The President on Tuesday November 7, 2017 presented to the joint session of the National Assembly the 2018 Budget Proposal of N8.6 trillion, representing 16 percent increase from last year’s estimate. It is good omen for this presentation to have taken place the way it did with banter and camaraderie because the story out there before the presentation, was that the legislators were spoiling for a war waiting to heckle the President to enquire why they should sit through listening to another Budget presentation, when justice had not been done to the Budget 2017. Particularly, with regard to the constituency aspect of that Budget which for obvious reasons is so dear to the heart of the legislators. The Budget presentation saw the President standing on his feet for the whole of one hour fifteen minutes, signaling his return to robust good health for which we should collectively give glory to God for His mercies.
This presentation being made at this time in the year, is epoch making as it is unprecedented. But the fact remains that even though we acknowledge this timing as a definitive improvement going by our experience in this regard, we would still have to improve on this timing if we are to achieve the laudable target of aligning the fiscal year with the calendar year as it is the practice in developed economies.
In fact, we would have to align with the recommendation in the Fiscal Responsibility Act, to have the Budget presented by August of the preceding year to allow ample time for the legislature to perform its appropriation function.
As the Senate President observed, the President would have to cultivate the culture of having to lobby which is legitimate in a democracy for the speedy passage of the Proposal. One recommendation which had been made severally in the past is that the Budget office at the National Assembly would have to collaborate and work closely with the Budget Office of the Federation, even during the preparation phase of the Budget if we are to achieve rancor free preparation and approval of the National Budget. Would Budget 2018 be ready for use at the beginning of the year? Realistically, going by recent experience that would be a tall order. We would have to learn new tricks as well as unlearn old habits for that to happen. But if the Budget would be ready, say, by beginning of February or even March, then that would be a definite improvement. More so, if we are to consider the recent record of approving the Budget by the middle of the year and thereafter unrealistically expecting to record good implementation.
One major reason why the appropriation exercise is time consuming is the practice of the legislature requiring each Department of Government to come and defend its Budget before it. Logically the Executive that transmitted the Budget to the National Assembly, must have gone through that process before collation to arrive at the Budget, which was presented to the National Assembly and is clearly within the purview of its responsibility for that to happen. Therefore taking up all that time listening to each Department to make another round of defense is clearly redundant and procedurally wrong as the Executive is not expected to have presented the Departmental submissions without tampering with them to better align with its vision for the Economy. Therefore, the National Assembly should ideally have recourse to the Executive with any queries it might have. The prevalent practice is time wasting and provides a window for rent seeking behavior, and therefore should be revisited to align with the procedure which we have herein aligned.
The Budget has been tagged the “2018 Budget of consolidation.” Questions have been raised to enquire whether it is not premature to talk of consolidation at this point in time. If for instance we consider the exit from recession; it is clear to all that what has happened so far is tentative as it is clear to all that the exit from the recession is yet to work through the economy as there are many sectors particularly services, in which many Nigerians find themselves operating from, and which are still languishing under the throes of recession. But the fact remains that, if Budget 2017 was dubbed Budget of Economic Recovery and Growth, the only logical next step is to Consolidate as the President clearly observed. On some aspect in the text of his presentation, truthfully that what has happened so far, but clearly remains work in progress for instance the Power sector.
There is also palpably an element of misconception as the Legislature cautioned severally that Budget 2017 must be implemented. The major benefit of articulating the Budget within the context of The Medium Term Expenditure Framework (MTEF) or for that matter The Economic Recovery and Growth Plan (ERGP)(2017-2020) is to remove the incidences of aspects of the Budget which have not been concluded within the fiscal year, or which were not in fact scheduled to have been completed within the fiscal year, as it is often the case with most capital projects to be seamlessly rolled over for execution in the following year and not abandoned. And for aspects of the Budget under consideration that was most reassuring the case, as there was regular referral to either the MTEF or the ERGP which conveyed the distinct impression that the Budget under consideration in keeping with best practice has been prepared contextually.
The Budget is adjudged realistic based on the reasonableness of the assumptions that underpinned its preparation. Oil benchmark price of 45 dollars per barrel was assumed and this is conservative considering the fact that oil price is trending currently at over 60 dollars per barrel; a price which has not been witnessed since July, 2015 almost 28 months ago. And having regard to the resolve of OPEC, as well as collaborating non-OPEC members, to sustain the production cut if necessary deep into the middle of next year, and factoring in the attempt at transparency and probity at the Saudi kingdom which saw four princes as well as eleven Ministers indicted sending jitters to the oil market, it could be safely concluded that oil price is heading northwards and therefore the benchmark price could not have been more realistic. The only fly in the ointment is the threat by The Avengers to resume hostility in the Niger Delta, with the potential of disrupting the volume of oil production which has been estimated at 2.3 million barrels per day. We pray that good counsel would prevail and all concerned would see the collective wisdom of maintaining the peace. We do not expect that the Authorities would require to be schooled regarding the wisdom of adopting a pacifist approach, by reassuring all concerned that implementation of promises made are on course, and only calls for patience for the promises to be delivered.
An exchange rate of 305 Naira to the dollar has been assumed with the rate at the Investor & Exporter widow at around 360 Naira. I have heard comments to the effect that we should have adopted a more realistic rate better aligned with the alternative window since that would translate to greater quantum of Naira, for sharing with the other tiers of government to contribute to the amelioration of the squeeze, which has resulted to salary arrears. But the psychology of the market is that once we attempted that, we would sacrifice the current stability we enjoy at the market. We would have to do whatever is in our power to avoid upsetting the apple cart as we observed the economic recovery is still fragile, and would have to be nurtured to ensure that we do not experience disruptive reversals. The fact which stares us all in the face is that, we are on a winning streak as the Reserves have currently inched up to around 34 billion dollars.
It seems we are a bit ambitious with projecting an economic growth rate of 3.5 per cent for 2018 considering the fact that we just barely exited the recession at a notional 0.55 per cent GDP growth. That assumption could be wishful, reminding ourselves that we have a population growth of around 3 per cent and therefore we needed that level of growth to record any improvement in the quality of life of the citizenry. But what we have assumed would seem to be within the range of IMF projection which projects average world economic growth of 3.7 per cent. Emerging and developing economies are expected to grow at an average of 4.7 per cent and developed economies contributing an average of 2 per cent to this growth. An inflation rate of 12.1 per cent would also appear a bit unrealistic considering that inflation rate is for now trending around 15 per cent but some of these assumptions are not really critical. Inflation rate becomes relevant when we attempt to project future costs. The enemy is in implementation; particularly with regard to cash backing more so as we have tried to leverage on non-oil sources. Otherwise we have crafted a Budget which most certainly could facilitate our desire to consolidate the gains made so far as we exit the recession if we are able to muster the will for robust implementation.
Dr. Boniface Chizea
Dr. Boniface Chizea, writes from Lagos
