The 2017 Budget and Nigeria’s debt profile

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After over five months of tacky prevarication, the National Assembly ast Thursday passed the 2017 Appropriation Bill, increasing the overall budgetary expenditure as presented last December by the president from N7.298 trillion to N7.441 trillion. It is a telling sign of the times that the debt service provision is the third largest component of the 2017 fiscal plan, representing 24.73% or approximately a quarter of the entire budget. This is a reminder; if any was needed that Nigeria’s debt profile is becoming unsustainable. To make matters worse, the Budget Office failed to publish the approved 2017-2019 Medium Term Expenditure Framework (MTEF), upon which the 2017 budget estimates were extracted. The move, which worsens Nigeria’s Budget Transparency rating among the global community, will undermine budget monitoring efforts, particularly by civil society groups. With the economy stuck in recession; and tempers flaring from the palpitation of socio-political discontents, Nigeria could easily be fanned aflame by suffocating debt which is a recipe for social cataclysm and possible implosion.

With a deficit financing of N2.35 trillion, the N1.8 trillion cost of debt servicing is about 36% of total expected revenue, indicating the debt service may soon be back to the pre debt relief period. The breakdown shows N1,488,002,436,547 is earmarked to service domestic debts; N175,882,993,952 for foreign debts and N177,460,296707 for sinking fund to retire maturing loans. The capital vote of 29.3% is just a little higher than debt service. The debt service compared to capital allocation of 10 key ministries shows the opportunity costs of servicing debts. The capital allocation to 10 key ministries as a percentage of debt service is 72.99% while debt service is 84.49% of the overall capital vote.

It should worry Nigerians that for the third consecutive year, the rising cost of debt servicing is in the top three allocations in the national budget. What this means in concrete terms is that, by the end of 2017, Nigeria would have spent N4.2 trillion on debt servicing; from N943 billion in 2015, it rose over 50% to N1.48 trillion in 2016 and now stands at N1.8 trillion. In the last three years, the government has had a budget of about N18 trillion; of which debt service alone took an average of 23%, more than one-fifth, leaving N13.8 trillion for recurrent and capital expenditures. Paradoxically, on a debt solvency and liquidity ratio analysis relative to revenue, this situation points to a broken fiscal regime with recurrent expenditure surpassing revenue, meaning the country borrows to finance consumption. This is utterly ridiculous. President Buhari must act decisively to salvage the nation crumbling under the weight of debt servicing and bureaucratic ineptitude. Nigerians are tired of excuses and deserve some respite.

Truth be told: the current situation has far-reaching national security implications, as it extends beyond the federal government to all the states. Data from the National Bureau of Statistics, Office of the Accountant-General of the Federation, FAAC and Debt Management Office, show that many states, especially oil-producing ones are broke, or in the red; and the issue has well gone past crisis point. Lagos tops the chart with an indebtedness of N603.25 billion; Delta (N331.95 billion); Osun (N165.91 billion) and Akwa Ibom (N161.23 billion), as at 2016. Other states with high debt burden include: Benue (N49.15 billion); Edo (N94.54 billion); Enugu (N57.56 billion); Ekiti (N67.3 billion) Kano (N81.05 billion); Katsina (N30.03 billion) and Ogun (N103.75 billion), as at 2016.

Nigeria’s economy has been groaning under the weight of high governance cost which consumes 70% of its earnings to the detriment of capital projects. Infrastructure and other indices of development have been de-emphasized in order to foot the cost of governance. In a country where the government has crowded out the private sector, despite bouts of privatization, and the public sector is the biggest business entity, the federal budget is the oxygen of national life. It should therefore embody the vision and bear the imprimatur of the man Nigerians elected to be their president. The attitude of the presidency negates the cardinal place of the federal budget in the life of every Nigerian. Without concrete budget details, Nigerians have been cavalierly informed of the arithmetic benchmark price for crude oil as if the assumption of $44.5 per barrel and the overtly optimistic benchmark production rate of 2.2mbpd is realistic. It is an open secret that current production still falls short of the benchmark to justify the revenue assumptions. So, is the government already opening the window for further increased deficit financing? Besides, the budget approved exchange rate is unrealistic owing to the gap between the official exchange rate of N305/$1 and the N380/$1 which is what obtains in the market, creating multiple exchange rates in the country.

This tacky approach to the budget process implants fiscal and monetary policies that embarrass government and everyone else with growth indices without any human index growth in the country. It does not inspire confidence that everything is late about the budget. The attendant multiplier and time lags portend unfavourable results all over the economic and social sectors. All of this is avoidable if the president could find time out of his perennial medical leave to adopt the budgeting process as his first responsibility tool for Nigeria.

In the meantime, the rising debt profile of the country is a national emergency and a sad reflection on presidential leadership that could be interpreted as an act of nonchalance and a blatant endorsement of the status quo; which wittingly or unwittingly is pushing the nation towards the precipice. Preaching is not the solution. The buck stops at the President’s desk and any leader that perennially makes excuses only exhibits a lack of focus and opens himself to charges of cluelessness and failed leadership. Thankfully, Mr. President still has enough time to turn things around and prove himself as a man who can deliver on his promises; a President who fought the most, not just spoke out the most, on behalf of the Nigerian people. This is the time to deepen Nigeria’s democracy; and give it a new identity for it to live up to its billing as government of the people

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