An entrepreneur’s look at the 2016 appropriation bill (part 2)

Since we are not an export based economy yet, it will be to our best interest to begin to perfect our international trade, economic participation and dominance within the confines of our comfortable zones of the west African region. Because in most of the west African region the Nigeria business presence is very high, our currency also is being exchanged for the local and other international currencies, they are even used for purchases therein. We can begin to dominate these areas with our competitive advantages and enlarge our markets to these frontiers for all our products, increasing the scope and limits of our supply, as it enlarges our productive capacity (this is by way of taking advantage of the ECOWAS protocol of free movement of goods and persons within the region). Most importantly if we can satisty our local consumption with local indigenous made products and services, we will never have to worry about the fall in the price of our commodities in the international market. Because we will be meeting our local needs ourselves, being the ones making these products therefore we would be providing enough employment for our teeming populace, hence we would be very low on poverty index as a nation. With these we would have to worry less about foreign exchange, because we may not need to use a lot of them afterall, since we are making very little imports. Then both our foreign reserve and the sovereign wealth fund would be preserved. Leaving us a prosperous, progressive and inclusive strong nation, where all would have a sense of belonging and be happy to make their own contributions.

But can you imagine that on the 2016 appropriation the entire earnings of the country plus all local and foreign grants, and contributions from development partners are mapped out to the recurrent expenditure, while the 30 percent for capital expenditure would be borrowed without a repayment plan nor a strategy to stop the same from occuring in the subsequent years; How then can a nation develop when all it earns is spent (on consumption) and never saved nor invested.

On the foreign exchange management, a thought has to be spared for the supply side management, aside the demand side that we have all along been engaged in. If we can encourage the import side of foreign exchange through FDIs and receipts from external transactions of various organisations like the NNPC, NLG, and other companies with offshore branches and businesses, like the banks, telecommunications companies and the diaspora funds, If we can encourage them to bring in their funds into the economy themselves through the open market, then there would be enough foreign exchange to cover our needs, and there would not be any need to be drawing from our national reserves to defend the Naria.

The salient point of indigenous economic participation is a thing that must be looked into, a situation where the major drivers of the economy is operated by foreign organisations and practitioners is not acceptable, if our desire is to get the best out our economic potentials. In the oil and gas sector it is baffling that all the lucrative ancillary services are operated by foreign interest like, insurance, legal services, logistics (haulage of the crude oil and gas to the international markets and destinations), and many more. Non of these are handled by the locals or are the transactions domiciled locally to at least benefit the system, and these are where the real money is in the industry. The same is happening in the maritime industry even with the cabbottage law, almost all the cargo vessels are foreign, the same goes for their insurance, legal services and so on, there are very minimal local contributions in this industry, no wonder the economy cannot feel the impact of this huge industry and the activities that goes on there, except in the custom receipts and so on, but in the real business of the maritime industry, we are not there yet. For Nigeria to get out of her economic situation, she must engage all her potentials fully and they include all that have been enumerated here and more.

The issue of capital market participation of conglomerates is a thing that must be looked into, because some of these organisations make most of their money here but go to list in the stock markets of their nations of origin; thereby denying our populace the opportunity of benefiting from their reported activities in Nigeria through the capital market. There is also the issue of their CSR and consumer rights, is it not natural that Nigeria being the place they make most of their income, that their investments in CSR be in this nation, rather what do we get. These organisations back home sponsor football clubs, adopt hospitals and schools, but substitute CSR with promotions in Nigeria, and go on to rake in more money from us instead of giving back.

To get back on our feet as a country, we must consider seriously the issue of non commodity based revenues like taxes, most developed countries live on taxes rather than commodities based receipts. Because it is more guaranteed, accountable and makes the citizenry to easily connect with the nation and governance, knowing that it runs on the sweat of their browse. Corporate taxes is one thing I know that if we can access them efficiently from all corporations and organisations running activities in Nigeria, we might as well step down oil receipts to the background. But to what extent the organisations pay their taxes in Nigeria is a thing yet to be unravelled, especially in the oil and gas industry, the maritime and so on. If we can get them to pay then our worries are taken care of by half. The second leg is the income and property taxes; although we would need a veritable identification system to run a system as this, but in the mean time we can be innovative to get things done to get by, while we wait for a more sustainable and enduring ideal version when we would have sorted out the identity system.

Nigeria is far from any form of recession if we can get our arts together. As a highly informal economy, recession is hard to get on us because most activities and revenues are unaccounted for and isn’t within the banking and official system, this is one of the reasons managing money supply in Nigeria is a tough call. We have about thirty two million active bank accounts in Nigeria, in a country of one hundred and seventy million people, and about a hundred million adults (the BVN bank verification system says we have about 22 million active bank accounts in Nigeria). Then it is easy to see with this, the level of financial exclusion in the country, and to imagine the humongous level of funds in the informal market; monies with the traders (in their shops and at homes for businesses and personal use), monies with the currency traders and the neighbourhood traditional savings vendors (the ISUSU vendors), and the ordinary people. With all these and the precautions that we have extensively discussed in this article, we as a nation will not only come out of this economic situation, but will rise to take our rightful position as the arrow head of the African market and the black world.

At the end, it is not all unpleasant implications and perceived outcomes to the 2016 appropriation bill that is currently going through legislative scrutiny by both chambers of the National Assembly. This appropriation is the first of the Muhammadu Buhari led APC administration. Although there are so much discrepancies and irregularities therein, we shall yet look into it for whatever it is worth.

This budget estimate is coming on the heels of global economic downturn; especially with regards to the sharp slide in commodities prices, which is significantly impacting the Nigerian economy coupled with pockets of other equally significant home-grown difficulties. It is geared towards bridging infrastructural deficit, stimulating the economy and promoting inclusive growth; recognising and including the poor and vulnerable amongst us in the economic equation.

It is aimed to create a significant number of jobs in order to reduce the alarming rate of unemployment and underemployment especially among the youth. The poor and vulnerable through special intervention programs; e.g. conditional cash transfer and primary school feeding etcetera is catered for under this plan. The appropriation is targeted at building an economy that is less vulnerable to oil price shocks creating a resilient diversified national income base, and an efficient public financial management system. Increasing the country’s revenue by broadening the tax base and ensuring efficient collection strategy, blocking leakages and reducing cost of governance through IPPIS efficiency unit, etcetera.

However, the funding of the budget is challenged by the declining price of oil which has put enormous pressure on commodities dependent nations globally including Nigeria.

Indeed this budget is expansionist with a total sum of N6.08tr, which is an increase of about N1tr from the revised allocation of N5.09tr for 2015. The FG will fund the budget with N820bn, N1.45tr and N1.51tr from oil related, non-oil and independent revenues respectively aggregating to N3.85tr.

As a result of shortfall in revenue particularly that of the non-oil segment, the proposed budget has a deficit of N2.2tr but the sum of N900bn and N980bn will be borrowed international and domestically respectively. It is noteworthy to point out therefore that the N1.8tr which would be borrowed, representing 30% of the budget, will be absolutely used to executive capital projects, none of it will go into settling salaries and allowances, or any form of recurrent expenditure. This budget deficit represents 2.16% of our GDP (estimated to be about $521bn). Our national debt to GDP ratio remains one of the lowest not only in Africa but in the world. In an attempt to ensure that our debts do not constitute a serious burden on our national economy in the future, the Federal Government has resolved to service debt to the tune of N1.47tr in the 2016 fiscal year.

This administration recognizes how far behind we are as a nation in different areas of nation-building, which regrettably successive government failed to develop Nigeria infrastructurally. The government of the day, in a show of its commitment to build roads, boost power generation and invest remarkably in infrastructural projects has allocated in the bill the total sum of N1.8tr representing 223% year on year increase of capital expenditure.

It is glaring that travelling by road in Nigeria has become a serious nightmare, as our road networks across the country are in deplorable state and are presently death traps. Existing roads are neither maintained nor rehabilitated while the newly awarded ones are hardly completed. In addition, the power sector over the years has been in a state of neglect across the supply chain, affordable housing also has become almost impossible for the average Nigerian person. Therefore the Federal Government has allocated N433.4bn to the Federal Ministry of Works, Power and Housing for the execution of capital projects only.

In addition Nigeria cannot boast of a national carrier let alone state-of-the-art airport in this time and age, neither do we have an efficient railway system. Against this backdrop, the Federal Government allocated N202bn to the Federal Ministry of Transport for the implementation of capital projects for the fiscal year.

There are insinuations in some quarters that the government has not walked its talk of Nigerian’s economy diversification by voting N498.4bn and N18.6bn to the Ministries of Interior and Solid Minerals respectively. The logic is that, the Ministry of Interior accommodates Nigerian Immigration Service, Prison Service, Fire Service, Police Force etcetera but the Ministry of Solid Minerals and Steel Development can be compared to the Nigerian National Petroleum Corporation (NNPC) which the government is currently working assiduously to make it more transparent, efficient and possibly reduce Joint Venture cash calls.

The Ministry of Solid Minerals is less staffed and all the government is trying to achieve is reform the sector, partner with states and boost investor confidence in investing into exploration and exploitation of solid minerals in Nigeria. As it has been proven severally government has no business in doing business. Government is only expected to create the enabling environment for businesses to thrive; a fact this government is committed to achieve.

Lawrence Chukwuemeka