Alhaji
Atiku Abubakar, the presidential candidate of the Peoples Democratic Party
(PDP), has said only a government that understands how to run the economy can
save the country from its challenges.
He made this known recently in a piece entitled
‘My Takeaways From Budget 2019’.
In the critique, the former vice president
faulted the Muhammadu Buhari administration’s budget proposal for 2019.
According to him, the proposal is
“fundamentally flawed” and built on a “very shaky foundation”.
President Buhari had presented a budget
proposal of N8.83 trillion for 2019 to a joint session of the National Assembly
on December 19, 2018.
READ THE FULL REVIEW OF THE 2019 BUDGET
PROPOSAL BY ATIKU BELOW;
President Muhammadu Buhari
presented the 2019 Budget Proposals to the Joint Session of the National
Assembly on Wednesday 20 December 2018. Its key aim is to, according to the
President, ‘further place the economy on the path of inclusive, diversified and
sustainable growth in order to continue to lift significant numbers of our
citizens out of poverty’. The 2019 Appropriation Bill proposes an aggregate
expenditure of N8.83 trillion for the year of which N4.04 trillion is
recurrent, N2.31 trillion capital and N2.14 trillion will be devoted to debt
service. The planned spending is lower than the 2018 budget by N300 billion.
Allowing for 11% inflation rate, its real value is N7.95 trillion.
The proposed budget as
presented is fundamentally flawed. It deliberately ignores and fails to address
current realities and pretends, as Mr President asserts, ‘we are on the right
direction’. On the contrary, the 2019 budget is built on a very shaky
foundation and makes very generous, often wild and untenable assumptions which
pose significant risks to its implementation. It will be a disservice to the
country if we ignore these fundamental flaws.
Several inaccurate claims
litter the budget document – all, I think, in an attempt for Mr. President to
whitewash the regime and hide their monumental failure to improve, even minimally,
the welfare and living standards of much of the population. I see the rhetoric
of ‘inclusive, diversified and sustainable growth’ as no more than an
amplification of the APC-led government’s renewed propaganda to hoodwink the
citizens into believing that there is ‘light at the end of the tunnel’.
Few of these claims by Mr.
President are that ‘we have recorded several successes in economic management’,
that ‘the economy has recovered from recession’, that ‘foreign capital
inflows including direct and portfolio investments (have) responded to improved
economic management and that ‘we have had a sustained accretion to foreign
exchange reserves’ etc.
In reality, the economy is
yet to recover from the 2016/2017 recession as it remains SEVERELY STRESSED,
extremely fragile and vulnerable to external shocks. GDP growth declined from
2.11% in 2017 to 1.9% in Q1 and to 1.5% in Q2 of 2018. In Q3 of 2018, there was
only a marginal increase of 0.3% to 1.8%.
In its current form, the
local economy is not dynamic enough to journey to their so-called NEXT
LEVEL. For the year 2019, a general slowdown in the real growth rates of
economic activity in both the oil and non-oil sectors has been projected at
1.9% by the World Bank. This rate is well below the 2019 budget projection of
3.01% and is not enough to create the needed jobs for the growing population of
the country or for the attainment of the SDGs.
As a sign of the weakness
of the economy, the rate of unemployment has increased from 18.8% in 2017 to
23.1% in Q3 of 2018. Today, close to 20 million people are unemployed compared
to 7.2 million people in 2014. These high rates of unemployment represent both
a significant distortion in the economic system and a lost opportunity for
critical national development and could potentially threaten social stability.
Sadly, Foreign Direct
Investment (FDI) is limited and is declining. In Q3, 2018 capital inflows were
US$2.855.21 billion showing a decrease of 48.21% compared to Q2 2018 and 31.12%
decrease compared to Q3 2017. Indeed, its current level is the lowest since Q2,
2017. Value of Foreign Portfolio recorded at US$1.7 billion represents a
decrease of 58.2% compared to Q2 2018. It also represents a 37.7% decrease
compared to the Q3 of 2017.
Finally, it is very
significant to note that capital importation in 2014 (Q3) was US$6.5 billion
and in 2018 (Q3) US$2.9 billion. This shows US$3.6 billion or 55% decline since
the regime came into power.
So, contrary to Mr
President’s assertion, capital importation actually shrinks! In reality, Mr
President should expect no less. It is a fact that under his watch and
resulting from his actions or inactions, investor confidence in the economy has
waned like never before in Nigeria’s history. Nigeria remains an
uncompetitive economy as demonstrated by the recent World Economic Forum (WEF),
Global Competitiveness Index which positions Nigeria as 115th of 140
Countries. The Report shows that Nigeria has moved three places down,
contrary to Mr President’s claim that ‘we are moving in the right
direction’. Nigeria remains one of the most difficult places to do
business as evidenced by the massive outflows of capital in recent times.
Yes, we have seen some
increases in gross reserves. However, the so-called ‘successes’ recorded did
not emanate from any coherent and comprehensive economic policies of the
Federal Government. The ‘sustained accretion’ to foreign exchange reserves
resulted from increases in international prices of Brent Crude and foreign
borrowing. Given our total dependence on the oil sector for foreign exchange
earnings, any turbulence in the international oil market will lead to
reversals.
This cannot be counted as
‘success’. The acclaimed ‘success’ was simply by the Grace of God.
Even Mr President’s
acclaimed successes in agriculture can be interrogated. In spite of the
so-called ‘increased investment across the entire value chain from agricultural
inputs to farming and ultimately, food processing’, agricultural growth is well
below historical levels. The growth in agricultural production declined
from 3.48% in Q3 2015 to 1.91% in Q3 2018. Similarly, in 2018, growth has been
declining from 3% in Q1, to 1.19% in Q2 and 1.91% in Q3. There is little
evidence to show that ‘increased investment’ in agriculture has yielded
positive results.
This brings us to what the
key question is: can the 2019 budget place the economy on the path of
inclusive, diversified and sustainable growth in order to continue to lift
significant numbers of our citizens out of poverty as PMB claims?
Here
are 6 reasons why it cannot.
First, the
2019 (budget) is built on a very shaky foundation. It seeks to consolidate
on the ‘achievements’ and ‘successes’ of the 2018 budget. However, the 2018
budget was itself poorly implemented. Actual revenue collected was only N2.84
trillion (as at September 2018) against projected revenue of N7.17 trillion.
This implied that as at September 2018, only approximately 40% of projected
revenues were realized by the Federal Government. Similarly, by December 14,
2018, only N820.57 billion was released for capital spending out of a projected
expenditure of N2.652 trillion. This implied that only 31% of the capital
budget was implemented. This would impact negatively on growth, jobs and
poverty.
With such a dismal budget
performance, the economy would NOT have had the capacity to grow, generate
wealth and jobs.
Secondly, the 2019 budget
is business as usual budget. The Federal Government keeps repeating the same
mistakes BUT expects different results. For example, although the current
resource position remains precarious, government does not intend to introduce
significant fiscal restructuring. Thus, in spite of dwindling revenues, subsidy
on PMS will continue (US$1 billion is budgeted for that); Government does not
intend to introduce any reforms in the foreign exchange market as multiple
exchange rates will be maintained – thus given away between ₦300 billion and
₦800 billion to opportunists, rent-seekers, middlemen, arbitrageurs, and
fraudsters; and finally, the budget is overwhelmingly recurrent, with capital
spending taking the back seat.
Thirdly, 2019 Budget is
based on grossly exaggerated assumptions. They are NOT able to put in place any
coherent and comprehensive policies to give hope that these assumptions can be
met. For example, the Oil price benchmark has been pegged at $60 per barrel and
domestic oil production will be maintained at 2.3 million barrels per
day. Of recent, the oil market has been turbulent, and Brent Crude sells
at less than US$60. There are projections of over-supply resulting from US
shale production and pressure on Saudi by the US not to cut production. With
regards to local production, we all know that throughout 2018, average
production was 1.95 million barrels per day. Indeed, the latest report from
OPEC suggests that Nigeria will be required to cut production to 1.65 million
barrels per day. This implies that revenue targets to implement the budget will
not be met.
The most laughable
assumption is that real GDP will grow at 3.01 per cent. When indeed, GDP growth
has been sluggish, with a projection of 1.9% in 2019. The government cannot cut
spending and expect the economy to grow.
Fourthly and very
fundamentally, 2019 Budget is very small. The size of the budget is not sufficient
to stimulate the growth of the economy, create jobs and alleviate poverty. The
planned total expenditure of N8.83 trillion is lower than 2018 budget by
approximately N290 billion. The Federal Government is contracting the economy
whereas, in a period of recession, governments MUST spend more to have a
meaningful impact on jobs and poverty.
The budget is also very low
in relation to the size of the Nigerian economy, which is estimated at
approximately N150 trillion. This means that the 2019 budget is barely 6% of
GDP. (Compare Bangladesh 15.30%, India 12.74% and Afghanistan 11.9% in 2017).
Again, this will have no meaningful impact on jobs and poverty.
Fifthly, Nigeria’s fiscal
crisis persists and fiscal position of the Federal Government, and by extension,
the states and local governments remain precarious. First, projected revenues
of N6.97 trillion are 3% lower than 2018 and second, the oil sector continues
its dominance as it contributes 54% of the budget revenues. The non-oil sector
is expected to contribute only 20% of the budget revenues. There are no
coherent and comprehensive plans to expand the resource horizon of the Federal
Government.
As a result of the brewing
fiscal crisis, the budget deficit remains high at N1.86 trillion. This is
equivalent to 21% of the budget and 1.3% of GDP. The implication is that the
Federal Government will need to borrow more in 2018 to implement the budget.
Debt Service is already putting a strain on government revenues. The sum
of N2.14 trillion has been provided for debt service. This means that 30% of
projected revenue will be used in debt service.
Six, as has been with
previous budgets, recurrent costs and debt service will take a lion share of
the budget as against capital expenditure. Capital expenditure will be only 23%
of planned expenditure. On the other hand, 24% of the budget will be spent on
debt service and 46% on overhead and personnel costs. Thus over 70% of the
budget will be devoted to recurrent costs and debt service. This will not grow
the economy and create jobs.
It is, therefore, putting
it mildly to say that the 2019 proposed budget is not developmental, will not
pull Nigeria from the abyss and may, indeed accentuate the misery and
hopelessness the Nigerian people have lived with since 2015.
There must be an
alternative to this Budget. Nigeria needs a government which understands how to
run the economy in order to Get Nigeria Working Again. Fortunately for the
country, the Atiku/Obi team has exactly that capacity and experience.
For the avoidance of doubt,
an Atiku Presidency, come 2019, will present to Nigerians a people’s budget
that will prioritize and focus on the twin challenges of unemployment and
poverty. Nigeria’s high rates of unemployment, poverty and inequality represent
both a significant distortion in the economic system and a lost opportunity for
critical national development and could potentially threaten social stability.
Resolving these thorny
issues requires a significant departure from the APC-led government’s ways of
doing things. #TheAtikuPlan will accelerate growth rather than contract the
economy to steer Nigeria out of recession and to create opportunities for our
youth to be self-employed. The private sector will be a critical driver
of economic growth and #TheAtikuPlan will, therefore, act expeditiously to
create a supportive and enabling environment for businesses to invest and
thrive.
We shall disrupt and
improve the budgeting process to facilitate more effective budget impact on the
economy by increasing, significantly, the share of capital expenditure in the
budget to a minimum of 40% in the first instance. To facilitate increased
capital spending, we shall improve spending efficiency by cutting on recurrent
expenses, by ensuring the judicious utilization of all borrowed funds for
economic diversification and infrastructural development and by promoting more
Public-Private Partnerships in critical infrastructure funding.
#TheAtikuPlan recognises
that Nigeria’s current unprecedented fiscal crises, characterized by rising
debt levels and revenue shortfalls, have resulted largely from APC-led
government’s poor management of resources. We shall, therefore, undertake
significant fiscal re-structuring including a review of the current subsidy
regime and of the monumental losses to the economy arising from leakages from
the operation of the foreign exchange market, in order to channel resources
into the critical sectors of the economy.
#TheAtikuPlan Will Get
Nigeria Working Again.
Atiku
Abubakar is former Vice President of Nigeria and Presidential candidate of the
PDP.
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