The "if-only" budget: President Umaru Yar'Adua's much-delayed budget reflects the current global economic realities, but was met with general hostility. Adamu Kibla explains why.What a difference a year makes. When Nigeria's President Umaru Yar'Adua presented his very first budget roughly a year ago, wave after wave of optimism seemed to roll off the speech. It was a very different matter this time around. The 2009 budget, reflecting the rapidly changing times we are living in, is a cautious chart plotting a fine line between dangerous international shoals.
As it was, the budget was delayed as finance ministry and central bank planners tried to find some purchase on the slippery global economic slope on which to hang some sort of comprehensible policy.
While they were at it, the price of oil, on which Nigeria has constructed virtually its entire economic superstructure, was dropping like a stone. From a position of plenty just a few short months ago, Nigeria was finding itself in the very uncomfortable situation where penury might stare it in the face.
Neverthless, neither President Yar'Adua nor the governor of the Central Bank of Nigeria, Chukwumu Soludo, were prepared to sacrifice the feel-good factor the country had enjoyed for the past three years. Soludo stated firmly that the economic reverberations shaking the rest of the world would bypass Nigeria, cocooned as it was by its distance from the sources of toxic paper that were causing such havoc elsewhere.
Privately, he must have contemplated the abruptly shrinking pile of oil revenues with dismay. The naira also almost immediately lost considerable value - which only meant that more barrels of oil would have to be sold just to stand still in terms of revenue. But Nigeria does not have more barrels to sell even if the demand were there, because the troubles in the Delta have lopped off a sizeable chunk of output.
The delayed budget was given a rancorous reception in parliament. The main grouse appeared to be that the executive, having promised the earth during the 2008 budget, had delivered nothing. A great opportunity, some members said, had been lost. "We failed to repair the roof when the sun was shining; now it is raining," was one irate comment.
The Minister of Finance, Shamsudeen Usman, countered by accusing the parliamentarians themselves of causing the delay by being tardy in passing allocations. Legislators bristled at this comment, saying that the executive was looking for lame excuses to hide its incompetence.
Sense of disappointment
The belligerent attitude adopted by parliament was echoed by the press and the country's business community. There is a sense of disappointment that the executive took its eye off the much-vaunted Vision 2020, which proposes that Nigeria will become one of the 20 best-performing economies in the world in 11 years' time.
"At the beginning of last year, Vision 2020 was a very viable project," says David Gheni, a manufacturer and distributor. "The business community, especially the banking sector, was delivering growth based on best practice. We hoped this attitude would filter into the rest of the economy, particularly government. But nothing came from all the promises. Where are Yar'Adua's seven points now?" he asks.
Gheni was referring to the president's 2008 budget speech in which he told the nation: "I am delighted to report that our economy has been one of the fastest growing, not only in Africa but also the world. Based on current trends, real GDP growth for 2007-2008 is set to average 7% per annum, much better than the performance of the previous two decades when GDP growth averaged 3% per annum."
He said that since the economic growth rate had been higher than the population growth rate, there had been a sharp increase in per capita GDP from about $400 at the beginning of 2000 to $1,000 by the end of 2007.
Yar'Adua set out a seven-point programme that was aimed at improving the physical infrastructure, particularly power and transportation; human development capital especially in education and health; a large chunk (20% of the total Federal Government budget) destined for the Delta; and 7% allocated to agriculture and water.
He had also stated that his government's policy was to wean Nigeria away from its almost total dependence on oil revenues (90% of exports) and to use the momentum of the sharp increase in growth to rapidly diversify the economic base.
The 2009 budget of N2.87 trillion ($24bn) reflects an increase of 8.4% over last year which was itself an increase of 7% on the 2007 budget. The budget, it seems, was pared down to take into account the dramatic drop in the price of oil. Yar'Adua's second budget presents a deficit of N1.09 trillion ($90.5bn) or roughly 4% of national GDP. The deficit will be made up from funds unspent from the last budget, the government will retrieve $200m from the Nigeria Trust Fund at the African Development Bank and will issue $500m worth of 10-year bonds on the international capital market.
Too much money for government
What seems to have really roused the ire of commentators is that a huge chunk of the budget, $137bn, is allocated to recurrent expenses. "It is arrant profligacy and lack of prudence to allocate over 60% of public resources to less than 1% of the population occupying public offices," writes Adebolu Arowolo.
The country is still smarting from the exposure of high-level corruption particularly in the power sector, although Yar'Adua's "zero tolerance" policy seems to be paying off, as many civil service departments showed surpluses at the end of their accounting period.
Nevertheless, there is fear that after three or four years of progress, the country may be sliding back into its old unaccountable and patronage-based systems, which would severely undermine the new philosophy of meritocracy and knowledge-based action.
Yar'Adua himself has been progressive and pragmatic in his previous position as governor and therefore appears to be a natural ally of the business community. But business itself is split between those "under patronage", whose political connections produce lucrative contracts, and "the independents", who compete on terms of efficiency and results.
"Over the last three years, the 'meritocrats' were winning," says businessman Ibrahim Soro. "The question now is how will the community react to the changed circumstances and whether or not the government will also start its own house cleaning. I believe that no matter what is happening in the rest of the world, the Nigerian market will remain robust."
What is without dispute is that Nigeria will have to continue pumping out as much oil as it can to make up for the revenue shortfall. This means that the government's first priority will be to find a solution to the problems in the Delta. The new budget allocated 20% of the federal government budget to the Delta. Part of the money will go towards social and economic projects and part towards "increasing security".
In summary, the constraints of the budget have been forced by external circumstances over which Nigeria has no control. Most countries around the world are in a similar position and, everything considered, it is still an optimistic budget. The regret is that so little was achieved, especially in terms of infrastructure over the past year when Nigeria was flush with money.
RELATED ARTICLE: Budget Details
The key projects that will be funded by the 2009 budget include:
* The N3.5bn for the Mambilla hydroelectric power generation project, N21.5bn for other generation projects, including N6.5bn for the completion of the Niger Delta Power Holding Company's N1PP projects, N32bn for transmission projects and N19.25bn for distribution projects.
* N903.9m for the TransSahara Gas Pipeline, N6.7bn for the calabar-umuahiaAjaokuta Gas Pipeline, N10.3bn for the AjaokutaAbuja-Kano pipeline and N1.1bn for the Gas Supply Pipeline to PHCN Delta IV.
Transport and communications:
* N10.7bn for access roads to six nnpc refineries and ports, N56.86bn for highways construction and rehabilitation, N4.3bn for the construction of the second Niger Bridge at Onitsha in southeastern Nigeria and N3.6bn for the Guto/Bagana Bridge across the River Benue (both bridges are being constructed through PPP arrangements) and provisions for several other Presidential Initiative and Priority road projects.
N12.4bn for the completion of the Ajaokuta-warri line to the Delta Steel Jetty; N8.3bn for the modernisation of locomotives, coaches and wagons, rehabilitation works and procurement of railway equipment and N8.4bn for the dredging of the Lower River Niger.