Sobowale On Business

February 21, 2022

Tear up the 2022 Budget, start praying

2024 Budget: LCCI calls for improved capital expenditure performance

By Dele Sobowale

“As a people normally gets the government it deserves, so a society normally receives the punishment it asks for.” — Robert Audrey, in Social Contract

All at once, we seem to be suffering from a plague of sorts in Nigeria. One is destroying our cars and pockets with adulterated fuel. The other, we are discovering to our national sorrow, has been a mole for organised crime syndicates in the top levels of the Nigerian Police establishment.

It is difficult right now to determine which would turn out to be worse for our economy in the end. The situation of things represent our punishment when we voted for Buhari. However you look at it, one word links them — CORRUPTION. By now, the only people left who have not accepted the fact that the FG has lost the fight against corruption are the self-deluded inhabitants of Aso Rock.

On Saturday, January 1, 2022, I published several predictions about what Nigerians should expect this year. Among them was the following: “Forget the 2022 Budget; it will never be implemented.” I also projected a tougher year than what we suffered in 2021. We are less than two months into 2022 and President Buhari has shredded the Budget. Here is how.

“Buhari requests N2.55tn supplementary budget for subsidy from NÁssembly.” — News Report, February 16, 2022.

Here, in part, is the letter from Buhari to the National Assembly:

“An additional provision of N2.55tn will be required to fund the petrol subsidy in 2022. Consequently, the Federation Account (main pool) revenue for the three tiers of government is projected to decline by N2tn; while the FGN’s share from the account is projected to reduce by N1.05tn.”

 With that request, which is certain to be granted by the NASS, the 2022 Budget went down the shredding machine. All the man hours and funds wasted in preparing the now worthless document will never be known. But they represent the punishments we asked for in 2015 and 2019. More lashes are on the way.

“FG, states set for showdown over planned N950bn FAAC deductions.”

It is not only the FG which will suffer from reduced revenue this year. States will also feel the impact. That portends unrest in most states; most of them are already stretched to the limit. A decision made to continue subsidy by the FG is now causing collateral damage to states’ finances. Trouble is on the way.

CBN announces imminent forex scarcity

“Banks forex ban: Dollar scarcity, inflation, firms’ closure imminent, experts say” —News Report, February 14, 2022.

The Governor of the Central Bank of Nigeria, CBN, had on February 10, 2022 announced that banks will no longer be allocated foreign exchange by December this year. Banks have been advised to meet their foreign exchange needs from export proceeds. The banks, having no choice over the matter, really don’t need the advice from Mr Emefiele. They have been cast adrift; and should be left alone to source their foreign exchange by any legitimate means. More trouble.

Obviously, with doors slammed in the faces of banks, Bureaux De Change, BDCs have also had the gate shut on them. But, make no mistake about it, most of them will not go out of business. Only the exchange rate will climb up for reasons not too hard to understand.

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Although the CBN can claim that the long term notice will enable banks and BDCs to adjust to the new policy, it has inevitably invited pervasive hoarding of dollars – starting right away. Banks, not too certain of the future, will naturally seek to conserve what is available now. Only the top, prime customers and those with domiciliary accounts can be sure of attention. Most other customers face harsh times. More severe scarcity of dollars started as soon as the CBN finished its announcement. Imports-induced inflation will add to the causes of inflation nationally. Unfortunately, that is not the only cause for worry.

Enter economic arsonists

“Stations run out of petrol, scarcity paralyses states.” —Report, February 17, 2022.

When this year draws to a close, economic historians might point to February as the month when the Budget, and by extension, the Nigerian economy was ruined.

The nation’s economic programme and hope for recovery was set on fire by a large stock of adulterated fuel imported into the country, whose Minister of Petroleum is one Muhammadu Buhari, GCFR. Some people, whose cars’ engines were damaged, have already been ruined by the FG. Only a fool will believe the empty promise of compensation. So many obstacles will be placed in the way of victims to frustrate them. In the end, any amount set aside for redress will be corruptly embezzled. We are dealing with an FG whose officials ignore audit queries after misappropriation of funds; and nobody is punished.

Furthermore, nobody should believe the assurances that the importation was not deliberate. Nobody who has ever been engaged in large scale importation of goods can believe that nonsense. First, there is invariably pre-shipment inspection to ensure quantity and quality of the consignment. Then, there is pre-offloading inspection to ensure the consignment is intact. It is impossible for the two inspections to fail to detect the adulteration – without collusion by officials of government.

 Now, we are told that normalcy will return next week with regard to supply. But, the unnecessary disruption of supplies has already set in motion an inflation spiral which will continue for much longer. Those forced to abandon work and go in search of petrol will feel the impact well beyond February.

Rising inflation is certain

The National Bureau of Statistics, after announcing a slight drop in inflation for January 2022, has been quick to point out that inflation will rise in February; but, the NBS has not also informed Nigerians that as prices rise in the aggregate, their purchasing power will decline faster. As purchasing power plummets, more people will dive below the poverty line.

One question I am frequently asked by people is: why are we not feeling the impact of rising global price of crude oil – which is now about $95 per barrel? Two cardinal reasons account for this sad situation. First, the 2022 Budget is based on 2.3 million barrels per day, mbpd. Nigeria now produces only about 1.5mbpd officially. But, a lot of Nigerian crude is stolen by syndicates enjoying protection from security agents. Second, as the price of crude goes up, the landing cost of fuel also rises. Between low production of crude and higher cost of fuel, Nigeria is not benefiting from high crude price.

The CBN is aware of our inability to take advantage of higher crude prices, on account of low rig count. It is also aware of the inevitable increase in fuel subsidy expenditure; which leaves very little balance in external reserves. The CBN is only being pro-active by announcing the new foreign exchange policy which unfortunately will result in factory closures and more unemployment.

It is time to tear up the 2022 Budget and start praying.

Making mountains out of molehills

Nigeria’s population is 200 million; China’s is 1.4 billion or seven times our own. Nigeria reportedly produces 7 million metric tonnes of rice; China 402 millionmetric tonnes or 57 times our own. Top Chinese officials don’t make mountains out of their output of rice. Top Nigerian officials in designer suits stood in front of our molehills in self-congratulation. Celebrating failure will certainly never lead to success. The retail price of rice in China has not risen more than two per cent in five years. The difference in leadership is clear.

Vanguard News Nigeria