President Buhari should declare a state of emergency on Nigerian finances to activate ordinances that would help the government move numbers around and unlock some more numbers if he expects the 2020 national budget to work for Nigerians. I do think the National Assembly leadership and Mr President should hold a retreat this weekend to actionize the data Finance Minister, GMD NNPC and others have made public.
Nigeria has not recovered from 2008 market collapse unlike most parts of the world. As a student, I bought the naija big offer from First Bank of Nigeria at about N46 per unit when the exchange rate was N157 per dollar. Since that market crash, FBN shares have not exceeded N12 per unit. If you build in the dollar exchange rate (for those that imported dollars to buy), the best effective price is N5 per unit, excluding inflation. (Today, FBN is worth N142 billion at N4 per unit.)
In most companies in the Nigerian Stock Exchange, anyone that invested pre-2010 is still under waters. So, while Europe and the U.S. had recovered from that great recession, Nigerian investors are still hoping.
Now, if the avalanche of coronavirus blows and we do not move ahead to arrest the situation on time, we could have a double-whammy. That would technically cripple our capital markets, dry up capital and put the nation into depression.
With our budget looking like $14 billion (debts servicing will take about $7 billion of that unless we renegotiate) and any hope of getting foreign loans vanishing, streamlining recurrent expenditure will be critical. There are great ideas but I cannot write here as some would be tough choices which must be well managed to avoid breakdown of law and order. Mr President has some tools he can play to get Nigeria going. But he needs to lead and make hard choices.
There would be so much financial engineering for even that low number: the Federal Executive Council has approved reductions on capital budget by 20%, and 25% cut in recurrent expenditures. In short, I expect customs revenue to drop as import from Asia has crashed. Government’s plan to sell some assets like power systems will struggle as there would be fewer buyers; so that number has to go low in the budget.
And the big one: the government has frozen recruitment except for health services and security. I do not believe that one though, relying on past records. Tough months ahead across all sectors because this sub-$20 billion cannot be 70% executed. In other words, the real 2020 Nigerian budget is below $14 billion.
We need urgency because the private sector cannot lead this redesign. Arik just suspended flights to Ghana, Liberia and Senegal even as local airlines are battling the demon of coronavirus on passenger volume. The national assembly has frozen visitors and excursions indefinitely. If companies follow that path, Nigeria will crawl to a standstill. Governors in the northern part of the nation plans to shut down mosques to prevent spread in the nation. The impact on the private sector would be huge, and taxes would not save the nation. Yes, we expect the tax revenue to drop.
*there could be minor modifications on this proposed budget. But one signed into law was just about it.