The 2016 Budget will be the first Budget to be formulated and implemented by the administration of President Muhammadu Buhari. Given the numerous campaign promises the President made and the change mantra of his party, the All Progressives Congress (APC), public expectations about the impact of the Budget on the economy and the social status of the average Nigerian are understandably at an all-time high. Never has so much been promised by a Nigerian President and never have there been such great hope created in the hearts of Nigerians regarding the good government can do and will do to lift their living conditions.
The enormous weight of the expectations is already being felt by the President and his party. Soon after assuming office, President Buhari said Nigerians would stone him if he fails them. But the consequences of his failure may be much worse for him than he anticipates. Nigerians are in a hurry and are tired of platitudes from their leaders. Already cynicism is so soon returning to public discourses about the Federal Government's intentions and actions from a people who were so optimistic about the new government just four months ago.
Efforts by the spokesmen of President Buhari and the APC to manage the public expectations engendered by the flowery campaign promises have been tepid and unconvincing. Doubts about the sincerity of the President and APC are no longer muted. Even the First Lady (or the Wife of the President as we are told she should be called) has, uncharacteristically, waded into the matter. On Tuesday, 10th November, 2015, she issued a press statement calling on her party to fulfil its campaign promises regarding the payment of the N5,000 monthly Unemployment Allowance to the "25 million most vulnerable Nigerian youths" and the daily feeding of all Nigerian Primary School Pupils. I believe she must have already persuaded her husband to implement the promises and that he must have given her permission to go public with her advocacy on the matter. Other than the APC Senators who recently rejected the motion moved by the PDP's Senator Phillip Aduda that the Federal Government should commence payment of the N5,000 monthly Unemployment Allowance, might there be other elements in the ruling party who are opposed to the fulfilment of the campaign promises such that the First Lady/Wife of the President felt impelled to intervene in the matter and even do so publicly?
The Vice President, Pastor Prof. Yemi Osinbajo, has been indicating the Federal Government's plans regarding the 2016 Budget which is being prepared. Firstly, he said it would be a Zero-based Budget; meaning that the expenditure estimates would not be mere increments on the previous year's figures, as have often been the case in our past Budgets, but projected amounts for each expense head would be computed in isolation and justified given consideration to the actual essential needs and the government's policy priorities. This is a salutary development and I applaud the Buhari Administration for this. It portends good for our budgeting process if well implemented.
Last week, while speaking at the Retreat for Ministerial Nominees in the State House, Abuja, the Vice President said that the Federal Government is working on the 2016 Budget and that the Total Expenditure would be between N7Trillion and N8Trillion. He also indicated that the proposed Capital Expenditure would be N2Trillion. This means that the Federal Government is planing to spend about N5Trillion/N6Trillion on Recurrent Expenditure even though it has now rationalised the Ministries to just 25. The proposed Recurrent Expenditure in the 2016 Budget is more than the entire
Federal Government Budget for the 2015 Fiscal Year.
Clearly, there are no plans to prune the size of the civil service. It also appears that the huge sum being set aside for Recurrent Expenditure may include provision for the payment of the N5,000 monthly Unemployment Allowance and the Lunch-For-School-Pupils programme promised by the President. Alhaji Lai Muhammed had said that the reason the APC was yet to implement the Unemployment Allowance is because "the Jonathan Administration did not make allowance for it in the 2015 Budget". Maybe Alhaji Lai Mohammed expected former President Goodluck Jonathan to have included it in his government's 2015 Budget in anticipation of his losing the 2015 Presidential Election. LOL!!!
The Buhari Government needs N900Billion per annum just to pay the N5,000 Unemployment Allowance to our "25million vulnerable youths". With a population of about 170million people and in the absence of authentic demographic data, I suspect the number of our "vulnerable youths" may be nearer 100million! The amount needed to feed our Primary School Pupils nationwide would be much more than that required to pay the Unemployment Allowance. And it would depend on the quality of lunch being planned for our children. It sum required could be as much as N1.5Trillion per annum.
How is the Federal Government of Nigeria going to fund a N7Trillion or N8Trillion Budget in 2016 given our present economic realities? Does it expect another Oil Boom? What is the likelihood of the price of crude oil leaving the sub-$50 per barrel level it has been at and rising to even $60 per barrel within the next 14 months considering the fundamentals and dynamics of the international market for hydrocarbons?
Yes; of course, the Federal Government could borrow to fund the 2016 Budget. But is this desirable, even if feasible, given that our nation's Total Debt Stock (FGN plus States) as at 30th June, 2015, stood at US$63.81Billion or N12.12Trillion? The Federal Government's Domestic Debts as at 30th June, 2015, was US$42.63Billion or N8.40Trillion. Our External Debts (FGN plus States) was US$10.32 or N2.03Trillion. With our External Reserves reportedly standing at just US$30.13 as at 27th October, 2015, our declining Foreign Exchange Inflows and our unabated demand for imported products, Nigeria is no longer attractive to private foreign lenders as it had been in recent years.
The Federal Government cannot find cheap foreign private debt financing for the proposed 2016 Budget especially since we have been delisted from the prestigious JP Morgan Government Bond Index. A couple of days ago, Barclays Bank equally anounced that it would soon delist Nigeria from its own Government Bond Index. Both Indices are concerned that our debt instruments are no longer liquid in view of the foreign exchange transfer restrictions imposed by the Central Bank of Nigeria in its futile efforts at defending the Naira without the robust Foreign Exchange Reserves level required to do so.
Except there is an unexpected positive development in our economic fortunes, the Effective Yield Rate of Nigeria's Federal Government Bonds will no doubt rise shortly and it could become as high as 9% or even 12% in the near term since Nigeria is now considered a high risk market given our new Foreign Exchange Transfer Risk. This also has negative implications for the Eurobonds issued by our corporates. Domestic debt funding of the 2016 Budget is not feasible in view of the sheer volume of money we need to source and the lack of liquidity in the market to absorb it. But if the Central Bank of Nigeria pushes it through using its regulatory leverage with Nigerian financial institutions, our private sector borrowers would be further crowded out of the domestic debt market and the cost of funds would rise concomitantly. In addition, the expansionary fiscal stance signaled by the 2016 Budget proposal would also exacerbate the inflationary trend which is already worrying on account of the impact of the depreciation on the value of the Naira.
I hope that the Buhari Administration rethinks its expressed Budget plans 2016. Nigeria should cut its coat according to its cloth. The country is virtually in a recession and it can ill afford spending money it does not have. The 2016 Budget should be austere. May God help us Jesus' Name. Amen.
God bless Nigeria.
NIGERIA DI FURE!
The enormous weight of the expectations is already being felt by the President and his party. Soon after assuming office, President Buhari said Nigerians would stone him if he fails them. But the consequences of his failure may be much worse for him than he anticipates. Nigerians are in a hurry and are tired of platitudes from their leaders. Already cynicism is so soon returning to public discourses about the Federal Government's intentions and actions from a people who were so optimistic about the new government just four months ago.
Efforts by the spokesmen of President Buhari and the APC to manage the public expectations engendered by the flowery campaign promises have been tepid and unconvincing. Doubts about the sincerity of the President and APC are no longer muted. Even the First Lady (or the Wife of the President as we are told she should be called) has, uncharacteristically, waded into the matter. On Tuesday, 10th November, 2015, she issued a press statement calling on her party to fulfil its campaign promises regarding the payment of the N5,000 monthly Unemployment Allowance to the "25 million most vulnerable Nigerian youths" and the daily feeding of all Nigerian Primary School Pupils. I believe she must have already persuaded her husband to implement the promises and that he must have given her permission to go public with her advocacy on the matter. Other than the APC Senators who recently rejected the motion moved by the PDP's Senator Phillip Aduda that the Federal Government should commence payment of the N5,000 monthly Unemployment Allowance, might there be other elements in the ruling party who are opposed to the fulfilment of the campaign promises such that the First Lady/Wife of the President felt impelled to intervene in the matter and even do so publicly?
The Vice President, Pastor Prof. Yemi Osinbajo, has been indicating the Federal Government's plans regarding the 2016 Budget which is being prepared. Firstly, he said it would be a Zero-based Budget; meaning that the expenditure estimates would not be mere increments on the previous year's figures, as have often been the case in our past Budgets, but projected amounts for each expense head would be computed in isolation and justified given consideration to the actual essential needs and the government's policy priorities. This is a salutary development and I applaud the Buhari Administration for this. It portends good for our budgeting process if well implemented.
Last week, while speaking at the Retreat for Ministerial Nominees in the State House, Abuja, the Vice President said that the Federal Government is working on the 2016 Budget and that the Total Expenditure would be between N7Trillion and N8Trillion. He also indicated that the proposed Capital Expenditure would be N2Trillion. This means that the Federal Government is planing to spend about N5Trillion/N6Trillion on Recurrent Expenditure even though it has now rationalised the Ministries to just 25. The proposed Recurrent Expenditure in the 2016 Budget is more than the entire
Federal Government Budget for the 2015 Fiscal Year.
Clearly, there are no plans to prune the size of the civil service. It also appears that the huge sum being set aside for Recurrent Expenditure may include provision for the payment of the N5,000 monthly Unemployment Allowance and the Lunch-For-School-Pupils programme promised by the President. Alhaji Lai Muhammed had said that the reason the APC was yet to implement the Unemployment Allowance is because "the Jonathan Administration did not make allowance for it in the 2015 Budget". Maybe Alhaji Lai Mohammed expected former President Goodluck Jonathan to have included it in his government's 2015 Budget in anticipation of his losing the 2015 Presidential Election. LOL!!!
The Buhari Government needs N900Billion per annum just to pay the N5,000 Unemployment Allowance to our "25million vulnerable youths". With a population of about 170million people and in the absence of authentic demographic data, I suspect the number of our "vulnerable youths" may be nearer 100million! The amount needed to feed our Primary School Pupils nationwide would be much more than that required to pay the Unemployment Allowance. And it would depend on the quality of lunch being planned for our children. It sum required could be as much as N1.5Trillion per annum.
How is the Federal Government of Nigeria going to fund a N7Trillion or N8Trillion Budget in 2016 given our present economic realities? Does it expect another Oil Boom? What is the likelihood of the price of crude oil leaving the sub-$50 per barrel level it has been at and rising to even $60 per barrel within the next 14 months considering the fundamentals and dynamics of the international market for hydrocarbons?
Yes; of course, the Federal Government could borrow to fund the 2016 Budget. But is this desirable, even if feasible, given that our nation's Total Debt Stock (FGN plus States) as at 30th June, 2015, stood at US$63.81Billion or N12.12Trillion? The Federal Government's Domestic Debts as at 30th June, 2015, was US$42.63Billion or N8.40Trillion. Our External Debts (FGN plus States) was US$10.32 or N2.03Trillion. With our External Reserves reportedly standing at just US$30.13 as at 27th October, 2015, our declining Foreign Exchange Inflows and our unabated demand for imported products, Nigeria is no longer attractive to private foreign lenders as it had been in recent years.
The Federal Government cannot find cheap foreign private debt financing for the proposed 2016 Budget especially since we have been delisted from the prestigious JP Morgan Government Bond Index. A couple of days ago, Barclays Bank equally anounced that it would soon delist Nigeria from its own Government Bond Index. Both Indices are concerned that our debt instruments are no longer liquid in view of the foreign exchange transfer restrictions imposed by the Central Bank of Nigeria in its futile efforts at defending the Naira without the robust Foreign Exchange Reserves level required to do so.
Except there is an unexpected positive development in our economic fortunes, the Effective Yield Rate of Nigeria's Federal Government Bonds will no doubt rise shortly and it could become as high as 9% or even 12% in the near term since Nigeria is now considered a high risk market given our new Foreign Exchange Transfer Risk. This also has negative implications for the Eurobonds issued by our corporates. Domestic debt funding of the 2016 Budget is not feasible in view of the sheer volume of money we need to source and the lack of liquidity in the market to absorb it. But if the Central Bank of Nigeria pushes it through using its regulatory leverage with Nigerian financial institutions, our private sector borrowers would be further crowded out of the domestic debt market and the cost of funds would rise concomitantly. In addition, the expansionary fiscal stance signaled by the 2016 Budget proposal would also exacerbate the inflationary trend which is already worrying on account of the impact of the depreciation on the value of the Naira.
I hope that the Buhari Administration rethinks its expressed Budget plans 2016. Nigeria should cut its coat according to its cloth. The country is virtually in a recession and it can ill afford spending money it does not have. The 2016 Budget should be austere. May God help us Jesus' Name. Amen.
God bless Nigeria.
NIGERIA DI FURE!
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