By Les Lebe
Nigerians have become nonchallant over the years about the process and outcome of our Nations annual budgets. Indeed in the past three decades or so the most outstanding feature of our budgets has always been the glitz and razmattaz which accompanies the annual ritual of budget presentation.

There is probably no greater testimony of serial budget failures than the abysmal state of our economy and the increasingly painful poverty of the vast majority of our people, inspite of the comparatively handsome revenue profile over the years.  Paradoxically we seem to have ingeniously keyed in our budget process to support and sustain a frame work that would ineveitably make our people poorer in the face of increasing export revenue!

Not surprisingly, the 2011 budget proposal, presented a couple of days before the annual recess of the National Assembly by the President Goodluck Jonathan, perfectly fits the mould of ealier budgets.  In the place of the terse, hurried and meaningless contraption of the 2010 budget, the current proposal is verbose, and full of promise of good intentions but is equally futile as an instrument of economic rebirth and growth!

The solid path to development is not paved in hype and propaganda, but in recognition of our failures and girding our loins and doing the right things to lift our people from poverty. Mr President’s assurances of a “resilient economy with robust GDP growth rates of 7.86%”paints a picture of a dynamic, progressive and successful economy, but we all know the truth!  Inspite of the glossy picture, the rate of unemployment has continued its upward trajectory.

Also inspite of the meager quantum incomes of the majority of our people, the inflation rate of the average family food basket remains around 15% with devastating consequences for the standard of living and welfare of most households; Mr. Presidents’ 2011 budget obviously also recognizes this contradiction between a resilient economy with such buoyant growth rates and the realities of rising unemployment, unbridled inflation a comatose industrial sub sector and the prevailing level of corruption and insecurity in the land.

To this end, Mr. President has affirmed that this year’s budget has been designed to enhance the “investment environment for the real sector in a way that will foster INCLUSIVE growth so that ordinary citizens should feel the tangible benefit of our economic growth”, with gainful employment levels commensurate with economic growth and wealth creation.  Indeed the word INCLUSIVE appears to be the new buzzword in the government hype as it appears over a dozen times in the 2011 appropriation bill! But the truth is that absence of inclusive growth has been obvious to past administrations and they all wanted to remedy  this flaw without any success.

It is highly unlikely that this budget will succeed where others have failed as it equally contains a copious dose of good intentions but regrettably with has no strong underlying substrata to actualize this dream!

How President Jonathan intends to revitalize the real sector and SMEs, which are the real engines of growth and employment with prevailing commercial lending rates at over 20% remains to be seen.

Inspite of the good intentions all the past administrations have fallen at this doorstep to economic recovery.  This column has maintained unflinchingly that the serial bail out packages for selected industrial subsectors will not do the trick, we have witnessed the failure of several such attempts in the past. The very modest N50bn seed funding for the National Job creation scheme would like NAPEP and other such programmes inevitably be riddled with misdirection and misplacement of priorities and the funds would be frittered away with barely little to show for it.

Similarly, the public works programme which is expected to commence in the 36 states and the federal capital territory in conjuction with private sector contractors will similarly be plagued with bloated invoices and substandard jobs and since no specific targets have been set, the benefit from this programme will at best be superficial.

Even a toddler in any of our urban centres today feels the impact of inadequate power supply and the acronym ‘NEPA’ forms part of their early vocabulary. The success or otherwise of the industrial subsector and the proposed National Job creation scheme in sustaining and increasing employment opportunities revolves around the output, transmission and distribution capabilities of PHCN.  The attempts of past administrations to improve output and efficiency in this critical subsector have failed woefully.

The 2011 budget proposal boasts of yet another road map without a time plan for achievement of specific output and performance targets; mean while the constitutional impediments with regards to transmission is unlikely to give independent power producers (IPPs) the confidence to invest in increased generation capacity inspite of the potential of government’s incorporation of a Bulk Trader company with World Bank and Ministry of Finance partial risk guarantees!

The reality of course is that a liberal production and transmission framework which recognizes the power sector as a state rather than federal responsibility will quickly transform this sector even without any World Bank or MOF guarantee.

The 2011 budget proposal has apparently identified 50 priority projects recommended by the Infrastructure Concession Regulatory Commission for execution to boost productivity.  Mr. President quite rightly recognizes that government resources are certainly inadequate to bankroll the implementation of these priority projects and the government appreciates that it would need to “look to the private sector for the majority of the Capital requirement….  to this end, government will focus on improving the business environment.”

Well , not surprisingly, earlier governments made similar promises without any real success, as production costs remained very high, especially with the burden of suicidal lending rates.   The current administration’s strategy is regrettably very much the same as in the past; “increasing allocation of cheap and long term credit to the real sector of the economy” has failed to produce the desired result and it is clear that a policy of serial bail out packages may not be the way out!

A more enduring and potentially successful strategy is to bring the cost of borrowing across the board to about 5%; special sectorial needs such as for education and wealth and Agriculture could then access loans at between Zero to a maximum of 2.5%!

Mr. President’s erroneously believes that the prevailing crisis in the financial system is responsible for their inability to lend to the real sector!  We recall that bank consolidation and significantly increased capital base were also touted as a game changer for the real sector a few year back, but today we are very much wiser!

The banks will continue to show no preference for the real sector so long as they continue to have the government as their main customer!  The debt management (read as debt creating office)and the Central Bank are the prime buddies of banks; presently these government agencies continue to borrow close to N200bn from the banks every month, stifling credit to the ‘supposedly risk prone’ and infrastructurally deprived real sector.

If President Jonathan sincerely wants the real sector to grow, let him direct the CBN and the DMO to stop borrowing for just 12months; the banks will then have no where else to turn but the real sector for their survival.  As things stand, even in these times of stress in the banks, and inspite of the minimal lending to real sector, the banks almost without exception continue to declare fairly substantial profits.

The question is from where are they making their money; certainly not from non performing loans, but most certainly from the same government that continues to pump easy money into the vaults of the banks every month, only to return soon after to borrow the money back on the spurious grounds of liquidity management and fostering of a market for long term debt instruments

Mr. President is certainly not simple minded and he must be aware that no real positive change will be witnessed in the real sector in the next 12 months with such arrangement.  Indeed, inspite of the best efforts of the newly established Assets Management Company AMCON, our National Debt will increase by over $15bn by the time that AMCON borrows N2.5 trillion from the Capital market (read as predominantly the same money deposit banks that receive humongous cash deposits from the CBN every month).

In which case our national debt may well exceed $45bn, a figure that is much higher than the $35bn that forced us on our knees to the London and Paris Club only 3 years or so ago for debt forgiveness! While their surrogate presided over our finances to facilitate our separation from our money, incidentally same group of creditors are back at our door step with exhortations that Nigeria’s low external debt is inappropriate.

Mr. President also expects” through the establishment of the Nigerian Sovereign Wealth Fund “ to entrench greater prudence in the management of our exhaustible oil wealth for this and future generations, as well as to use the fund as a catalyst for attracting investment into critical infrastructure”.

This appears to be an ingenious strategy to keep our economy in the woods.   It is true that some oil producing countries have indeed established a sovereign wealth fund, but the reality of course is that most of these countries are in a much higher level of development and indeed industrial saturation than poor Nigeria!

It appears illogical that we should go cap in hand abroad to borrow for infrastructural enhancement at a cost when we concurrently sit on idle funds which we save or invest in the economy of our creditors.  Our commitment in view of our state of development should be to commit heavily to infrastructural enhancement so that we can survive now and thereby provide an appropriate platform for the welfare of future generations.  The dollar which currently serves as our reserve currency stands the potential of losing value as a result of the United state’s heavy indebtedness and our dollar savings could easily diminish overtime and thereby confine future generation perpetually to the unenviable group of fourth world countries.  In any case, it seems like warped logic to expect foreign investors to come and invest here while you invest your own money abroad!

Next week we shall comment on other aspect of President Jonathan’s 2011 budget proposals and discuss the validity and likely impact of the key assumptions on which the budget is predicated.

SAVE THE NAIRA, SAVE THE NAIRA