Budget 2009 is not right

There are several pitfalls in the 2009 Federal Budget. The most scandalous of this has resulted in the unwarranted haggling over inclusion of constituency projects in the Appropriation Bill. The so-called constituency projects are at once a ransom demanded by federal legislators and a sop conceded by the federal executive arm that is being falsely presented as an understanding to ensure prompt passage of the budget:

it is actually an underhand deal that robs the country of the unstinted service of the executive and legislative arms and therefore against the national interest. Through the arrangement, each federal legislator collects an agreed share of a non-descript constituency projects fund and does as (s)he pleases with it.

It is a travesty that raises federal constituencies of both legislative chambers into a sort of autonomous federating units or fourth tier of government where the respective electees act as the mini-executives who preside over and expend an illegally created layer of votes purloined from the federal consolidated revenue fund and on which the legislators render no account. It is unconstitutional and marks a return to the corrupt and unethical settlement syndrome of old; it breeds divided interest with the personal trampling over the national interest; and it compromises the ability of the legislature to carry out its legislative and oversight functions with due diligence. Consequently constituency projects should be expunged from the budget and funds wrongly earmarked for them should revert to the federal consolidated revenue fund.

Events around the budget foreshow that come 2009, budget revenue projections and purported revenue receipts may be subject to subtle engineering. The benchmark oil price of $45 per barrel may be achieved on annual average if not bettered. On the other hand, the projected oil production figure of 2.292 million barrels per day may not come to pass no thanks to possible OPEC production cutback in the face of global recession and reduced oil demand in addition to the militancy in the Niger Delta which may continue. The budget does not bear any specific benchmark naira exchange rate. Ominously as President Yar'Adua presented the budget to the National Assembly, the naira exchange rate, which is subject to official control despite claims to the contrary, depreciated significantly. Apparently there are plans to shell out estimated budget naira amounts based on a weakened currency. That will be a wrong way to go.

There is a lot to do to take the economy out of the woods. But having yet again "opted to devote more resources to completing existing projects and discharging outstanding obligations from the 2007 and 2008 fiscal years", the administration in 2009 should produce genuine results. Although the above has become a yearly mantra, our national experience has been that instead of the existing projects being executed, they were left to gather further layers of decay while only a part of the huge funds annually appropriated for completing the projects were returned as savings with the balance vanishing into thin air. Government should spare us false claims of achievements in the 2009 fiscal year.

For instance, with food inflation standing at 19 per cent in October and with no jump in agricultural exports or expansion in processed agricultural produce during the year, government's claim that its major achievement in 2008 was a robust 9 per cent growth in agriculture is an outright lie that Nigerians do not deserve. A review of the list of approved budget projects clearly indicates that no verifiable progress has been made by the responsible ministries, departments and agencies.

Although the administration had earlier in the year pledged to create 10 million jobs by 2011, the budget is silent on how many jobs to expect next year. In an open economy, most jobs are provided by private enterprises; but government must put in place the enabling environment for private businesses to thrive by pursuing appropriate fiscal, monetary and exchange rate policies. In this regard, however, the administration proposes in 2009 and the medium term to continue with the selfsame monetary, exchange rate and fiscal measures that have for three decades fuelled cancerous money supply levels with attendant high inflation, unattractive lending rates and hostile economic environment. That official decision dashes all hopes that the planned public-private partnership initiatives meant to deliver key economic needs will succeed.

It is unbelievable that, despite decades of resounding failure, government still does not see that its fiscal, monetary and exchange rate policies have veered from the standards that could give birth to its promised economic targets. Thus, whereas President Yar'Adua professes extreme reluctance at seeking legislative approval for a budget deficit of 3.95 per cent of GDP next year, in reality, the age-long government practice of withholding Federation Account proceeds while substituting in their place CBN naira advances that are misconstrued as oil revenue for sharing among all tiers of government to fund public expenditure, truly puts the implicit 2009 budget deficit at about 15 per cent of GDP, which is ruinous.

That contemptuously gross fiscal irresponsibility, consistent with economic expectation, in 2009 will as hitherto produce continued harsh economic conditions and render unachievable most of the objectives of the budget. To save the situation, it is yet again left to recommend for immediate adoption by government, a correct translation of public sector foreign exchange receipts through universal banks into realised naira revenue for government expenditure (in a manner proposed by the CBN in August 2007). This will open the prospects for all economic agents (government, firms and individuals) at our current stage of development to access, at low single digit interest rates, bank credit reaching up to about 100 per cent of GDP (that is, several times the combined government budgets in a given year) for funding wide-ranging economic activities, including the various projects and programmes contained in the national budget) in a conducive economic environment.

It is in such favourable ambience that the public sector, the private sector and public-private sector partnerships make positive contributions and drive economic development and growth at full speed in the national interest.

December 16, 2008