If all goes according to schedule, sometime this week, President Muhammadu Buhari will present details of his government’s tax and spend plans for fiscal 2018 to the national assembly. However, over recent years, not much of the budget process has gone by the book.
The most obvious shortcoming is the failure by government to process the annual budget expeditiously. This has meant that expedients designed to paper over cracks in the process have become the rule. Beyond the fact that our national budget is only available for implementation by the third quarter of each year, our national planning process faces much deeper structural problems. For example, in the January-July 2017 period, by one estimate, the difference between what the federal government had projected as revenue in the 2017 appropriation act and the actual budget take was 35.1%.
Now, one would think that given the incumbent government’s penchant for bruiting about Panglossian statistics on both domestic crude oil production numbers and oil prices (both up on budget estimates), this difference would have been positive. No. Instead, in the 7 months to July 2017, the nation earned N2.95tn as gross revenue, after budgeting for N4.55tn. Crude oil export earning still accounts for much of our official revenue — coming in at about 66.1% of the actual earnings for the January-July period.
Despite oil prices averaging US$51.56 per barrel in the 7 months period (we had budgeted for US$44.5pb for the year), the shortfall in oil revenues was about N1.12tn. But crude oil export earnings were not the only culprit. Gross non-oil revenue came in under budget too. We budgeted N1.43tn for the period. We earned N999bn. Across the two categories by which we measure gross non-oil income (companies’ income and other taxes; and excise and fees, import duty and customs revenue) this under-performance of budget was similarly replicated.
Now, it is easy to turn this into a partisan exercise: evidence that the Buhari administration is not working. But it helps to recall that over the last 12 years, or thereabouts, no government has implemented the budget properly. We have invariably exceeded our recurrent spending limit, while putting in a dismal shift implementing the capital part of the budget. While this readily accounts for why domestic installed capacity shrinks daily, it does not explain why our budgeting process is so flawed.
That governments will continue to play politics with the numbers on the economy is evidenced by the recent claim by the Buhari administration that the economy is on the mend.
Yes, it grew by 0.55% in the three months to end-June 2018 (subject to revision by the official bean counters), and it is scheduled to grow by as much, if not better, when third quarter GDP numbers are released. But only a little part of this growth is the result of reforms by government to the economy. Yes, we have pole-jumped several notches on the World Bank’s ease of doing business log. But all this shows is that there are tremendous opportunities for positive changes to the way the economy works. And that with the right political will Nigeria might not be as hard to get to work as a succession of inept rulers often suggest.
But still, much of the growth traction the economy has notched up of late is the result of us selling more crude oil at higher global prices. The economy is still comatose. Inflation remains vertiginously high. Unemployment even higher. The misery index is in stratospheric territory. The budget deficit grows. Official debt numbers ratchet up at a dizzying pace. Our population growth rate (hard to believe some numbers touted here) remain elevated. Despite the positive outlook represented by the purchasing managers index’s trajectory, industrial capacity continues to shrink. Much of the funds inflow into the economy (much of which has helped to support the strengthening naira narrative) has been “hot money”. Not enough has gone into planting factories and workplaces.
This list goes on. What is to be done? One possible answer is to deprive government of the rose-tinted spectacles with which it contemplates the economy. But it is one that is unlikely to happen soon. At a primary level, the central challenge is to make government finances more transparent, and to shift success metrics away from intentions to outcomes. The latter, obviously makes more objective assessments of government’s execution of its plans possible. Even this, it does not do half as well as the former. For a more transparent fiscal space will also help address the perceptions of alienation that are currently crimping the efficient working of our state and the economy that it rides on.
However, we could look to create an independent body whose job will be to look at government’s plans, and test these against less politically compromised estimates in order to tell how realistic such plans are of achievement. Put differently, this economy so clearly needs an independent agency that will square claims such as the recent one by the Minister of Labour and Productivity, Chris Ngige to the effect that since assuming office, the Buhari administration has created 7 million blue-collar jobs against the fact that the economy’s unemployment rate was 14.2% in the last quarter of 2016.
Given that the fourth quarter 2016 count was the ninth consecutive quarter that the unemployment rate had risen, it follows that we have been creating far fewer jobs than there are would-be workers. That is if we discount the possibility that the 7 million jobs to which the minister alluded did not all happen this year.
Either way, an economy with a development mountain as high as ours to climb cannot continue to play fast and loose with how we understand and assess key indices.