By Dele Sobowale
“Accordingly, there is a deliberate reduction in budget expenditure from the N5,159.66billion approved in the 2010 Amendment and Supplementary Budgets. Aggregate expenditure for 2011 is projected at N4,226.19billion…This represents a 18.1%  contraction”–

President Jonathan during the presentation of BUDGET OF FISCAL CONSOLIDATION to the National Assembly, December 15, 2010.

VISION 20:2020 AS ANCHOR.

That the budget was presented so late in the year, as the members of the National Assembly, NASS, were packing their bags for Christmas holidays, instead of two months earlier, is the first signal that 2011 Budget will suffer the same fate as all the previous budgets presented by the Yar’Adua/Jonathan/Sambo administration. The serious consideration of the budget would ordinarily not start in earnest until late January.

But, 2011 promises to be an extra-ordinary year and the first quarter of it will find most NASS members engaged in political battles for re-election. They will spend more time on politics than statecraft  which they have largely abandoned anyway. Those fighting for their lives, even if it is political lives, usually don’t have time for anything else.

President Jonathan

Thus, it is guaranteed ab initio Budget of Fiscal Consolidation will not receive the attention it deserves – even if it does not contain too many contradictions and unexplained details.

The government calls it Budget of Fiscal Consolidation, but, reading through the script, one finds it difficult to discover anything being consolidated. Instead, the budget parades the same set of promises, which, to  politicians, are like biscuits made to be broken -except one. The one exception being the president’s announcement that the 2011 Budget “is also the first budget to be prepared based on the Nigeria Vision 20:2020’s First National Implementation Plan”.

That was in the first sentence and most economists, if not required to read the entire budget in order to analyse it, would have thrown it away at that point; dismissing it as another Budget of Illusions. The year 2020 starting from 2011 is a mere ten years away.

And as Dr Okonjo-Iweala, our former Minister of Finance and World Bank chief, told us, right here in Nigeria, three weeks ago, no top twenty economy generates less than 60,000MWZ of electricity; South Africa, which is ranked number 31, already generates 45,000MWZ and has approached the World Bank to raise loan to increase by 25% its current power generation and supply.

That additional 11,125MWZ will not be available in less than ten years. Yet, Nigeria’s economic planners have persuaded the president that this nation can increase its power generation – and distribution – to more than 45,000MWZ from the current unstable 4,000MWZ in ten years. Even when achieved, 45,000MWZ will just about get us to top 30.

The former Minister of Finance gave other reasons including our stone age infrastructure, lack of railway system to carry bulk cargo cost effectively and weak financial base to warn us to desist from the illusion of Vision 20:2020. There is no need to list, seriatim, all the obstacles this nation must surmount to reach top 20. They are known to those deceiving the president themselves.

For instance, the 2011 Budget propses a N500billion intervention for power and a $500million facility “to support small and growing businesses”. To any top 20 economy, these represent only “lunch money”. And there is no guarantee the funds will be available as, when and where needed in Nigeria. Yet, here we have a budget anchored on that water hyacinth. As the lawyers tell us, you can’t build something on nothing.
BUDGET THRUSTS

The budget, according to the president, is based on four pillars:

·    Job creation
·    Optimization of capital spending by rationalizing recurrent expenditure.
·    Accelerate the implementation of reforms

·    Reinstate greater prudence in the management of the nation’s financial resources.
Without exception, governments since the 1950s have advanced some if not all the same reasons for the budgets they have presented. At any rate, the goals of fiscal and monetary policies of any nation have remained the same.

Government is in power to defend the currency, curtail inflation which is another synonym for discouraging escalating price increases and, as much as possible, achieve full employment. With respect to employment generation, there is nothing remarkable about job creation in 2011 except that it merely demonstrates the negligence that has characterized the management of this aspect of the management of our economy in more than twenty years. We send out millions of school leavers and hundreds of thousands of graduates of tertiary institutions without any prospect of finding jobs or creating self-employment.

There is also a sneaky suspicion that this is all aimed at the election next year and might soon be jettisoned once the next four years are secured. It has happened before. Who, for instance, remembers that we started 2007 with a seven-point agenda which has quietly been buried? Politicians always think of the next election.

At any rate, there are serious grounds for concern that GDP growth, which the budget projects at 7% for 2011, might not result in jobs. The Honourable Minister of Finance is the witness. According to the Minister, in a report by PUNCH on December 7, 2010, “We have growth without job creation and employment; therefore the impact is not felt in the life of the average Nigerian”.

The government has announced 6% and 7% GDP growth rates in the last three years; and the “overall GDP growth for 2010 is projected at 7.85%”, according to the president. GDP growth is racing ahead at two and half times the population growth rate; yet no jobs are created. Why? In India and China, every percentage gap between population growth and GDP growth has led to more jobs. The budget address has failed to answer this question.

The “new” National Job Creation Scheme”, NJCS, which will be funded with N50billion, another drop of water in the ocean, is not really new. To start with, what sort of jobs do you create on N333 per capita? You can’t even start a decent pure water or recharge card micro-enterprise on that. NJCS merely renames the old Poverty Alleviation Programme, PAP, embarked upon by the administration of former President Olusegun Obasanjo in the early days of his first term in 1999.

That administration,  as some of us would recollect, seized N10billion on the basis of “anticipatory approval”, that is, without approval from the NASS, from the national accounts on its  first week in office.  It  handed the funds to  some people  to “create jobs”. Till today, no official report has been received about the expenditure of the N10billion. The poor jobless people in Lagos, who were used as excuse for  the funds became unemployed less than six months after.

Many are still jobless today. So, N50billion, given out in election year to again “create jobs”, sounds suspiciously like “the same stale soup warmed up and served in new plates” – apologies to IBB. If care is not taken, no permanent jobs will result and Nigeria will be N50billion poorer. Meanwhile, GDP growth for 2011 is projected at 7%; almost a whole percentage less than this year’s estimates.

It remains to be seen how 7% GDP growth will generate new employment when 7.85% created none without deep structural changes in allocation of national income.

PRUDENT MANAGEMENT OF RESOURCES
The Presidency, with 44 Ministers, about 55 Permanent Secretaries, unknown number of Special Advisers and the NASS together, consumes a greater percentage of our resources than any other nation on earth. When we add to that parallel government parasitism at states and local government levels, it  should be clear why there is growth without employment.

–all the money is going to people who go to Dubai to buy properties not enough to those who will spend 100% of it in Nigeria and create the jobs we need.

Since the budget is still work in process, and the president has said, “Let us collectively decide on the course that will swiftly propel us to the attainment of our goals”, perhaps he will accept a modest proposal about the Presidency to start with.

He does not need 44 Ministers. USA, China, India, Indonesia, Russia, Brazil, to mention a few, whose nations are larger either in population or landmass, but certainly having far bigger GDP, parade less than 20 Ministers. What are we doing with 40+? Jonathan should consider himself as representing Bayelsa on the Federal Executive Council; Sambo takes care of Kaduna; all service chiefs, who are of cabinet rank and the IGP represent their states; so do  the Chief of Staff and National Security Adviser.

He would not need to appoint more than 20 additional Ministers. Next, he should reduce his “Advisers” by half and use the services of knowledgeable Nigerians, part time, to address issues and offer solutions which, after approval, must be implemented by appropriate public officials who must be penalised for failure. In that regard, some people should be sacked for the failure of the 2010 Budget to serve as warning to others.

OTHER INITIATIVES
Even the Roadmap for Power Sector is not new. We have heard about Public Private Partnership for decades. The reasons for the private sector reluctance to wade in remain the same. Governments in Nigeria change policies so fast, they jeopardize private investment. And politicians still consider PHCN a cash cow. For that matter, the same is true of NNPC.

And when he announced that “government has begun to explore options for addressing the complaints of small businesses regarding access to credit”, one is at a loss. Was this fellow in Nigeria since the 1980s, 1990s, early 2000s and even in the last three years? This complaint had been on the national agenda for ages and there has been no solution to it – even  in the last three and a half years.

That is also true of the promise to increase access to agricultural credit. The Yar’Adua/Jonathan/Sambo administration announced a N200billion farm support programme about two years ago. What happened to the funds? At  any rate, what is new about another promise to farmers?

As much as the president attempted to be upbeat about the implementation of the 2010 Budget, the real story was in the admission that “the average capital utilization is just under 50% as at the end of October”. In other words, public servants, from the president down to the gatemen, who had collected 100% of their salaries, had delivered less than 50% of the services that would benefit Nigerians with only two weeks  to go.

The story was the same in 2008, 2009. The same set of people will execute the 2011 Budget. What new skills and attitudes will they acquire between now and 2011 that will make it possible for them to perform as expected in 2011? In fairness to them, they are already handicapped by the late presentation of the budget and wrong premises on which it is based. Call it a case of the blind leading the blind.

Curiously, two essential inputs are missing from the budget for next year. There is no estimate for inflation; although we were told “it has fallen to 13.4% in October 2010”. What we were not told was the variance between the 8.5% promised us and the 13.4% we ended with. Neither was there any estimate for exchange rates, which, even if it turns out to be off, still serves as a guide to investors at home and abroad.

THE HEART OF THE MATTER
The real concern is about how the Federal Government realistically expects to reduce the expenditure by almost N1trillion when the minimum wage bill, when passed, will increase the wage bill by more than 250%. Short of firing half of the Federal Government workers, the government appears to be sending a budget to which it will seek supplementary appropriations later and the deficits will soar beyond 3.2% of the GDP.

Still on GDP, it is curious that the president gave the deficit as a percentage of a figure which is either deliberately or inadvertently not disclosed. As it is, we don’t know what the size of the deficit will be. So, it  is difficult to know whether to applaud or be appalled. Yet, the real size of deficits does matter. They influence interest and exchange rates; determine to a large extent the success or failure of bond offers and ultimately inflation.

NASS REACTION
The National Assembly has given us an indication of what to expect. The Speaker of the House has requested for the budgets of some agencies of government to be specifically included. They have never done that before; and they should have. But, now, they are embarking on a vengeance mission. The real target is the Central Bank of Nigeria, CBN.

On that alone, Nigerians can expect another battle between the NASS and the CBN governor. Unlike the first one, in which Sanusi caught them unawares, they will be waiting – but better prepared. The man had bested them on their own turf the last time. They don’t intend to let him get away with it a second time. This time, the goal is to make the CBN governor look bad. He will most probably fall into their trap because, like a boxer who only knows how to move forward swinging, he does not know how to dance away from trouble. Irrespective of the winner of the next bout, precious time will be wasted.

CONCLUSION
Will the budget work? Of course it will work marvelously. It makes no new specific promises and, the old promises, re-issued, don’t amount to much unless the president has the courage to sack half his cabinet and advisers and apply the funds to upgrading infrastructure. Incidentally, for Nigeria to reach top 20 in 2020, Dr Okonjo-Iweala also told us that we need to grow at 11-12% year after year for more than ten years. In the first year of the last ten years to 2020, the government which at once promises us top 20 position in 2020 also promised us 7% GDP growth in 2011.

The variance between seven and eleven or twelve compounded over ten years is so large one wonders if the “planners” consulted their financial tables. Why announce top 20 when your own figures tell you that with luck we will double the GDP in 2020. Remarkably commendable as that achievement might be, it still does not take us to top 20. Illusions are not better illustrated than that.

Nigerians and, indeed the world, can expect very little from it. As the saying goes, “blessed are they that expect nothing, for they shall never be disappointed”.

Highlights of the budget

Aggregate expenditure
N4.226 trillion  representing  18.1 per cent reduction from the N5.159 trillion appropriated in  the 2010 amendment and supplementary budgets.

The benchmark
$65 per barrel of crude oil, optimum production rate of 2.3 million barrels per day (bpd) and an exchange rate of N150 to a dollar.

Economic growth projection
7 percent.

Capital spending
N1trillion of the budget set aside for capital spending, while the remainder is to be spent on recurrent expenditure and debt servicing, meaning that the total spending may be set to fall by 18 per cent, which paves way for increase in the recurrent expenditure in the overall spending for the period of one year.

Targets
Employment generation, real sector growth, public financial management, banking reforms.

Other details

Experts are of the opinion that, despite a promising start with the unveiling of power sector reforms, there could still be too few signs of meaningful structural changes in the economy holistically.

The assumption is that 2011 growth would be boosted by the level of spending already seen in 2010, as well as what is yet to come, but, investors seeking reassurance that there is long term thinking to underscore policy, may likely be disappointed, with any meaningful fiscal consolidation until 2012.

Analysts believe that despite higher oil prices and output, the foreign reserves of $33 billion was down almost a quarter on a year ago at the start of December. The  budget deficit is expected to widen up to 6.1 percent this year.

There is the  tendency for government to save oil revenues above the benchmark price set at $67 per barrel in 2010 into an “Excess Crude Account” to protect it against a downturn, although there are plans to replace the account with a Sovereign Wealth Fund.

It follows that  the 2011 oil production forecast is down slightly on the 2.35 million bpd assumed for this year, while the assumed exchange rate of 150 naira to the dollar remains the same.

In that capacity, issues of public expenditure, the quality of spending, sectoral allocation of the budget, macroeconomic assumptions, budget implementation and fiscal deficits, among others, which had come to the front burner vis a vis the need to reduce distortions to micro and macroeconomic indicators in the coming year, must be given serious thought.

Economists stressed that as the global economic crisis recedes, posing fresh challenges to repositioning the economy, there is the need for budget that would accelerate infrastructure development to revamp the real sector of the economy to enhance relative full employment now.