By Dele Sobowale
“Are you better off today than in January 2021; or for that matter in January 2015?”
That was a question posed to several Nigerians I met from December 1 to December 31, 2021. The answer was unanimous. “No”. Buhari and his spokesmen, spokeswomen and other apologists can say what they want, but, the Nigerian people feeling the lashes of their governance know how terrible their lives have become since 2015.
The majority of the people still reeling from the usually joyous Yuletide festivities, which last month were plunged into repugnant ruins — no money, no Father Christmas, the Zenith Bank structure at the Victoria Island stood virtually empty and no carnivals or Carols. One woman cried throughout her narrative of previous Christmas seasons compared with the 2021. “Our children have been robbed of a great experience.”
What to expect from 2022 budget
“Everybody has a stream of tendency…”
Oliver Wendell Holmes, 1841-1935, US Supreme Court Justice.
When forecasting the future, it is generally advisable to look at the major actors, especially the most influential, on stage. An annual budget is a reflection of the character, the vision, the capability, the knowledge and intelligence of the President or Prime Minister presenting it to parliament. Every annual budget reflects his grasp of economics and ability to manage.
Nigeria has been governed by Buharinomics since 2015 and the results for the last six full years are already with us. The same Buhari, totally unchanged, will manage the seventh full year in 2022. Can anybody honestly declare that he expects anything different from the past? Just in case, there are still some self-deluded believers in Buhari’s ability to deliver on the promises contained in the budget, here are a few things to consider.
First, we are off to a bad start. As usual, the major revenue earner, in dollars and naira, remains crude oil. And, again as usual, the 2022 Budget reveals a government which does not learn anything from the past – even its own past mistakes. The budget is based on 2.1 million barrels per day. This is unrealistic for several reasons; but two will be sufficient.
Nigeria has not been able to produce 2 million barrels per day consistently since 2013. Only once was it possible to produce 2mbpd in over eight years. Fact-based analysis would have suggested that it was wishful thinking to expect that level of output for 2022. Furthermore, Nigerian oil rig count is down. Operating rigs can at best produce 1.8 mbpd. Rigs are not units you can turn on or off as you like. For the country to be able to produce 2mbpd, more rigs will need to be re-started. Nobody is in a hurry to do that.
Even a sudden rise in global demand for crude oil will not confer much advantage to the country; as long as rig count remains low. Rigs have become the major limiting factor to the successful implementation of the budget for 2022 – apart from another element demonstrating incompetence.
Obviously, the negative variance on crude oil revenue – dollars – started two days ago and might again continue until December 31, 2022.
Several unwanted repercussions will follow from missed crude oil revenue target. The most apparent will be difficulties experienced in paying debt, funding the domestic need for foreign exchange, making good on agreements with doctors, ASUU etc and paying salaries. Ultimately, the actual deficit will exceed the budgeted amount and Nigeria will have to borrow more later in the year than what the National Assembly approved. We will end 2022 more heavily indebted than we have been told in the budget because Buharinomics is premised on “borrow-and-spend” policy as the bedrock of economic management.
It has probably never occurred to Buhari and his team that there is such a thing as diminishing opportunities. The more you borrow and increase the debt burden, the less your opportunity to obtain loans at favourable rates. Each new creditor must factor in the chances of default. Buhari must believe that Nigeria’s ability to borrow is infinitely elastic. Listening to the Finance Minister declaring that we must borrow, without stating how to repay, is enough to make economists, finance experts and bankers hold their heads in horror. They cannot even learn a lesson from the predicament of debtors now caught in AMCON’s net. They too had to borrow. They just did not know when to stop.
Foreign Exchange crisis will persist because the FG will not earn enough dollars to fund its own budget. The private sector, which made desperate appeals to the Central Bank of Nigeria, and the Manufacturers Association of Nigeria, MAN, which sent a begging team to Aso Rock might as well stay home. As lawyers say “You can’t give what you don’t have. Buhari will have very little foreign currency to give anybody. His government will not have enough for its operations in 2022.
Not once since the 2016 budget was the FG able to generate, internally, the revenue expected from the Ministries, Departments and Agencies, MDAs. Despite that, no single organisation remitted all the funds as required by the Treasury Single Account in place. The Nigeria Ports Authority, NPA, was probably the second worst agency of government – after the Nigerian National Petroleum Corporation, NNPC, judged on failure on remittances.
Its immediate past Managing Director, who was quietly eased out, flouted the regulations so openly as to embolden others to withhold public funds. Meanwhile, the FG went around the world begging cap in hand to borrow funds withheld by favoured subordinates. Nothing suggests that there will be stricter control in 2022. On the contrary, with Buhari knee-deep in 2023 politics, things are likely to get worse.
Subsidy time bomb
Buhari missed the opportunity to slay and bury the monster called “fuel subsidy” immediately he was inaugurated in 2015. He should then have placed fuel under open import licence. Government would have had three basic responsibilities – quality control, safety and collection of VAT. Price setting would have been left to the private sector. Either on account of desire to “please” the masses, or lack of courage, he chose to retain subsidies for six and a half years. It was a blunder; for which the country will pay dearly this year. Irrespective of whether he removes or retains subsidy, the consequences will be grave for the country. To be candid, it is not clear which will be more explosive. But the two are potentially dangerous; and could make budget execution extremely difficult.
The major pillars of every annual national budget remain the same in 2022 as in previous years. Governments always have excuses to give for failure. Sometimes, they make totally false declarations which can be easily disproved. The following facts are however beyond dispute.
From 2016 to 2021, the Buhari administration failed to achieve its targets on the following: gross revenue, exchange rate, GDP growth, deficit and employment generation. Instead, each year, more people went below the poverty line and Nigeria’s debt burden increased.
Nothing suggests that the 2022 experience will be different. We have the same team, the same leader and the same tendency to always borrow.
Still, let me wish you and your loved ones a prosperous 2022.