Why the 2019 budget will fail

PRESIDENT BUHARI PRESENT 2019 BUDGET 1A-C. President Muhammadu Buhari Presents 2019 Budget at a joint session of the National Assembly in Abuja. PHOTO; SUNDAY AGHAEZE. DEC 19 2018

By Jaye Gaskia

As we approach the decisive moment of the 2019 general elections, a number of issues are emerging, re-emerging, and or are being reinforced.

Ordinarily these issues should play very significant roles in shaping the electoral campaigns, and ultimately the outcome of the elections. Whether they will play this role or not is yet to be seen, but given our history, and given the trajectory of the electoral campaigns up to this moment, it is debatable if these issues will feature strongly, let alone be in a position to shape the campaigns and its outcome.

It is important to state very clearly at this point that the problem we face is that of the failure of an entire ruling class, and not just the failure of specific regimes. For the avoidance of doubt every regime since 1999 has played quite a significant role in the laying of the foundations for, as well as in the compounding of our problems.

For instance, in the decade before 2015, unemployment grew from approximately 8% to about 30%; while poverty grew from approximately 54% to about 72% [one of the very few countries in the world where rather than half poverty, the MDG goal, poverty actually grew by a quarter].

What makes these depressing outcomes in terms of living standards even more alarming is the fact that all of these was happening at a time when the economy, that is the GDP was growing at an average of 5 to 8% annually!

The implication being that we became one of the most unequal societies in the world with extremely wide gaps between the rich and the poor; a situation expressed in the fact that while the top 10% wealthiest Nigerians owned 40% of national wealth, compared to the 4% share owned by the bottom 20% of the population.

Nevertheless, let us go ahead to highlight a number of these issues. They are around the economy and security, and include recent reports from the National Bureau of Statistics [NBS] on unemployment; from the Central Bank of Nigeria [CBN] on revenue generation performance in 2018 as well as projected economic outlook for 2019; and of course, the projections of the 2019 budget estimates prepared by the Executive and laid before the legislature by the President on December 19th 2018.

We shall then conclude with a conversation around security, or more appropriately, “insecurity”.

Rising Unemployment

We begin with unemployment and its intensification over the years. The most recent report on unemployment by the NBS paints a very depressing picture.

According to the said report, general unemployment rose from 18.8% in Quarter 3 of 2017 to 23.1% in Quarter 3 of 2018.

And although the total number of persons in the work force rose from 85.1 million in Q3 2017 to 90.5 million in Q3 2018, the total number of people classified as unemployed however rose from 17.6 million in Q4 2017 to 20.9 million in Q3 2018.

The implication of this seeming discrepancy is that more people are entering the labour market than are being absorbed by the labour market. This is reinforced by the fact that a majority of those who are unemployed cited lack of work experience, and the fact that they have never worked before as part of the reasons they are unemployed.

Furthermore, although it is not clear what the figure for general underemployment is, nevertheless, the NBS report did disaggregate the data between urban and rural unemployment thus: While 23.9% of rural and 21.2% of urban dwellers were unemployed; 22.8% of rural, and 13.7% of urban dwellers were underemployed.

The implication of the foregoing is that total, that is composite unemployment [including underemployment] rate hovers around 40% of the population; with 46.7% combined rural unemployment and 34.9% combined urban unemployment respectively.

In real terms, it means that roughly 2 out of every 5 able bodied person of working age are out of work.

The context is even more depressing for youths aged 15 to 35 years old. According to the same NB report, “although unemployment among youths [aged 15 – 35 yrs] declined to 29.7% in Q3 2018 from 30.50% in Q2 2017 [why Q2 2017 was used for comparism and not Q3 2017 was not stated, but I suspect that it is because if weighed against Q3 2017, the figure for Q3 2018 would not reflect a decline, but an increase]”!

Nevertheless, the report did go to show the trajectory on increase in youth unemployment from 13.7% in Q3 2015, through 19.1% Q3 2016, to 25.5% in Q3 2017.

In other words, if we were to use year on year figure as is the standard practice, then it would be more correct to state that youth unemployment grew from 25.5% in Q3 2017 to 29. 7% in Q3 2018, period.

From the point of view of policy formulation and implementation it is more important to understand why youth unemployment grew from 19.1% in Q3 2016 to 30.50% in Q2 2017, then dropped to 25.5% in Q3 2017, before rising again to 29.7% in Q3 2018.

In the context of people-oriented governance, it is more important to try to understand the reasons for these than to attempt the sleight of hand which seems to present a rosier picture than it actually is.

We are not done yet with youth unemployment figures though. Youth underemployment rate however declined from 27.2% in Q3 2017 to 25.7% in Q3 2018.

Thus, combined Youth unemployment [including underemployment] stood at 55.4% in Q3 2018 from 52.6% in Q3 2017.

The implication of these is that more than 1 in 2 of young persons aged 15 to 35 years old are out of work. That is more than half of the youth population of working age.

It is perhaps little wonder that we are witnessing a spike and innovations in old and new forms of criminality across the country.

It does seem that there is a link between this high and rising levels of unemployment, and the rising levels of drug and substance abuse among youths, the rising incidences of violent crimes and conflicts across the country, as well as the rising levels and intensity of poverty.

2018 Revenue Generation Performance and the 2019 Budget Estimates

The recent presentation of the 2019 budget estimates by the President to the NASS, has again brought to the fore the issues and challenges associated with the budgetary process in Nigeria since the 1999 return to Civil Rule.

Once again, the budget was presented late, on December 19th 2018, two days before the vacation of the National Assembly [NASS].

And given the vacation and the fact that the general elections are in February and March 2019, and as such much of January will be spent campaigning; it is almost certain that the NASS will not be in a position to consider this budget until probably April 2019. The implication is that this budget may not be passed by the current 8th Assembly and may have to be handed over to the 9th Assembly for consideration and passage.

The second, and more damaging implication is that budget implementation will once again commence rather later, perhaps in the third quarter of the year, with its attendant huge and deleterious implication on the economy.

The 2019 budget contrary to the campaign promise of the current administration, thus continues and in fact deepens the practice of uncertainty in the budget cycle and its annual toll on the economy.

It is important that we return a context of certainty in the budget cycle and decide whether we want to shift our financial year from June to July or enforce the current January to December cycle which since 1999 has been observed in the breach contrary to the provisions of the 1999 CFRN [as amended] and the Fiscal Responsibility Act [FRA] of 2007.

The second issue laid bare by this shoddy manner of budget preparation and presentation is that our budgets are not based on any clear indicative long term strategic and operational development plan and planning processes and framework.

At best what is done is a process of guesstimation, that is arbitrary and illogical. Otherwise how do you explain the context where year in year out, we base our annual budgets on the same assumptions and parameters, even though every preceding budget has underperformed, and those parameters and assumptions have failed to materialise?

For instance, in the life of this administration benchmark for oil production has always been put at more than 2 million barrels per day; yet in each of those years, average annual production figure has never exceeded 1.9 million barrels per day!

Let us take the parameters and assumptions of the recently presented 2019 budget estimates for instance.

The 2019 budget estimates of N8.8tn is predicated on Oil production estimates of 2.3 million barrels per day; Exchange rate of N305 to $1; Inflation rate of 9.98%; GDP growth rate of 3.01%; Crude oil price of $60 per barrel; and total projected revenue of N6.97tn.

Well, the most charitable thing that can be said about these assumptions upon which the whole budget is predicated is that it is Aspirational.

However, even to qualify to be described as aspirational one would need to see a clear indicating implementation plan that suggests not only how the budget goals will be realised in terms of revenue generated, but also in terms of its outcomes. Alas there is no such, and there has never been any such plan of action by this or any previous regime.

How can the 2.3 million barrels per day oil production figure be realised? In a context of global overproduction putting pressures on prices, and leading OPEC of which we are a member to take an interventionist decision to cut production in order to shore up prices?

In the context of these overproduction and decision to cut production, Nigeria’s production quota was cut to 1.68 Million. A figure we are not even yet sure of being able to sell in full!

The implication is that just as we are seeing in 2018, there will also be significant revenue shortfall in 2019.

Already for 2018, the CBN has reported a N3tn revenue shortfall as at the end of Q3 2018, meaning a revenue generation performance of about 67%.

If we were indeed planning, and our budgets are based on a plan and are aimed to direct investment towards implementing the plan, why aren’t we learning from this performance report?

Similarly, the best that can be said for the projected 9.98% inflation, and 3.01% GDP growth is that they are overly optimistic.

The most optimistic GDP growth forecast from the African Development Bank estimates 2019 Nigeria GDP growth at 2.5%, compared with 2.1% for the IMF and estimates in similar range from the CBN.

In the same vein, the most optimistic inflation rate outlook for Nigeria, which is from the CBN is 11.48%, while others including the IMF, private sector financial institutions, as well as the AfDB estimates inflation rate of 3% to 3.5%.

The question is where did the FEC get its own figures from? How did it arrive at those figures?

And as for the price of oil, the $60 figure is too close for comfort given all the vagaries of the global economic situation; including the slowing down of the growth of the Chinese economy, the impact of the trade dispute and standoff between China and the USA, the context of overproduction of oil, as well as the uncertainties that characterise the policy making trajectory of the Trump administration; given all of the above, it is in fact probably overtly too optimistic a figure.

Furthermore, we have once again as we have always done, generated and laid before the legislature budget estimates for a new year, without any indication and articulation, let alone consideration, of the performance of the outgoing or previous budget.

No one, not even the NASS has seen the statutorily required Quarterly Budget performance reports from the Executive; nor has the NASS itself generated any quarterly or half yearly oversight reports for any of the MDAs.

From the foregoing, it seems very clear that the 2019 budget is inherently programmed to fail and underperform like the previous ones.

It also seems like it is a budget predicated on electoral campaign, rather than on any sound scientific and strategic basis.

It is clear that we need to enforce a predictable budget cycle as well as enforce a budgetary process based on strategic planning and long-term visioning, enabled by a comprehensive needs assessment process.

Unfortunately, however, in a clear demonstration of the class character of the leadership failure and governance incompetence of the ruling class, not even the myriad of the opposition parties and opposition presidential candidates; have engaged with or are engaging in any serious manner with the very significant structural, systemic, process, content and quality issues bedevilling our public finance and public investment institutional and process framework.

To Conclude: A Note on Security

As we can see insecurity is inexorably interlinked with the condition of living of citizens, expressed in levels of unemployment, degree of alienation, intensity of poverty, and scale of hopelessness.

In this context, insecurity is a manifestation of both a political and an economic problem; and is encapsulated in a leadership, that is collective, class leadership crisis.

What is preventing our numerous security and law enforcement agencies from working together in a coordinated manner, enhancing synergy?

What is required to empower and authorise communities to play a significant role as the first line in their own security?

The answer is blowing in the wind. It is simple, it is leadership. Some say restructuring. Some say devolution of powers and especially internal security powers. But in reality, it is a leadership problem, a leadership crisis.

To empower communities requires a governance reform that restores formal governance of a democratic nature to communities in the form of democratically elected community governments, which can then empanel their community security outfits;

To restructure Nigeria and devolve powers will require to address the question of citizenship and resolve the indigene-settler contestation in favour of universal citizenship based on residency;

Any restructuring and or devolution of powers that does not resolve the questions of community governance and citizenship, will result in a mere cosmetic tinkering with the problem in a manner that will compound rather resolve the crisis.

Jaye Gaskia is Convener, Take Back Nigeria Movement [TBN]

 

 

 

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