QUITE expectedly, the crash in the prices of crude oil in the global market occasioned by the coronavirus pandemic is impacting negatively on the Nigerian economy. It is therefore no surprise that the 2020 budget had to be drastically tinkered with by the executive.The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, recently told State House correspondents that the Federal Government had approved the slashing of the budget by N 1.5 trillion, that is, from N10.5 trillion to N9.09 trillion.
Since earnings from crude oil are expected to dwindle as the world economy, following the coronavirus pandemic, has contracted, a review of the budget is normal. Obviously, certain expenditures, both capital and recurrent, now have to be cut down in the face of the new realities. It will be recalled that in our review of the 2020 budget, we submitted that it was predicated on sheer profligacy. We noted that, per usual, the Federal Government would continue to commit close to 90 per cent of its net spend on recurrent expenditure, meaning that for every naira that it spends, only 10 kobo would go towards any kind of capital expenditure.
As if this anomaly were not enough,more money had to be committed to running costs and salaries because, with very little warning, the Federal Government went ahead and created five new federal ministries, namely Power, Police Affairs,Aviation, Special Duties and International Affairs,and Humanitarian Affairs/Disaster Management and Social Development, increasing the total number to 44. Thus, while a total of N2.45 trillion was allocated for recurrent expenditure in the 2019 budget, well over N3 trillion was allocated towards the same purpose in the proposed 2020 budget.
It was certainly disturbing that in the originally proposed 2020 budget, capital expenditure was slashed by almost 30 per cent — from N3.18 trillion in 2019 to N2.05 trillion in 2020. That meant that the government would essentially be servicing its humongous foreign and local debts (currently estimated at nearly N17 trillion), paying salaries and other associated running costs, with little or no room for long-term planning and vital developmental projects. Worse still, there have been no conscious efforts to reduce the high cost of governance incurred by the three arms of government to reflect the reality of a haemorrhaging economy without a productive real sector.
As the coronavirus pandemic and the collapse of the world crude oil prices forced the Nigerian government back to the drawing board,it needed to make necessary adjustments to resolve the palpable contradictions. But that remains to be seen. While it is true, for example, that new employments into the civil service have been put in abeyance, the cost of governance remains criminally high. It needs to be cut down. Besides,since there will be uncomfortable consequences of the slash in the budget, the government is expected to find means of ameliorating these discomforts. We therefore call on the National Assembly to do a thorough job on the new budget which is based on an oil benchmark of $30 per barrel as against the initially proposed $57. Quite appropriately, the leadership of the National Assembly,on Wednesday, met with the Finance minister, Mrs. Zainab Ahmed; Minister of State for Petroleum Resources, Chief Sylva Timipre; Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, and other top government officials on the state of the economy and the planned review of the 2020 budget.
The review process is coming advisedly and it is without doubt the proper response to the challenges posed by the crash in crude oil prices. It will no doubt reveal the truth about the country’s adaptability and flexibility in making necessary adjustments to the vagaries of a dynamic world economy. How it eventually fares in these tough times will depend on the competence and confidence of its managers. Naturally, the handlers of the Nigerian economy must make provisions to cushion the effects of the new stringent measures to protect the people who will be hardest hit by them.