Coronavirus: FG Considers Reviewing 2020 Budget” – Daily Independence, March 5, 2020, p 1. “55 Nigerian oil cargo unsold as demand tumbles” – Punch, March 6, 2020, p 23. Shakespeare, 1564-1616, must have had a situation like the one in which Nigeria now finds itself before pronouncing that: “All things do help the unhappy man to fall.” (Vanguard Nook of Quotations, VBQ p257).
President Buhari, during one of his many trips abroad – on private visits, of course – once described himself as the most unhappy leader. He has a right to claim that title. Nigeria under him became the poverty capital of the world and that is a title that will not be relinquished soon. On four indices included in the Misery Index, MI — children out of school, maternal death, infant mortality and per capita income – Nigeria is ranked first in all of them. Nigeria is also home to two of the world’s five worst terrorist groups. Boko Haram and Fulani Herdsmen have ensured that Nigeria is not only represented but has managed to record more casualties of terrorism than some of the countries now officially at war. For good measure, although the poorest country among the Organisation of Petroleum Exporting Countries, OPEC, and it is only the eight largest producer, more crude oil is stolen in Nigeria than any other country. Thus, the Federal Government of a nation which needs every dollar it can get from crude oil stands and looks on while a few selfish but powerful crooks consign the rest of Nigeria to prolonged poverty and endless destitution. None of the big oil thieves living in Abuja and Lekki/Victoria Island has been apprehended and prosecuted. Instead of protecting our own most important source of funds, we are contented to make requests for $22 billion loan package – which a rubber stamp Senate readily approves. Yet, nobody in the Senate seriously believes that the jumbo loan will solve our economic problems. Most likely, most of it will be embezzled. The Buhari administration, by the time it leaves office in 2023 will leave the next generation with more debt to repay than any other government in history. Those observations are meant to provide readers some background to what will follow in this article because Nigerians need to understand the disaster that awaits us on account of COVID – 19 and our near total dependence on oil. Perhaps the place to start is what was predicted last year when the 2020 Budget was presented to the puppet National Assembly, NASS. Having successfully planted his stooges in the two chambers as Senate President and Speaker, Buhari was certain that the budget would be passed as it was. He was right. NASS dutifully passed the 2020 Budget. Unfortunately for Buhari, the NASS and Nigeria, the demand for crude was less than expected right from January 1, 2020. It remained low throughout the second month of the year and as we move into March, we discover that Coronavirus (COVID-19) has rendered Budget 2020 totally untenable.
BUDGET OF DECEIT AND SELF-DELUSION “The most obstinate illusions are ultimately broken by facts.” Trevor Roper. Vanguard Book of Quotations, VBQ, p 100. “The Budget of Continuity was based on a benchmark oil price of $60 per barrel, oil production of 2.3mbpd. Government projected a deficit of N1.91tn. The revenue performance is only 58 per cent of the 2019 budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically oil revenues were below target by 49 per cent as at June 2019.”
That was President Buhari’s Budget summarised. Below was my own reaction to it at the time. I never expected the Government to listen to warnings from others.
STARTING ON THE WRONG FOOT; STAYING ON THE WRONG TRACK “Morning shows the day” according to an old adage. The disaster of the 2020 Budget actually had its origins in 2015. The first three appointments every modern Head of Government makes in today’s global village are: the Ministers for Defence, Finance and External Affairs. Those are the people other countries appraise most critically. And, the appointments are made very quickly after elections are over. Bearing in mind that, “A week is a long time in politics” (Harold Wilson, British Prime Minister 1970s), Buhari waiting for five months to make those key appointments had already sent a signal to the global community; and not a good one. To them turn around and hand the economy to people totally unknown in global financial institutions for the five months sent another signal; a worse one. When he finally made the selection of Minister of Finance, it was to please a political loyalist instead of picking someone with network in the international financial community. Mrs Kemi Adeosun might be a good accountant; but, she is not and cannot be an excellent Finance Minister. The results showed very quickly. A recession followed in 2016. The rest of the analysis of the 2020 Budget went on to predict that it will never be implemented as it is. That was before COVID-19 gate-crashed into our lives and is now going to cause a lot of havoc to the budget of every country on the planet. The first signal of the problems ahead is the turmoil in global oil trade. The Organisation of Petroleum Exporting Countries, OPEC, is now in disarray. Saudi Arabia, the largest exporter, after failing to get Russia, a non-member to agree to a cut in production and supplies, had unilaterally reduced crude price and is now set to increase output. Those steps spell economic doom for countries like Nigeria which are more heavily dependent on oil. From the evidence available at the moment, the average price of crude oil on the global market is unlikely to exceed $50 per barrel for the next three months unless an emergency meeting of OPEC is held to establish a new quota and production level acceptable to all members. Even then, any agreement by OPEC members will not be binding on non-members – who now control a larger percentage of global oil output than OPEC. The cartel has lost the clout which in the past made it possible to dictate global oil prices. While there are several uncertainties, there is one certainty which cannot be ignored; COVID-19 has devastated Nigeria’s 2020 budget; It was not realistic before COVID-19; it is totally in shreds now. It requires no high intelligence to realise that a budget review is urgently needed.
BUHARI APPOINTS BUDGET REVIEW ADVISERS. For once President Buhari did not waste time in approving a budget review committee of advisers. That is a step in the right direction. Other steps must necessarily follow – and quickly too because time is one of the variables they must bring into consideration. In that connection the most important matters to be decided include the following: Bench mark crude price to adopt in the recommendations for the budget review; Time to start operating the new budget; the impact on the Federal and State Governments; and How to handle the inevitable recession. In the second part of this series, I will elaborate on the four issues listed above. But permit me to be the bearer of bad news; ANOTHER RECESSION IS LOOMING ON THE NIGERIAN ECONOMIC ENVIRONMENT.