2019 Budget low, built on shaky foundation, says Atiku

The Presidential candidate of the Peoples Democratic Party (PDP), Alhaji Atiku Abubakar has faulted the 2019 Appropriation Bill presented to the nation by President Muhammadu Buhari, describing it as abysmally low compared with the Population and based on a shaky non- performing current 2018 budget. He said the proposed budget as presented is fundamentally flawed and that it deliberately ignores and fails to address current realities and pretends, as Mr. President asserts, ‘we are on the right direction’. President Buhari had last week Wednesday presented to the National Assembly the 2019 Appropriation Bill proposes an aggregate expenditure of N8.83 trillion of which N4.04 trillion is recurrent, N2.31 trillion capital and N2.14 trillion will be devoted to debt service. Atiku had in a statement on Sunday said the planned spending is lower than the 2018 budget by N300 billion stressing that its real value is N7.95 trillion should 11% inflation rate be considered. The former vice president argued that the 2019 budget is built on very shaky foundation and makes very generous, often wild and untenable assumptions which pose significant risks to its implementation, adding that it will be a disservice to the country if we ignore these fundamental flaws. “Several inaccurate claims litter the budget document – all, I think, in an attempt for Mr. President to whitewash the regime and hide their monumental failure to improve, even minimally, the welfare and living standards of much of the population. I see the rhetoric of ‘inclusive, diversified and sustainable growth’ as no more than an amplification of the APC-led government’s renewed propaganda to hoodwink the citizens into believing that there is ‘light at the end of the tunnel’. “Few of these claims by Mr. President are that ‘we have recorded several successes in economic management’, that ‘the economy has recovered from recession’, that ‘foreign capital inflows including direct and portfolio investments (have) responded to improved economic management and that ‘we have had a sustained accretion to foreign exchange reserves’ etc. “In reality, the economy is yet to recover from the 2016/2017 recession as it remains severely stressed, extremely fragile and vulnerable to external shocks. GDP growth declined from 2.11% in 2017 to 1.9% in Q1 and to 1.5% in Q2 of 2018. In Q3 of 2018 there was only a marginal increase of 0.3% to 1.8%. As a sign of the weakness of the economy, he said rate of unemployment has increased from 18.8% in 2017 to 23.1% in Q3 of 2018 and that today, close to 20 million people are unemployed compared to 7.2 million people in 2014. “These high rates of unemployment represent both a significant distortion in the economic system and a lost opportunity for critical national development and could potentially threaten social stability “Sadly, Foreign Direct Investment (FDI) is limited and is declining. In Q3, 2018 capital inflows were US$2.855.21 billion showing a decrease of 48.21% compared to Q2 2018 and 31.12% decrease compared to Q3 2017. Indeed, its current level is the lowest since Q2, 2017. Value of Foreign Portfolio recorded at US$1.7 billion represents a decrease of 58.2% compared to Q2 2018. It also represents a 37.7% decrease compared to the Q3 of 2017. Atiku said Nigeria remains an uncompetitive economy as demonstrated by the recent World Economic Forum (WEF), Global Competitiveness Index which positions Nigeria as 115th of 140 Countries. He said the Report shows that Nigeria has moved three places down, contrary to Mr. President’s claim that ‘we are moving in the right direction’. Nigeria remains one of the most difficult places to do business as evidenced by the massive outflows of capital in recent times. He doubted if the 2019 budget can place the economy on the path of inclusive, diversified and sustainable growth in order to continue to lift significant numbers of our citizens out of poverty as claimed by the President The presidential candidate proceeded to give 6 reasons why the 2019 budget it cannot. “First, the 2019 is built on a very shaky foundation. It seeks to consolidate on the ‘achievements’ and ‘successes’ of the 2018 budget. “However, the 2018 budget was itself poorly implemented. Actual revenue collected was only N2.84 trillion (as at September 2018) against projected revenue of N7.17 trillion. This implied that as at September 2018, only approximately 40% of projected revenues were realized by the Federal Government. Similarly, by December 14 2018, only N820.57 billion was released for capital spending out of a projected expenditure of N2.652 trillion. This implied that only 31% of the capital budget was implemented. This would impact negatively on growth, jobs and poverty. With such a dismal budget performance, the economy would NOT have had the capacity to grow, generate wealth and jobs. “Secondly, the 2019 budget is a business as usual budget. The Federal Government keeps repeating the same mistakes BUT expects different results. For example, although the current resource position remains precarious, government does not intend to introduce significant fiscal restructuring. Thus, in spite of dwindling revenues, subsidy on PMS will continue (US$1 billion is budgeted for that); Government does not intend to introduce any reforms in the foreign exchange market as multiple exchange rates will be maintained – thus given away between ₦300 billion and ₦800 billion to opportunists, rent-seekers, middlemen, arbitrageurs, and fraudsters; and finally, the budget is overwhelmingly recurrent, with capital spending taking the back seat. Thirdly, 2019 Budget is based on grossly exaggerated assumptions. They are NOT able to put in place any coherent and comprehensive policies to give hope that these assumptions can be met. “For example the Oil price benchmark has been pegged at $60 per barrel and domestic oil production will be maintained at 2.3 million barrels per day. Of recent, the oil market has been turbulent and Brent Crude sells at less than US$60. There are projections of over-supply resulting from US shale production and pressure on Saudi by the US not to cut production. With regards to local production, we all know that throughout 2018, average production was 1.95 million barrels per day. Indeed, the latest report from OPEC suggests that Nigeria will be required to cut production to 1.65 million barrels per day. This implies that revenue targets to implement the budget will not be met. “The most laughable assumption is that real GDP will grow at 3.01 percent. When indeed, GDP growth has been sluggish, with a projection of 1.9% in 2019. The government cannot cut spending and expect the economy to grow. “Fourthly and very fundamentally, 2019 Budget is very small. The size of the budget is not sufficient to stimulate growth of the economy, create jobs and alleviate poverty. The planned total expenditure of N8.83 trillion is lower than 2018 budget by approximately N290 billion. The Federal Government is contracting the economy whereas in a period of recession, governments MUST spend more to have meaningful impact on jobs and poverty. “The budget is also very low in relation to the size of the Nigerian economy, which is estimated at approximately N150 trillion. This means that the 2019 budget is barely 6% of GDP. (Compare Bangladesh 15.30%, India 12.74% and Afghanistan 11.9% in 2017). Again, this will have no meaningful impact on jobs and poverty. “Fifthly, Nigeria’s fiscal crisis persists and fiscal position of the Federal Government, and by extension, the states and local governments remains precarious. First, projected revenues of N6.97 trillion are 3% lower than 2018 and second, the oil sector continues its dominance as it contributes 54% of the budget revenues. The non-oil sector is expected to contribute only 20% of the budget revenues. There are no coherent and comprehensive plans to expand the resource horizon of the Federal Government. “As a result of the brewing fiscal crisis, budget deficit remains high at N1.86 trillion. This is equivalent to 21% of the budget and 1.3% of GDP. The implication is that the Federal Government will need to borrow more in 2018 to implement the budget. Debt Service is already putting a strain on government revenues. The sum of N2.14 trillion has been provided for debt service. This means that 30% of projected revenue will be used in debt service. “Six, as has been with previous budgets, recurrent costs and debt service will take a lion share of the budget as against capital expenditure. Capital expenditure will be only 23% of planned expenditure. On the other hand, 24% of the budget will be spent on debt service and 46% on overhead and personnel costs. Thus over 70% of the budget will be devoted to recurrent costs and debt service. This will not grow the economy and create jobs From the foregoing, he submitted that ” it is therefore putting it mild to say that the 2019 proposed budget is not developmental, will not pull Nigeria from the abyss and may, indeed accentuate the misery and hopelessness the Nigerian people have lived with since 2015″. Alternatively, he said Nigeria needs a government which understands how to run the economy in order to Get Nigeria Working Again. Fortunately for the country, the Atiku/Obi team has exactly that capacity and experience. He said Atiku Presidency, come 2019, will present to Nigerians a people’s budget that will prioritize and focus on the twin challenges of unemployment and poverty. Nigeria’s high rates of unemployment, poverty and inequality represent both a significant distortion in the economic system and a lost opportunity for critical national development and could potentially threaten social stability. “We shall disrupt and improve the budgeting process to facilitate more effective budget impact on the economy by increasing, significantly, the share of capital expenditure in the budget to a minimum of 40% in the first instance. To facilitate increased capital spending, we shall improve spending efficiency by cutting on recurrent expenses, by ensuring the judicious utilization of all borrowed funds for economic diversification and infrastructural development and by promoting more Public Private Partnerships in critical infrastructure funding”, he said. Tunde Opalana, Abuja