the budget in time so that the economy will continue go forward.”
The university, who reiterated that the perennial delays in passing yearly budgets showed that the legislature was ignorant of its responsibility, said, the early passage of the budget would promote economic growth and development.
“The Nigerian economy depends on government’s budget to function properly. The private sector particularly needs to see government direction to plan and execute their plans. Early passage of budget helps in this regard. The private sector is the major participant in the capital market.
“Growth enhancing activities in the capital market are negatively affected by the delay in passing the budget,” Tella said.
He noted that passing the federal budget in good time was capable of promoting economic growth, assisting private sector for optimal business performance as well as energising money and capital market activities.
Tella explained that early budget passage would promote planning in the lower levels of governments and the private sector.
In the assertion of Prof. Leo Ukpong of University of Uyo, “It is bad for the economy. One, it sends a bad signal to investors in terms of expenditure. Projects that are approved or expected to be involved in, when they delay the budget that means those budgets will also be delayed. In terms of expenditure activities, that will also delay.”
The second major problem, he stressed, “Is in terms of uncertainty, it creates fear because we don’t even know when they will approve it so those who want to invest and those who have contracts, all those things will slow down. The question is not whether it will be bad for them economy the question should be how long the budget will be delayed? We do you know because right now we are in election cycle and right now most of the focus right now is on election so this may throw things up for about two to three months. I hope it is not that long, before they will focus on the budget. We don’t know who is coming in and no party will like to pass a budget when you are not sure your re going to be there so generally, we are going to see a drop in a lot of activities, we are going to see a drop in stock market especially the foreign investors hold back and those are all negative feedbacks of negative effect of the delayed budget.”
Like Tella, Ukpong argues that “Constitutionally budget should be passed one year before the next fiscal year so that we don’t have any problem. Unfortunately that is in our constitution and it is the right thing because it is like saying I should pass a budget for what I will do next year so that the budget is approved and then the allocation in terms of payment can start taking place. I think every other country that is what they do. They make sure that one year ahead budget is on ground so that have start fighting for the other year at least we have money on ground to keep the government going if you follow USA you will see that they shut down the government for about three weeks because there was a budget fight between the parties.”
On the forward, Ukpong, who has expertise in Economics, Energy Economics, Monetary Economics, advises that the constitution need to be strengthened. “The presidency as the executive must do everything to make sure that the budget is approved one year before we start reading other expenditure so that it doesn’t completely throw us off. Right now we are hoping that they will finish election and focus on budget.”
Mr. Sola Oni, a chartered stockbroker and Chief Executive Officer, Sofunix Investment and Communications, said delay in the passage of the budget was highly injurious to economic growth and development.
“This enables them to advise their clients on taking positions and reviewing their portfolios accordingly.
“At macro level, early passage of the budget implies prompt implementation of capital projects. This is critical to the growth of the economy as it has impact on growing the Gross Domestic Products (GDP),” Oni said.
Light at the end of the tunnel
In the view of Zainab Ahmed, Finance Minister, Nigeria recorded the highest capital spending in history under the present government led by President Muhammadu Buhari. She was optimistic that the 2019 budget would achieve its set objective.
“You see, that’s the thing we can’t dictate to the National Assembly – how they do their work. In the process of budget preparation the Ministry of Budget and National Planning meets with every MDAs to defend their budget before us and then we collate that budget and submit to the National Assembly. We simply cannot decide or dictate to NASS how they handle the budget process or any of their processes for that matter. They are a different organ of government. It’s just like saying the judiciary and the executive is trying to determination how they take cases in court you can’t do that.”