“Nigeria gets 1.77mbpd as new production quota.”
News Report, October 5, 2019.
By Dele Sobowale
Everybody agrees in OPEC that we need to stabilise the market. We cannot allow price just to plummet.” Timipre Sylva, Minister of State for Petroleum Resources.
There are two imperatives for any nation selecting democracy and not wishing to be thrown into the dust bin of history — elect good and capable Chief Executive Officers and avoid electing jesters into the legislative chambers. Nigeria is trending dangerously close to unserious executive and legislative governance. Given the way the Presidency and the National Assembly, NASS, are treating the Medium Term Expenditure Framework, MTEF, and more immediately, the 2020 Budget, honest economic analysts must conclude that Nigeria is now on a dangerous trip to economic, social and political calamity.
Anybody who has ever had the least understanding of the Presidential system realises that what the President presents as budget is a proposal. The legislature has the final say – or to put it another way – the power of the purse. It is the elected representatives of the people who ultimately tell the Executive branch what can be spent. But that constitutional prerogative also carries with it the responsibility to determine how the funds approved will be raised. Only an irresponsible NASS would pass a budget without stipulating how to raise the funds. The NASS has since 1999 abdicated its responsibilities and has been mostly guilty of getting Nigeria into the economic mess we are in. Already, the economy is set to grow at less than two per cent again in 2019 and Nigeria will again add millions to those now living in extreme poverty.
The way the Presidency and the jokers at the NASS are handling the 2020 Budget illustrates why we are headed for the garbage can of history. Neither the Executive nor the legislative branch of the Federal Government is acting as if they mean well for Nigeria. Indeed, they are inadvertently sabotaging the economy such that another failed budget in 2020 will make it almost impossible for the country to reverse a head-long slide into a full depression. Let me explain from facts available to us.
The FG had proposed a budget of N10.002trn for 2020 based on export of 2.1 million barrels of crude oil per day. Crude oil revenues, as everybody, including the village idiot knows, constitutes over 60 per cent of our gross revenue. The same estimates were adopted in the MTEF. That fact alone would have rendered the proposal by the FG a costly joke.
The FG is aware that Nigeria as a member of the Organisation of Petroleum Exporting Countries, OPEC, and the weakest member, is bound by the decisions of the cartel on quota. Long before the first figures were written on the 2020 budget, the Nigerian National Petroleum Corporation, NNPC, and the Ministry were aware that an OPEC decision on quota was on the way and it would result in sharp reductions of production and export for all members. So, why adopt a figure like 2.1mbpd when it will never be achieved?
“Insanity is doing the same thing over again and expecting a different result”, according to the Chinese.
The Executive branch had been using 2.3mbpd as the base figure for budgets since 2009. Not once had Nigeria been able to export that much in ten years — not even during 2010 to 2013 when crude oil enjoyed a revival in the global market. But, the high price of crude more than made up for the negative variances in volume exported. But, all that changed in 2014 and it has been a great struggle for crude which has become almost intractable.
Budget expert understand that it is always fatal to stubbornly stick to a revenue estimate long after it has become clear that it no longer makes sense. For 2020, adopting 2.1 mbpd is not merely stupid, it almost amounts to a needless joke.
The report that Nigeria has now been limited to only 1.77 mbpd by OPEC obviously makes nonsense of the budget and the MTEF which were based on the figure now discredited. The inevitable acceptance of our sad fate by the Honourable Minister of State for Petroleum Resources has now thrown the entire budget and MTEF into the dust bin. So, why are lawmakers, presumed to be serious and sane still waiting for a document which was dead before arrival? That is bad enough. While the FG had been wasting everybody’s time with a N10.002trn budget which is grossly unrealistic, the jokers in the red chamber, as the Senate is called, had done something more bizarre. They increased the budget to N10.729trn. To say that it does not make sense is to be extremely polite. To call it lunatic will be regarded as abusive. So, we call it comical. That estimate is still based on crude oil shipment far in excess of what Nigeria will be allowed next year. The question to the Senate President and his colleagues in the Senate is: how do they propose to raise the funds? To demonstrate to them that the N10.729trn proposal is off the pale one only needs to point out two facts which are historical and irrefutable.
First, Nigeria never earned enough income from crude even when the price of crude was over $110 per barrel. Certainly, we cannot expect to generate oil revenue sufficient to fund a N10.729trn budget at $60 per barrel. Second, the Senators only have to ask the NNPC and they would have been told that the oil revenue this year is well below 2.1mbpd. And, prospects for oil exports for this year are expected to be better than in 2020. So what can possibly justify the increase by the Senate?
There is only one reason and it is not flattering to our self-image. We are led by politicians who are the least intelligent in the entire world. We already know that we are the most backward race in the world. We also know that Nigeria has the largest collection of black people on earth. Our leaders reflect our lack of global level intelligence. Now, before you take exception to that reflect on this.
Both the current Senate President and the Speaker of the House of Representatives had been in the National Assembly for years. One failed budget after another had passed through those two chambers in those years. What the ridiculous annual budgets have had in common had been the annual over-ambitious targets for crude exports. No parliament with intelligent people will make the same mistake three or four times in a row. The NASS had repeated the same error of passing budgets containing the same absurd estimates for more than eight years. That should tell you the sort of people who are leading us; and leading us into the dust bin of history.
Take it from me; nobody will implement the 2020 budget because what Buhari will place before the NASS will be a colossal joke; and not a funny one.