The 2021 Budget as a joke (1)

The 2021 Budget as a joke (1)

President Muhammadu Buhari presenting the 2021 budget to the National Assembly.

By Dele Sobowale

We do many things at the federal level that would be considered dishonest and illegal if done in the private sector” – Donald T Regan, 1986.

Donald Regan was US  Secretary of the Treasury (equivalent to our own Minister of Finance), from 1981-85 and Chief of Staff from 1985-87 for the Reagan administration. He was familiar with all the dishonest measures of the US federal government which, if engaged in by an individual, will brand him a fraudster or 419er. The Nigerian FG is not only just as guilty but operates with far less restraint than the US government. Add our National Assembly, NASS, invariably accomplices in the budgetary crimes and the Three Arms Zone of Abuja constitutes a greater peril to our economy.

The quantum of funds mismanaged in Abuja will make all the acclaimed criminals appear benevolent. Every subsequent wrong stems from the way budgets are packaged by the FG and approved by the NASS. Virtually every entry is false and known to be so.

President Buhari presented what was announced as the 2021 Budget to the NASS, on October 8, 2020. It was a terrible joke. This article might as well be titled FG PRESENTS ANOTHER DUD CHEQUE TO NIGERIANS and it will be just as apt.

Budget 2021 incorporates all the faults of the previous five failed budgets – 2016, 2017, 2018, 2019 and 2020. And, this latest demonstration of incompetence at budgeting, added a few more to ensure that it will never be implemented. By the time Buhari presents Budget 2022, we will all see clearly why this budget represents more than a disservice to the nation. It is almost a crime against Nigerians. If a man had spent the last five years promising more than he could deliver, Nigerians would by now have several unprintable epithets with which to describe him if he announces a sixth attempt at mass deception.

“You can fool some of the people all the time.” That was the observation of a late American President. He must have had a nation like present day Nigeria in mind. And some of the people annually misled are the members of the NASS, who assume that because it is their party leader who is presenting the budget, they are duty bound to endorse a bogus document. 

The blind leading the blind is bad enough. A government of the blind leading people with good eyes, in Abuja, is one of the greatest absurdities of the world today. Show me a NASS member who actually believes that this budget will work and I will show you an economic illiterate who should not be representing any Nigerian.

Before the rubber stamp NASS passes the budget, let me provide five cardinal reasons why it will not work: aggregate expenditure estimates, debt burden and servicing, capital expenditure, poverty alleviation and timing of funds release. One can easily add agriculture, manufacturing and lingering impacts of COVID-19. But, the five are more than enough to prove the points made here. As usual, although I can make all the observations myself, it is always better to bring third party evidence – bearing in mind the tendency of the Presidency to instigate comical rejoinders.

“Buhari put aggregate expenditure at N13.08tn..,,debt servicing [would gulp] N3.12tn..The 2021 budget deficit…is projected at N5.20tn,  representing 3.64 per cent.”    The projected expenditure is partly based “on daily crude oil production of 1.86m and oil price of $40 per barrel.” President Buhari, October 8, 2020.

Longer before Buhari, the FG had presented annual budgets based on daily production and export of crude oil far in excess of what historical trends or objective future forecasts would suggest.

Since 2011, two of our associates had requested from us projections of Nigerian crude oil production and export. Even, globally acclaimed Dr Ngozi Okonjo-Iweala, sadly, had succumbed to political pressure by the Jonathan administration. Budgets for 2012 to 2015 were premised on 2.3mbpd despite annual warnings from us. Not once in four years was Nigeria able to export 2.3mbpd of crude. Yet, the Jonathan government persisted in deceiving itself and Nigerians for four years. It was a blunder. 

While Jonathan had at least two world-class economists in charge of its Economic Management Team, Buhari, right from the start, till now, had been lacking such global financial experience. It has been extremely easy for them to rely on base sentiments when deciding that basic but most important variable when deciding crude oil production and export. For instance, it is a fact that Nigeria, based on agreement with OPEC, is honour-bound not to exceed 1.7mbpd of crude well into the first quarter of next year. Furthermore, as 2020 is coming to a close, Nigeria’s exports of crude have averaged less than 1.5mbpd. Experienced and objective managers anywhere will never ignore historical trends and known future certainties when preparing their budgets as Buhari’s government had done for six years in a row.

Just as Jonathan’s administration failed to reach the target in five years, Buhari’s will again fall short for the sixth year in a row – unless a major disruption to global oil supply occurs. No nation’s leaders should gamble and lose repeatedly with the lives of the people.

Those who fail to remember history, including their own, are condemned to repeating its mistakes. Unfortunately, crude oil revenue shortfall is not the only problem we have experienced since 2015. With expenditure projected at N13.08tn and deficit of N5.12tn expected, the FG was deliberately evasive about the anticipated revenue for 2021. The figure derived is N7.96tn or 60.85 per cent of expenditure. Close to 40 per cent of projected expenditure will have to be sourced from elsewhere, other than government operations.

Once again, we are faced with the analogy of the family head who regularly promises more than can be delivered and frequently fails to redeem his promises. Dud cheques follow.

Since 2015, the FG has failed to generate the revenue budgeted for each year. As we crawl to the fourth quarter of 2020, the actual income of government will most likely not exceed 62 per cent of this year’s estimates. Again, experienced and honest managers base their future projections on trends in the previous five years. So, it can be reasonably assumed that the FG will not generate N7.96tn in 2021; but more likely N4.8tn. The 3.2tn negative variance will comprise of lower receipts of crude oil revenue, remittances from Ministries, Departments and Agencies, as well as Value Added Tax, VAT, etc.

This had been the pattern for five years and nothing suggests 2021 will yield a different result. So, though not specifically stated in the budget presentation, the implied Internally Generated Revenue, IGR, remains very unrealistic.

Here is third party evidence.

“Earlier…, Fitch Ratings….said that the rate of Nigeria’s sovereign debt could trigger a downgrade as government battles to raise revenue amid depleting earnings and low prices…” DAILY INDEPENDENT, OCTOBER 12, 2020.

For those still doubting that objective financial experts are unanimous in their verdict that the FG’s estimates are unrealistic, here is more proof.

Dr Muda Yusuf, Director General, Lagos Chamber of Commerce and Industry (LCCI), in response to the proposed expenditure of N13.1trillion, in 2021, said, “…revenue projections seem optimistic, having regards to revenue performance over the last few years. We have witnessed large negative variances in revenue targets over the last few years. This poses a risk of bigger deficits than projected.”

The safest assumption is that large negative variances will continue into 2021.

To be continued…