Omodele Adigun
The last may not have been heard of the next year’s Appropriation Bill as experts tasked President Muhammadu Buhari to rebase the foreign exchange (forex) market to earn additional N3trillion rather than resort to borrowing.
According to Olisa Agbakoba (SAN), the “public sector borrowing requirement needs review so that revenue-to-debt ratio is less than 30 per cent.”
In the 2020 budget proposal presented to the National Assembly last week by President Muhammad Buhari, the Federal Government plans to expend N10.33 trillion, targets N8.155 trillion revenue and N2.175 trillion deficit. In his article entitled, Missing Links in 2020 Budget’, obtained online at the weekend, Agbakoba, said: “In my field, as an expert in shipping and hydrocarbons, there is banking, shipping, legal and insurance, but very little of the cash from this value chain from crude oil stays in our economy. We need to reset the clock.”
In the budget presentation, the president had said: “Investing in critical infrastructure is a key component of our fiscal strategy under the 2020 budget proposals.” He added that the “main emphasis” will be the completion of “as many ongoing projects as possible, rather than commencing new ones”. The president also revealed that MDAs “have not been allowed to admit new projects into their capital budget for 2020, unless adequate provision has been made for the completion of ALL ongoing projects”.
He hinted at “innovative borrowings using instruments such as Sukuk, Green Bonds and Diaspora Bonds” to finance infrastructure.
Commenting on this, Agbakoba said:
“Foreign and domestic investments in infrastructure is possible if the proper legal institutional and regulatory environment is established. Public revenue will be enhanced by at least N3 trillion if we rebase foreign exchange rates from N305 to N360 and remove fuel subsidy at once.
“Our public sector borrowing requirement needs review so that our revenue-to-debt ratio is less than 30 per cent. Banks must focus on their primary function of lending not trading as we have seen in purchase of Treasury bills in excess of N400 billion. Tax collection efficiency, and not increase,Í should be the policy
“Working from my diagnosis of Nigeria’s economic disease, we need to work out a macro-economic development framework that lays out a harmonised fiscal, monetary, investment, legal, institutional and regulatory agenda. Fiscal policy or rate at which government spends, must be dramatically expansionary. We cannot have an anaemic budget of N10 trillion for 200 million Nigerians, which is equivalent to N50,000 per person, per annum. This will keep us in poverty when we need double digit growth!
“On the basis of a GDP of $400 billion, the baseline annual budget should be 20 per cent which approximates to N20-N30 trillion annual spend rather than the miserly N10 trillion budget. Our annual spend is anaemic and we have to infuse large money. For monetary policy, we need urgent quantitative easing, which is easing of all interest rates in particular to slacken the heavy burden of high interest rates on lending afflicting long suffering Nigerians.
“We must be very proactive to look for new funds. Traditionally, public revenue has depended on tax and oil receipts but there are far too many other sources – the maritime sector is laden with cash, agriculture and the blue ocean, trade, the real sector, and controversial as it may appear, revenue that can be derived from new legislation on immunity from criminal prosecution. Government must consider legislation on criminal immunity to those who have plundered us, and we will likely see massive inflows of our money in foreign banks back to us. At present, the money is out of our reach anyway! I estimate $100 billion will flow back if we grant immunity from criminal prosecutions but with civil sanctions.”
Commenting on the proposed budget in his column,. Mr Simon Kolawole, the Publisher of The Cable, Nigeria’s online newspaper, lamented that the one missing item in the budget is a plan to cut down on borrowing.
His words: “We’ve been running deficit budgeting for decades — which I don’t think is a crime — but when are we going to be more innovative with funding so that we do not incur more debts? Buhari talked about “innovative borrowings using instruments such as Sukuk, Green Bonds and Diaspora Bonds” to finance infrastructure. How many more debts can we take? We are already servicing debts with a quarter of our federal budget. Why do we have to keep piling debt upon debt, no matter how favourable the conditions are and no matter the ratio to GDP? As many economists have pointed out, you pay your debt from your revenue, not your GDP.
“Critically, the one missing item in Buhari’s budget is a plan to cut down on borrowing — not just raising more revenue through increase in VAT. If you have an annual need of $10 billion to finance infrastructure, you have to look at your resources carefully and decide which ones you can finance and the ones you need to borrow for. I would suggest, for instance, that government should focus on infrastructure that is central to the health and education of ordinary Nigerians. “The private sector can handle some others. Why should government be taking loans to do railways and inter-state roads that are commercially viable and can be better managed by commercial entities?
“I would say some of the most commercially viable roads in Africa are in Nigeria — already identified and mapped out by the Infrastructure Concession Regulatory Commission (ICRC). Take a look at the Lagos-Ibadan expressway. Why should the government take loans, whether commercial or concessionary, to build such a road? Buhari himself has lamented time and again the state of federal roads and the lack of finance to fix them. Mr Nurudeen Rafindadi, the managing director of the Federal Roads Maintenance Agency (FERMA), said recently that the agency needs N100 billion yearly to rehabilitate 36,000 kilometres of federal roads across the country. We need good money.
“What can we do? The federal executive council recently announced that toll gates will soon return to federal highways. If my reading is right, this is to generate money to maintain the roads or pay back loans we took to build them — or both. The idea of toll gates is good but I would not recommend that government should be collecting the money. It is better to concession the roads to reputable investors who will build and maintain them under a Public Private Partnership (PPP).”