As we move towards the 2019 presidential election, there is trouble with our national finances, being the source of revenue to fund the federal and state budgets. This trouble has reached a critical stage that a national alarm should go off, to start an unprecedented debate so that everyone from all sectors of the economy will join in proffering solutions. It is obvious that even the persons who either want to continue in power or those who want to take over from them are not conscious of the parlous state of our finances. They are thinking of money flowing form the proverbial and imaginary sweet crude which will oil the machinery of government.
A chief contributor to this bliss of ignorance is the failure and refusal of the Budget Office of the Federation and either the Ministry of Finance or the Ministry of Budget and National Planning to do their assigned jobs under the Fiscal Responsibility Act on time. By law, the quarterly Budget Implementation Reports are to be published one month after the end of the quarter while the yearly BIR is to be published not later than six months after the end of the financial year. But the authorities do not take this responsibility seriously. They publish these reports as they desire.
It is pertinent to state that revenue projections undergird a budget and the variance between projected revenue and the actual realised should not be very wide. Not more than a five per cent variance may be tolerated as a good and fit practice considering that we are running a human system which may never attain perfection given that perfection only belongs to God. Now, what are the statistics from the fourth quarter BIR of 2017 which showed the full year projection of 2017 and what was eventually realized? From projected Federal Government retained revenue of N5,084.40bn, only N2,377.01bn was realised being 46.75 per cent of the projected revenue and a variance of 53 per cent. When other non-budgeted revenue heads such as refund from the Nigerian National Petroleum Corporation, exchange rate differential, etc. are added to the realised revenue, it comes up N2,657.67bn, being a paltry 52.27 per cent of the budgeted revenue and a variance of about 48 per cent.
Let us consider the components of this revenue big picture. The first is the Federal Government share of oil revenue projected at N2,122.18bn while only N1,125.05bn was realised, being a performance of 53.01 per cent, leaving a variance of 47 per cent. Non-oil revenue had a projection of N1,410.51bn while the sum of N956.67bn was realised, being a 67.82 per cent performance leaving a gap of 32 per cent. A further breakdown of non-oil revenue shows that the key subheads of Value Added Tax, Company Income Tax, Customs and Excise, and independent revenue all underperformed. The expectation from VAT was N241.92bn while the sum of N130.05bn was realised, being a 53.75 per cent performance; for CIT, the expectation was N807.82bn while the actual realised came up to N543.34bn, being 67.26 per cent performance. Customs and Excise had a projection of N277.56bn while the actual was N261.41bn which is a 95.26 per cent performance, being the best performance in the group. The perennial underperformer, independent revenue, had a projection of N807.57bn while the actual was N295.29bn, being a performance of 36.5 per cent.
This performance leaves more questions than answers. Why did oil revenue underperform at a time of high oil prices, without reported cases of militancy leading to disruptions in oil production? The composite BIR for the year states that “the average price of crude oil in the international market also represents an increase of US$9.77 per barrel (or 21.96 percent) above the US$44.5 per barrel oil price benchmark for the 2017 Budget”. The implication was that oil sold above the benchmark price in the international market. So, what is going on in the oil sector that we have not been told? Is it subsidy without appropriation, which is illegal and an assault on the constitution, mismanagement, fraud? Nigerians need to know. We are also daily told of the high performance of the Customs but they still missed their target. The impression always created is that the Customs have been exceeding their target. Why is the FGN always projecting a big figure for independent revenue year after year when it is evident that not much will come from the source? Alternatively, a lot is expected to have come from this source, especially in operating surplus from scheduled corporations; so, what is the FGN doing to support the collection of operating surplus in an evidence-led manner as provided in the Fiscal Responsibility Act? Where is the Fiscal Responsibility Commission in the scheme related to the collection of operating surplus? Again, oil revenue still comes top despite all the mantra of diversification of the economy.
Turning to the expenditure side, personnel had a projection of N1,884.07bn while the actual is N1,865.62bn being 99 per cent performance while debt projection was N1,663.89bn and actual at N1.634.93bn being a 98 per cent performance. This excludes other peripheral debt items which ballooned the figure further. In essence, the combination of personnel expenditure and debt repayment amounted to N3,502.55bn which exceeded the realised overall revenue by N844.88bn. The implication is that we borrowed to the tune of N844.88bn to pay salaries and debts. Also, whatever was spent on capital expenditure was borrowed. And the deficit ballooned from the projected N2,356bn to N3.805bn. Which means, 68.62 per cent of all our revenue are used to pay debts while the N2,765.53bn, which is the overall recurrent expenditure, is higher than all accrued FGN revenue of N2,657.67bn.
These figures should raise an alarm. They are not sustainable either in the short, medium or long term and they are totally unacceptable for a country of the size, with available resources and aspirations of Nigeria. The figures show that our budget is a huge joke; projections are never near the actuals and the budget is reduced to a mere exercise in projecting for what is not realisable. We are borrowing to pay salaries and repay previous debts and all pretences to executing capital projects is deceitful if it is based on borrowing. The debt is growing at an unprecedented scale and in geometrical proportions and no one seems to care. The unexecuted 2018 federal budget is going to be heavily reliant on borrowing while 2019 will follow the same trajectory. If we are not raising enough money to repay toady’s debts, how shall we pay back bigger debts tomorrow with an economy that is losing steam and where citizens and investors’ confidence is at an all-time low. The way we are going, the roof of this economy will collapse on all of us and the blame game of who caused the collapse will not save anyone.
We need to go back to the drawing board. The current Federal Government needs to open up to explain what it intends to do with this fiscal crisis. It is no longer enough to continue to pretend that all is well. If we do not open the space for interrogation and new ideas, when total bankruptcy sets in, we should all be ready to suffer the excruciating pains. We need creative thinking with the key operators getting out of the box so as to raise their antenna to new thought pathways. The time to act is now.
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