2012 BUDGET: FISCAL PRUDENCE, SUBSIDY REMOVAL AND OTHER ISSUES
Some few days back, President Goodluck Jonathan was at the joint national assembly special session, where he presented his 2012 budget. And, it is not surprising to any one that fuel subsidy removal has been given such a prominence in 2012 budget; going by the actions and utterances of Jonathan top government officials any good guesser can guess that in order to make fuel subsidy removal a reality, this government will make 2012 budget so depended on it that it will go into crisis if it is not implemented. For an economic team that is filled to brink by neo liberal thinkers and pro capitalist technocrats any one who is hoping for continuation of subsidy of any kind is wasting his thinking moments. The word ‘subsidy’, any subsidy be it in the power sector, toll gates, fertilizer, education, etc., is out of this management team point of reference. That is why protesters such as ASUU and Lekki toll gate protesters will find it difficult to actualize their missions. When the economic management team is composed of people who shared in the philosophy of the IMF and World Bank, I bait you my last Kobo, that severe economic restructuring has come to stay. In 1980s Nigerians vehemently opposed taking loan from the IMF together with it austerity measures, but when it was later on smuggle in as the so called home grown economic policy, the notorious structural adjustment program (SAP), Nigerians did not realized what hit them until years later. Today SAP is remembered as the beginning of Nigerians suffering and lost of focus. But it is not everything that is associated with SAP that is negative, in fact, the problem is not SAP (an economic policy as it was) but the Nigerian leadership, and as some may say the Nigerian mentality as at then. The same set of economic policy was adopted by our neighbour Ghana, today Ghana is better for it and it is being celebrated as one of Africa’s emerging economic success stories.
A little bit higher than 2011 budget, 2012 budget of N4.749 trillion is a budget that betrays government commitment to fiscal prudence. Allocating 72% of the budget (N2.472 trillion) to recurrent expenditure seems to me very outrageous, and a move away from government mantra of fiscal prudence. Though, as one analyst observes that it is not easy to cut recurrent expenditure in one full swoop, this government should have done better than this. The implication of this is that while trillions of Naira is being cut as fuel subsidy, the same amount is being move to finance government expenses such as transport and stationary allocation for president and vice president, legislative and ministerial expenses, etc. There is little in the way of prudence in a budget that will borrow about 22.3% of the total budget to finance mostly recurrent expenses; I do not have problem with government borrowing, but the budget should have been budget of infrastructural consolidation. About N1.059 trillion of the total budget amount of N4.749 trillion is to come from borrowing from China, Japan, Indian and France, as well as domestic borrowings, this is about a quarter of the overall budget. In a global period characterized by an unrivaled global debt crisis it seem unwise to borrow money to finance expenses like salary, allowances, and over bloated ministerial budgets. At a time major countries around the world are drastically cutting their budgetary expenses we are increasing our own. While 2011 is an election year, therefore, some expenses will naturally comes, 2012 is not an election year and still we are not in a full war.
What are the other implications of this 2012 budget? The monetary implication of increase government borrowing for the economy is to increase the rate of interest charged by lenders, and also to reduce the amount of credit that will be available to the private sector in the year 2012. For an expansionary budget such as that of 2012 a little bit of high inflation should be expected, despite government conservative forecast of 9.5%. This is more so with the expected removal of fuel subsidy from the economy and resultant devaluation in value of Naira, consistent with this government economic agenda. The $75 bench mark price for crude oil in the budget is predicted on the stability of the international price of crude oil, which may come under threat looking at the current turmoil in the global economy. In any way one look at it government should have intensify diversification of it revenue source not only by the current revert to borrowing, but also by looking for other sources of exporting Nigeria’s other natural resources. The expected increase in the recurrent expenditure will further increase our import bills, by putting pressure on the demand for imported goods and services. With little in the way of infrastructural development, increase interest and inflation rates, increase in the cost of energy, not much should be expected in the area of industrial growth and welfare. Despite the huge amount budgeted to tackle insecurity in the country, the major challenge to smooth implementation of 2012 budget will remain security, not only by the recent increase in threat from militant groups, but also from rising crimes, robbery, and ethno-religious crisis. Corruption far more than any other factor will continue to pose challenges to any development programme in Nigeria.