The Deficiencies in the 2020 Budget
“AS A MATTER OF URGENCY, GOVERNMENT NEEDS TO SET UP A USEFUL COMMITTEE, WHOSE PURPOSE IS TO REVIEW AND REDUCE NON-ESSENTIAL GOVERNMENT EXPENDITURE.... OR MAYBE, THIS CAN BE PART OF THE MANDATE OF THE NEWLY INAUGURATED PROFESSOR DOYIN SALAMI LED ECONOMIC COMMITTEE”
Business as Usual
“Apear tree cannot bear an apple”, just as “there’s no making apples of plums” - simply meaning, you cannot do something the ‘X’ way and expect a ‘Y’ result. Remember that, I told you that my first degree is in Economics (with a minor in Business Administration)? Even though I may be rusty, when I took a cursory look at the 2020 budget, I could not help but feel that, the aforementioned sayings, reflect the Nigerian situation rather aptly, and it is highly unlikely that there will be any real positive change in our circumstances, since the 2020 budget has shown that it is more or less, ‘a chip of the old block’, business as usual. For one, our budget on the whole, when compared with our GDP and population, is rather low, and to make matters worse, we cannot fund it. And, while borrowing may not necessarily be a bad thing, if it is done for the right reasons, like for measures to boost economic growth and create employment, it is toxic when it is done, simply for consumption purposes - because you will be unable to repay! Let me simplify it - would you rather lend money to someone to start a business or pay his child’s school fees, or to buy ‘aso-ebi’ (family cloth/uniform) for a wedding? Senseless comparison, don’t you think? But, constant borrowing by Government to fund our high recurrent expenditure, is akin to my aso-ebi example!
Deficit Budget
I’m sure that, we all know that a budget is simply a financial plan for a given period of time, in which proposed expenditures and revenues are laid out, matched against each other. Ideally, revenue should exceed expenditure - that is, ‘budget surplus’, though this also has its pros (more money available to pay off debts) and cons (reduction in economic growth and investment). However, what Nigeria has been running, is a ‘Deficit Budget’, that is, a budget in which revenue is less than expenditure, like the 2020 budget, in which the aggregate expenditure of N10.33 trillion, exceeds the expected revenue of N8.155 trillion. Government can fund the budget deficit, by borrowing - issuing Treasury bills or bonds, or outright borrowing of monies.
In basic (not exhaustive) terms, a deficit budget may be caused by various factors, including extremely high government expenditure, which exceeds tax revenues. Don’t get me wrong, high government expenditure is not always bad. Sometimes, it even leads to a direct increase in the demand for goods and services, which consequently, leads to an increase in employment and general output. But, that type of good government expenditure which I’m referring to, is capital expenditure, expenditure on infrastructure investment, industrialisation, education and so on, those things that will create jobs and yield benefits, and not the type of reckless expenditure that the Nigerian governments mostly undertake, like buying luxury vehicles for officials; paying exorbitant, undeserved, unjustifiable salaries and perquisites to members of the National Assembly; giving esta codes to unnecessarily large government entourages when they travel abroad on unnecessary trips, housing them in the most expensive hotels, inflation of contract sums, corruption and the like - expenditures that deplete finances, without adding any value whatsoever.
Some of the key ways to address budget deficit, is to reduce bad government expenditure, possibly increase certain taxes and stimulate economic growth. We all know that, the Economic Objectives set out in Section 16 of the 1999 Constitution of the Federal Republic of Nigeria (as amended)(the Constitution), are just there for decoration, and that, inter alia, contrary to Section 16(2)(c), our economic system is being operated to permit the concentration of wealth in the hands of a few individuals - Politicians, Government Officials and their cronies. If not, how, for instance, do we explain a Statutory Transfer of N127 billion to the National Assembly (NASS) in the 2020 budget, yet Government has not implemented the N30,000 minimum wage for the common man, while the defence of our nation, which has been ravaged by seemingly insurmountable insurgency and crime, gets less than NASS (N100 billion), and health, something so crucial to majority of Nigerians who depend on our useless healthcare system - since they are unable to afford anything better, gets only N46 billion (while Baba (President Muhammadu Buhari) and his family, enjoy medical tourism abroad). I’m not sure that the recipient of a statutory transfer, is even obliged to give account of how such funds are disbursed, Freedom of Information Act 2011 or not!
Cutting Costs: Reduction in the Cost of Governance and Increase in Some Taxes
In the 2020 budget, non-debt recurrent expenditure, is more than double, and debt service also exceeds the amount allocated to capital expenditure, while industry, trade and investment is a paltry N40 billion; and we truly expect there to be change and progress in our country? The measures to bridge the budget deficit gap, go hand in hand. We need more cogent, well-thought out fiscal and monetary policies, not the knee jerk policies that Government and the CBN, are presently churning out.
For example, reduction in the cost of governance, would go together with appropriate tax measures, like maybe an increase in VAT for luxury items, tax reduction or incentives for manufacturers, and not solely blanket tax increases across board, without reduction in the cost of governance, as Government is seeking to do now. Increase in taxes simplicita, will certainly not stimulate economic growth. ‘Au contraire’, it will stifle it, as it will result in there being less disposable income for the general household, less money in circulation, and reduced consumer demand, with a multiplier effect that will decrease economic growth.
However, truth of the matter is that, people are inclined to pay tax, when they see that their hard earned money is being put to good use, instead of being wasted on needless luxuries for a selected few in government. Even the common man, if he/she knows that, if they pay N1000 tax per month, for example, and this will result in their children being able to get good quality free education and decent healthcare for all, won’t the accounts of FIRS, LIRS and other State Tax Collection Agencies, be bursting at the seams with revenue? Talk less of the higher categories of tax payers.
Special Advisers?
Granted, it was not Baba and his administration, who designed our system to be what it is today, but Baba came in on the mantra of ‘change’, purportedly for the better. While I concede that, Baba cannot just decide to reduce, say the number of members of NASS and the Houses of Assembly, and that an amendment of Sections 47- 49 and 91 by virtue of Section 9(2) of the Constitution, is required for that, there are many other things that can be done, to cut the cost of governance. For instance, Sections 151 and 196 of the Constitution, give the President and Governors, powers to appoint Special Advisers - why appoint them, when the Ministries have Permanent Secretaries, who can do the same job? Meanwhile, these Advisers also come with their own retinue of needless staff, all costing the Government unnecessary expense, for what can only be described as, a duplication of efforts.
Unnecessary Institutions? EFCC v ICPC?
What is the role of the Why do we need two agencies? The Police also has the Special Fraud Unit. There’s also the NFIU. The other day, my friend told me that he had been invited to EFCC, on allegations of tax evasion. I was surprised. I asked where the FIRS and LIRS were, only to find that, indeed, the Interpretation Clause of the EFCC Act also defines tax evasion as an economic and financial crime, also under the purview of the Commission. My point? These numerous agencies do not have enough work to do, and their roles therefore, overlap. Why not streamline them and cut costs?
Salaries and Perquisites?
Why can’t government officials use the basic models of the made in Nigeria Innoson cars, which are cheaper than the luxury foreign cars that they use, so as to encourage the local car manufacturing industry and boost employment? Or like in the USA, NASS members lease vehicles, the fee deducted from their salaries on a monthly basis? Why must new vehicles be purchased every four years? I believe that British PM, Boris Johnson, is using the same vehicle used by his predecessor-in-office, Theresa May. I do not believe that British MPs are provided with vehicles. The salaries of the members of NASS and their allowances, should be reduced. In USA, national legislators are not given a housing allowance, for staying in Washington DC where they sit. Such cost-cutting moves, will make going for such elective office, less attractive, so that it will give those who truly want to serve, an opportunity to do so, instead of candidates making it a do or die affair, to get to NASS, purely for financial gain.
Other Actions
Even though my analysis is just a very basic overview (I would require the whole edition of this publication and more, to give a proper in-depth analysis), the bottom line is that, no matter what policies Government churns out to improve the economic situation in Nigeria, if the issue of our extremely high recurrent expenditure is not addressed, such policies may be in vain. As a matter of urgency, Government needs to set up a useful Committee, whose purpose is to review and reduce non-essential Government expenditure. In USA, in the 1940s, they had the ‘Byrd Committee’, a bipartisan Committee with a “narrow focus of making rescissions in Federal spending”. This Committee can work hand in hand with the newly inaugurated Professor Doyin Salami led Economic Committee. Furthermore, it is time to start to harness many of the untapped natural resources which Nigeria has been blessed with, in a bid to expand our sources of revenue. It is time to take a more in-depth look at the Nigeria Export Promotion Council (NEPC)’s ‘Zero Oil’ Proposal Plan, and other similar initiatives, with a view to implementing those that show promise. There also needs to be good transparency initiatives on the award of Government contracts, in order to cut waste and corruption.
Government, take out the 'iroko' from your eye, before you see the 'little Mr Akpan' in my own! That is, "Thou hypocrite, first cast out the beam (of excessive, wasteful spending, corruption and incoherent policies) out of thine own eye; and then shalt thou see clearly to cast out the mote out of thy brother's eye!"(Matthew 7:5).