2009 Budget: A Grope In A Time Of Global Recession – by Alabi Williams (Guardian)

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GUARDIAN

 

Sunday, December 21, 2008              

2009 Budget: A Grope In A Time Of Global Recession
By Alabi Williams,
Assistant Political Editor

FOR most people, one of the major challenges of the coming year would be the implementation of the proposed 2009 budget. There are fears, that in spite of the posturing by members of President Umar Yar’Adua’s economic team and the filibustering in the National Assembly, the country is gradually inching towards another period of economic hardship. Except that, having been in one form of recession or the other for more than two decades, nothing seems to be new anymore.

The last time Nigerians witnessed the fallout of a global economic recession, similar to that which is unfolding, was during the Second Republic under former President Shehu Shagari. The politicians of that era were largely oblivious of the handwriting on the wall, about which, opposition leader and presidential candidate of the Unity Party of Nigeria (UPN) in the 1979 elections, Obafemi Awolowo, had predicted.

By the middle of 1981, a fall in the prices of oil in the global market had caused a drop in revenue. The popular economic terminology used to explain that situation was that there was glut in the oil market. Producers of crude oil were rushing to export everything and the market was saturated. Unfortunately, there was no fiscal discipline among the politicians of that era to formulate interventions and quickly cushion the effects. While that government read out belt-tightening austerity measures for the populace, the politicians’ ostentatious taste had hit the roof.

The handlers of the economy did not see any relationship between low revenue and high spending. Government continued to borrow heavily to finance the stream of industries in the steel sectors of Ajaokuta, Aladja, Jos, Oshogbo and Katsina. The National Assembly at that time was too involved in politics, to be able to separate loyalty to the party from their duty to save the country. They did not monitor government’s unbridled spending. River basins were sunk all over the place and acres cleared to accommodate the pet projects of the ruling party-Green Revolution and housing for all.

By 1982, the debt profile of government had soared menacingly, and the country’s financial credibility abroad was threatened. The prices of household goods skyrocketed and rationing of staple items became a fashion in most homes. When the Military ousted the civilian regime on December 31, 1983, Soldiers broke into warehouses and food items (essential commodities) were auctioned to jubilating crowds. But that did not solve the problem, because even the military multiplied the economic woes, as the Naira never recovered meaningfully. From Shagari’s austerity measures to the Structural Adjustment Policy (SAP) of the Ibrahim Babangida era and the subsequent devaluations and vandalisations that followed, a new economy woe was inflicted on the people.

Today, a substantial percentage of the people do not recall that once upon a time, the country had an economy that was healthy in the eyes of the common people, not just in the calculation of government officials. That is what recession can do to an economy when planning is upside down.

THE 2009 Budget was late in coming. No thanks to the global recession; and the fluctuating price of oil in the international market. Beside that excuse, government was unable to put its act together and it soon turned into a ‘blame game’ between the NASS and the Presidency. When the delay began to rob off on government’s integrity, Presidency sources claimed the budget was ready, but that the National Assembly was not ready to receive the President. At the NASS, the impression given was that, the two arms needed to harmonise some grey areas in order to facilitate passage of the budget. The question nobody answered was, whether it is possible to harmonise differences over a budget that had not been presented; and if the committees in charge of appropriation/finance actually worked behind the scenes with the Presidency, how come there is disharmony between what was read to the joint session and what the Senate later discovered to be discrepancies?

The only plausible explanation for the delayed presentation had been the forwarding of a list of ministerial nominees by the President for clearance by the legislature. Under normal circumstances, ministers and heads of agencies and departments are the ones who would defend their budgets before the NASS. But what happens when there are no ministers to defend budgets of their ministries and departments?

When President Yar’Adua finally presented the budget on December 2, he was frank to admit that the changing international oil market poses grave concerns for the country’s fiscal outlook. He said.” The global financial crisis has led to slowing growth across the world’s economies, resulting in lower demand for commodities, especially oil. While speculative investment activities had helped buoyed oil prices in recent months, the reality of the global recession is beginning to be fully appreciated across the globe and more poignantly in Nigeria by its adverse impact on the international price of oil.”

He then presented a budget of reality, calling to mind, how good the global oil market had been, reaching the heights of $147/barrel in July and crashing to less than $50 in recent weeks.

The aggregate expenditure for 2009, according to Mr. President is, N2.87trillion, comprising N140.7billion for Statutory Transfers, N283.6billion for Debt Service, N1.649trillion for Recurrent (Non-Debt) Expenditure and N796.7 billion for Capital Expenditure, based on the assumed benchmark oil price of US$45/barrel and forecast production of 2.292mbpd. The budget also has inbuilt excess expenditure over income to the tune of N1.09trillion. This is a record deficit in the history of budget making.

Beyond the figures and the philosophy underlying the proposal, there is doubt out there, over the capacity and speed of government to implement the budget according to its letter. The disastrous outing regarding the 2008 budget does not inspire confidence in this government. This is further underscored by the refusal of the NASS and the Finance Ministry to admit that they had failed to live up to the people’s expectations.

Former Finance Minister, Shamsudeen Usman had blamed the failure of the 2008 budget on a number of factors, notable of which is the delay to get the budget passed. The Budget did not leave the NASS until April 2008. That suggests that, it was the legislature that caused the delay. The Senate in turn blamed the Executive for the delay and the failure to implement the budget.

The President has promised to work harder than he did with the 2008 budget, out of which only N178b was spent of the N785b proposed to execute capital projects in the outgoing year. This is despite the release of 100per cent capital vote to the Ministries, Departments and Agencies (MDAs). The question is; what were the ministries doing with all that money while ordinary Nigerians went through harrowing pains in the hands of Power Holding Company of Nigeria (PHCN) and the contractors who had abandoned the roads since December 2007, simply because government refused to pay them? The Senate reminded Shamsudeen Usman that even the supplementary appropriation it passed in September, with the promise by the Executive to use it to critically intervene in key sectors is yet to be implemented.

These are gross violations of the Appropriation Act, far worse than the virement offences for which the previous legislature threatened former President Olusegun Obasanjo with impeachment. The blame is squarely on the shoulders of the legislature. The powers to call to the Executive to order is vested in the parliament, but whether these law makers will protect the common from the repeated failure of government is a matter which a full-blown economic recession would make unavoidable.

THE Senate has passed the 2009 budget with significant amendment. The speed with which it carried out that assignment does not inspire any confidence, because the real challenge is to see the budget implemented. The House is taking its time to scrutinize the details. Already, objections are being raised by the South-south caucus in the House. Members last week rejected the allocations to the Niger Delta Development Commission (NDDC) and the Ministry of Niger Delta in the 2009 budget. They are asking for the payment of six years’ arrears of monthly allocations worth N300 billion due to the NDDC since 2003. The caucus demanded that statutory transfer to the NDDC should be raised to N107.4 billion in 2009. There are likely to be further engagements as the budget goes back to the Presidency. Budget 2008 was a ping-pong affair between the two arms, yet nothing was done with it.

Each time the President’s economic team is summoned by the legislature to explain their failure the law makers get overwhelmed by theories of how the economy is doing well. Can an economy do well in the midst of unspent budgets, helplessly bad roads, unabating insecurity, frustrating power-outages and a collapsed manufacturing sector? Or have they forgotten that Nigerian markets have become trading outposts for oversees manufacturing firms? Budget 2009 will truly show whether President Yar’Adua and the National Assembly want to move the country forward or in the reverse direction.

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