The Big Mess Called Budget 2021
ne of the highpoints of the jaundiced 2021 budget proposal presented to the National Assembly last week was a tacit confirmation that the finances of the federal government are overstrained by excessive borrowing by the Buhari government. The N13.08 trillion budget proposal sets aside N3.12 trillion for debt servicing, with N2.183 trillion going for domestic debts while N940.89 billion is for foreign debt. This same N13.08 voodoo budget has a deficit of N5.20 trillion. To block the deficit, a loan of N4.28 trillion will be obtained. Notwithstanding the 23.85 per cent of the budget going into debt servicing, the federal government’s fresh loans amount to over 30 per cent of the budget size.
Estimated revenue available to fund the budget is N7.886 trillion. This means that over 40 per cent of the revenues, if they come in fully, will be used for debt servicing. Debt servicing and new loans amount to N8.32 trillion. There is so much trickeries here; so much confusion caused by excessive borrowing. The weird economists around our President are not helping matters. A budget that will be largely funded by borrowing is definitely not “resilient,” i.e. buoyant; perhaps, they don’t know the meaning of “resilient.” This “Budget of Economic Recovery and Resilience” will simply strangulate Nigerians further because it is dead on arrival.
Any country desirous of development must place emphasis on Capital expenditure. But the reverse is the case in Nigeria. Budget 2021 is no exception. The recurrent outlay is N6.11 trillion, while the capital outlay is N3.85 trillion. This proposed recurrent outlay is almost double that of the capital expenditure. This means that Nigeria is still heavy on recurrent expenditure. So, where is the sweeping economic reform Buhari has been talking about?
The N5.20 trillion deficit in the budget proposal is another issue I find astonishing. It is beyond the three per cent threshold allowed by the Fiscal Responsibility Act of 2007 i.e. over 3.5% of Nigeria’s 2019 GDP. The law states: “Aggregate expenditure and the aggregate amount appropriated by the National Assembly for each financial year shall not be more than the estimated aggregate revenue plus a deficit, not exceeding three per cent of the estimated
Gross Domestic Product (GDP) or any sustainable percentage as may be determined by the National Assembly for each financial year.” Are those behind this budget 2021 unaware that the deficit entrenched breached the laws of Nigeria?
A worried former vice president, Atiku Abubakar, described the huge deficit and the breach of law as alarming, adding: “Even more disturbing is the fact that our GDP has fallen sharply from its 2019 figures, and has been projected by the World Bank and other multilateral institutions at somewhere between $400 billion and $350 billion. Meaning that in actual sense, the N5.21 trillion budget deficit is actually far above the 3% threshold stipulated by the FRA. That this escaped the notice of the Buhari administration shows a glaring lack of rigour in the formulation of the Budget.”
I guess our rubber stamp National Assembly will impose a dubious “sustainable percentage” of budget-to-GDP to smoothen the passage of the 2021 appropriation bill, since the law allows them to amend this sustainable percentage.
The revenue projection of N7.886 trillion in budget 2021 is equally preposterous. I fully align with the Director-General, Lagos Chamber of Commerce and Industry, Muda Yusuf, who faulted the income projections, saying they pose bigger deficits risks because the projections are too ambitious when compared with the revenue collected in the last four years of the Buhari government. Yusuf argues: “We have witnessed large negative variances in revenue targets over the last few years. This poses a risk of bigger deficits than projected. The ballooning recurrent expenditure and debt service is a case for concern. The combination of these two line items exceeds the total revenue expected. The implication is that the entire capital budget would be funded by borrowing. This, therefore, is a cause for concern.”
Amid these huge borrowing plans, budget 2021 still contains numerous frivolous expenditures. How can a government be borrowing this much, yet spending like a drunken sailor on useless things? Maintenance of the presidential fleet will gulp N12.5 billion up from N8.5 billion in 2020. The renovation of the National Assembly will take N9.2 billion. There is another N128 billion for salaries and allowances of our lawmakers and the bureaucracy of the National Assembly.
The news on personnel costs (salaries and allowances) is that it will gulp N3.76 trillion (28.75 per cent) of budget 2021. This remains the largest single item on FG’s recurrent outlay in the budget. Disbursement to federal civil servants accounted for 34 per cent of total recurrent spending in the first seven months of this year alone. So sad it will remain same in 2021. With 23.85 per cent allocated for debt servicing and personnel costs gulping 28.75 per cent, it means 52.60 per cent of the budget 2021 or N6.88 trillion will be spent on both items next year. So, what will be left for development? This is one big question begging for answer.
One thing now certain is that binge borrowing by the Buhari administration is not in the interest of this country. Nigeria’s debt stands at N31.01 trillion as at June 2020. N1.21 trillion was spent on debt servicing by the federal government in the first half of 2020 against N1.06 trillion spent during same period in 2019 thus translating to an increase of 14.6 per cent. The new borrowing plans in the 2021 budget shows this government cares less about the huge amount going into debt servicing. Very soon, Nigeria will be spending 50 per cent of its budget on debt servicing.
The National Assembly that should properly scrutinise budget 2021 cares less. The Senate has already assured the Executive that voodoo document will be passed by December. What a country!