WOES OF THE NIGERIAN ECONOMY (18) ASSU and the Recurrent budget When Olusegun Aganga, as minister of Finance told the nation that the recurrent expenditure accounts for 75percent of the budget, financial analysts wondered how Nigeria expects to develop with a capital expenditure of 25 percent. Okonjo-Iweala promised a reduction of 3percent , consequently, the component of the recurrent expenditure in the 2013 budget is about 70percent. If we must address the social and economic needs of our generation, then Nigeria must be in a hurry to develop. We cannot achieve development with a capital expenditure of 30percent annually. I had posited in my earlier write up, that a recurrent expenditure of over 70percent, implies that we are consuming our future. I am also not comfortable with the size of our national budget, considering the potentialities of our economy. If we must create opportunities for a sizeable proportion of the Nigerian population, then the need for huge capital expenditure cannot be overemphasized. The capital expenditure should be in the region of 5 trillion naira annually, to have a meaningful impact on growth and development. But, there is a problem. The federal Government can only generate about 3.5 trillion annually. It implies that the government borrows close to 2trillion naira annually to finance their budget of about 4.2trillion (2013 Budget). In the current budget, recurrent expenditure accounts for over 2.8trillion and leaving about 1.4 trillion for capital expenditure. When there is a revenue shortfall, the capital votes are often neglected. This explains the avalanche of abandoned projects that litter the nooks and crannies of Nigeria. It further explains why the federal government is a big swindler. Many people have been sent to their early graves because the federal government did not pay for the jobs that they had borrowed money from banks to execute. I sold a man’s car when I was a staff of a finance company when he could not pay back money borrowed to execute a NAFCON project in Portharcourt. It is the problem associated with the management of the capital budget at the federal level that is responsible for the huge inventory of domestic debts. It was convenient for Okonjo- Iweala and Obasanjo to pay foreign debts while neglecting the domestic debts. The debt has continued to grow and presently close to 3trillion naira. The tragedy of public finance in Nigeria is in the nature of government’s borrowing to finance budget. Under this democracy, after paying foreign debts, the trend has been to borrow from the domestic credit market. When government borrows from the domestic market, the private sector is crowded-out. There would not be any money available for them to borrow. This is why the banks hardly lend money to the ordinary people, because their monies are tied down in government bonds, which is riskless. When we situate the developmental needs of the economy and the size of the recurrent budget with the current demand of ASUU, against the revenue profile of the federal government, the issues will speak for themselves. ASUU is said to be demanding 400billion naira and when this is added to a recurrent vote of 2.8trillion, we would have 3.2trillion naira as the total recurrent expenditure for 2013. To finance this expenditure, government would have to remove the 400billion from the capital vote and be left will about 1trillion or as usual go to the domestic credit market to borrow. When this is done, those executing federal government capital projects would have been swindled, as no money would be available to pay for the jobs that they have done. On the other hand, those wishing to collect loans from the banks to expand their businesses would usually be shunned. The consequence of all of these is that the despondent paralysis will continue. Kidnapping and armed robbery will intensify. Prostitution will increase. What else? The future is being effectively consumed. If the Nigerian economy should develop at an impressive pace, then a growth of above 15percent annually must be envisaged. This can be possible if the capital allocation can increase to over 5trillion Naira annually. The revenue can be realized through a radical approach to public finance. This approach calls for a further reduction of the recurrent expenditure, including the size of the federal government; A robust tax regime that will grow government present revenue by over 50percent; External borrowings to finance regenerative projects; and above all, the issue of corruption must be addressed, so that there would be value for money spent on projects.
Posted on: Fri, 06 Sep 2013 15:27:29 +0000
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