By Les Leba
There are media concerns on the potential adverse impact of delay on budget implementation and the possibility of the Legislature overriding presidential opposition to 2013 budget enactment.
In reality, late budget enactment has over the years never really affected the disbursement of recurrent expenditure, so long as such expenditure do not exceed the previous year’s recurrent allocations; consequently, late budget enactment may only affect the capital budget.
Besides, despite the relative paucity of the capital budget, it has become traditional for ministries, government departments and agencies to continuously post billions of naira in their accounts as unspent revenue every year! Thus, late enactment may not adversely impact implementation any worse or different than that of previous years!
Some media reports suggest that the Presidency’s reservation may relate to the zero budget allocations for Securities and Exchange Commission as well as the N90bn increase in capital budget. The Legislature’s alleged inclusion of constituency projects and their adoption of $79/barrel crude oil benchmark have also been fingered for the Presidential delay.
In the present circumstance, if NASS advances its threat to override the Executive’s veto on the 2013 budget, Mr. President may ultimately become constrained to a gentleman’s agreement to quietly ship out Oteh to another agency in the near future. In this manner, President Jonathan may save face and avert any aspersion that he does not have the spine to confront the National Assembly (NASS)!
We may now address the issues of constituency projects and the alleged increase of the 2013 budget by N90bn; in plain language, the Executive contests that NASS has no constitutional power to tamper with the content of the Appropriation Bill. The National Assembly on the other hand, maintains that the President’s bill has to follow the same process as every other bill laid before the Legislature.
In the event, therefore, that the legislature has the power to evaluate, amend and pass any bill before it becomes law, it is in consonance with the spirit of the law for Mr. President’s appropriation bill to be also subject to the usual legislative protocols, which may advise omissions or inclusions, as deemed appropriate and agreed by both Legislative Houses.
However, the issue of crude oil budget benchmark is a little bit more complex; on the surface, the executive would like to be seen as conservative and prudent in adopting the lower crude benchmark price of $75/barrel; their argument is that, if for example, crude oil sells above the Executive’s recommended price of $75/barrel throughout 2013, the surplus will increase our national reserves!
In addition, in the event that crude prices unexpectedly fall below $75/barrel, the adverse impact of the reduced revenue inflow on expenditure will become less traumatic than if the budget was predicated on a much more optimistic benchmark.
The legislature on the other hand argues that deliberate understatement of budget benchmarks around $70/barrel in previous budgets led to accumulation of huge avoidable deficits in each year’s budget. In other words, the expenditure budget outstripped the understated revenue projections because of the very conservative budget benchmarks adopted.
The legislature may rightly argue that it does not make sense to fund such ‘ghost’ deficits by borrowing with high interest rates, while accumulating idle reserves from benchmark surpluses with little or no yield! This argument surely makes sense; however, the legislators themselves may in fact be unaware of the destabilising implications of increased dollar revenue brought about by higher crude price benchmarks!
The reason behind the unexpected negative impact of increasing dollar revenue is the CBN’s obtuse monetary policy framework, which substitutes monthly naira allocations at unilaterally determined rates for distributable dollar revenue. Consequently, the larger the dollar revenue (as in crude prices constantly well above conservative benchmark), the greater will be CBN’s naira creation and ultimately the greater will be the burden of excess cash (excess liquidity) in the system.
Excess liquidity in turn fuels high inflation and interest rates, and further pushes the naira value downwards, with disastrous economic and social consequences. Consequently, from the National Economic Team’s perspective, it is unhealthy for us to earn and spend such increases in dollar revenue because of the attendant problems of excess liquidity, when crude oil dollars are substituted with naira creations!
Thus, both the executive and the legislature may mean well, but the truth is that neither position is beneficial to economic growth. However, in spite of the monetary team’s acquiescence to this reality, the contradictions and paradoxes in our economy will only be resolved such that increasing dollar revenue will bring about improved social and economic welfare, when CBN stops the poisonous process of substituting naira allocations for dollar revenue, and instead adopts the instrument of dollar certificates for the payment of allocations of dollar revenue.
SAVE THE NAIRA, SAVE NIGERIANS!!