President Muhammed Buhari’s is proposing to spend over N6trillion in the 2016 Appropriation bill, even though government ‘reasonably’ expects to earn about N3.8trillion as revenue. Indeed, according to the budget proposals, N984bn will be borrowed in Naira from personal and corporate holders of surplus cash to fund the shortfall, while $4.5b (N900bn) will also be borrowed from the international market at the current exchange rate of about N200= $1 and prevailing commercial interest rates will apply.
President Muhammadu Buhari
In practice, a ready market for government borrowing is clearly a demonstration of investors confidence on the resilience of an economy and the ability to pay back, when the loan matures. Nonetheless some critics may recall, that we were once beguiled into an oppressive debt trap, by the popular refrain of international financial experts, that Nigeria was grossly under borrowed; the effusive flattery worked and government rapidly liberalised external borrowings until re-payment became a challenge and Nigerians were subsequently ‘bullied’ to ultimately part with about $18bn to obtain partial debt forgiveness from creditors in 2006.
Sadly, our national debt is, unexpectedly, presently more than double the $32bn debt, which was considered dangerously high with unsustainable related service charges, only ten years ago. Incidentally, if CBN’s Treasury bill borrowings are included, the present proposal for $9bn loan will propel our debt burden closer to $100bn. Furthermore, the unfortunate history of poor implementation and rampant corrupt practices may not inspire public confidence that a fresh N2Tn loan will be judiciously applied, despite Buhari’s renowned integrity factor, if Honorable members of the legislature, and their counterparts in the civil service do not wean themselves of the gluttonous appetite that comes from the pervading mindset of “ it is our time to chop”!
Clearly, a deliberate increase in total projected expenditure by over 30%, despite the dismal prospect of dwindling revenue, does not suggest best practice or responsible financial management which advises that, you cut your coat according to your cloth. Thus, it is more appropriate to adopt a balanced budget in austere times rather than a heavy commitment to further borrowing just to fund a spending spree which will not generate additional revenue, but will inevitably further compound our debt obligations to spike related service charges beyond an already precarious level. Indeed, the IMF’s Christine Lagarde recently aptly described the 2016 fiscal plan as akin to applying 35kobo out of every Naira we earn for debt service annually.
Although, the 2016 capital allocation of 30% has been celebrated as appropriate, there are real concerns that the increased expenditure, may not, as usual, be applied to critical infrastructural projects that would touch the lives of more Nigerians nationwide. Furthermore, financial waste will become grossly magnified, if the present Administration decides to commit to fresh projects with long gestations, without first identifying and completing those viable and socially supportive, ongoing projects that were inherited from previous administrations.
However, cynics may suggest that such a responsible approach to project selection and implementation would diminish the ‘beef’ in contract awards and the provision of jobs for the boys; afterall, we must remember, that not all politicians were as lucky as Buhari who did not have to sell property or obtain loans to contest elections for a lucrative stint in public office. Unfortunately, not even a contrite Buhari, who has already confessed to being shackled by the Judiciary in his anti-corruption crusade, will be able to stop desperate political buccaneers from their ‘harvest’ of closer access to easy public funds.
Nonetheless, in place of the proposed 30% deficit in 2016, the size of loans required to fund a 60% deficit in the initial N8Tn budget estimate ca