If oil money powers your budget, and the benchmark is at $57 per barrel, giving you a $31 billion budget, there is sad news. Nigeria feels that way because the nation has cut the benchmark to $30. Largely, Nigerian budget is now sub-$20 billion, for 200 million people.
In the evening of Tuesday, December 17, 2019, President Muhammadu Buhari appended his signature to the 2020 Appropriation Bill of N10.59 trillion (about $31 billion at black market rate or $35 billion at official exchange rate)
The budget was sent to the President last week by the national assembly for signing. Buhari who used the occasion of his 77th birthday to endorse the Appropriation Bill was surrounded by some members of his party administration.
Vice President Yemi Osibanjo; Senate President, Ahmed Lawan; House of Representatives Speaker, Femi Gbajabiamila; Secretary to the Government of the Federation, Boss Mustapha; Minister of Finance, Budget and National Planning, Zainab Ahmed and the Minister of State for Budget and National Planning, Clement Agba, all graced the occasion.
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.
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Of course, the Central Bank of Nigeria has promised to inject N1 trillion into the economy. Yet, I do not see how Nigeria can service its debts obligations, pay politicians-at-service, pay public sector workers, and not devalue Naira or flood everywhere with treasury bills to mop cash. But we will see: miracles happen on Fridays and Sundays in that country, always.
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Benchmarking Oil at $30 is still too ambitious, the more realistic benchmark should be $20 or $15, so that you won’t need to sit after one week to do another round of cutting; Oil won’t stabilise above $30 soon.
Nothing is in isolation, all projected revenue sources need to be recalibrated, including tax receipts, because everything is linked together.
But we have a massive leadership vacuum in the land. If you have been following responses to Coronavirus pandemic in different parts of the world, you realise how dislocated and uninspiring our political leadership is. From CBN announcement, it does appear that it manages both fiscal and monetary responsibilities; that’s a very dangerous thing, but this is Nigeria!
The Senate is still urging the president to address the nation, while a certain Donald Trump is basically holding press conferences daily.
For better perspective, the US Treasury Secretary is basically working day and night, negotiating bills and intervention packages with the Congress; they come in phases, just to ensure that American economy will still stand, with Americans not running out of cash or other essentials. Canada just announced its own $80B for various interventions.
We simply lack leadership.