Renowned economist and author, Henry Boyo has dissected the 2020 budget presented by President Muhammadu Buhari on Tuesday and drawn the conclusion that it would be a wasteful expectation to think the the budget would translate into meaningful impact on the economy. In this interview explains in some detail.
How do you see the 2020 budget proposal by President Buhari?
I wouldn’t talk much about the nominal figures that are quoted for the different sectors and things like that because they have become meaningless to me over time. They will put money for the different ministries and sectors and at the end of the day nothing will be achieved. I will just try and raise issues on certain critical indices.
Experience has taught us not to expect much in our budget from the figures bandied around on various sectors. But none the less in other to be able to encapsulate the budget content and make comparison between this year, last year and other years, I think the critical thing to do is to look at certain indices such as the quantum, i.e., the total amount being spent, you also want to look at the level of income and debt, the areas of leakages in the economy, have they been plugged with regards to things like subsidy and all the other so-called interventions,. You want to look at the exchange rate stability, whether the exchange rate will be stable enough under the circumstances expected for the budget to achieve result without any major crisis in terms of Naira devaluation that will make the entire budget meaningless.
Lets zero it on the over N10 trillion that was budgeted?
For example you are talking of the N10.33 trillion budget which is about USD30 billion USD or something of that range and suddenly inflation and exchange rate devaluation might make N10 trillion naira barely USD20 billion instead of 30billion dollars. So, these are the critical indices we should look at and fundamentally you should also pay significant attention to the issue of interest rates and inflation because, in earlier budgets I think budgets were predicated apart from the issue of how much barrels of oil produced and the estimated price, budgets were always predicated with an inflation rate not exceeding so and so level, that puts everybody on guard. So if you look at these various indices you don’t really have to argue too much whether the budget is going to be effective or not.
You certainly think for instance that the quantum sum of the money involved won’t mean much?
Yes, if you take the issue of quantum sums. In 2014 or earlier you will find that we had budgets in excess of between 4-5 trillion naira but don’t forget that the exchange rate at that time was about 160 or so, which meant that we were also still talking the same amount of dollars still about 30b dollars too. So if you now have a situation where you are extolling 10 trillion naira budget as increase spending that will drive the economy and provide for infrastructure, you are really deceiving yourself because in real terms this year’s budget is not bigger than what you had in 2013, 2014, or thereabout. So if the 2013, 2014 budgets were about the same thing did not yield much impact on our welfare and infrastructure, it will be a wasteful expectation that this same amount would trigger a development process that would accommodate not possibly 160 million people as at that time but nearer 200 million now. So know from the word go that in terms of quantum it is meaningless because of the factors I have explained to you. So whether they tell you that next year they are going to spend over 20 trillion and you get excited and say things will improve then you don’t have a sense of history because the incremental rise in the budget has never, ever translated into meaningful impact in Nigeria.
The second thing of course, is that, you will say, ‘Okay, if we are going to spend so much, where are we even going to get money from and then you find that almost 25 to 30 percent of the budget will still be borrowed again in addition to a debt burden which is speculated to be closer to USD 90 billion at the moment. So you now wonder, does it make sense to say you are increasing your budget spending by up to 10 trillion and at the same time with the heavy debt burden you have to still accommodate over 2 trillion debt in this new budget? It is really not a very meaningful position to take, so you find that the quantum of money is not as dazzling as ignorant ones will believe because it cannot provide expectation certainly.
So you are saying that our debt position will make a mess of the entire thing?
Of course, also you find that it’s sad that despite the heavy debt position we are in, you are having to go borrow and increase the debt burden, such that you now already spend close to 50 percent of the actual aggregate income you earn on debt servicing, that is not a safe path to thread in any language.
If you now want to say, ‘Okay what of the sectoral allocations, how do they fair?’ The critical areas to look for in that regard will be education, health, transportation and water, etc.
Education is among the least in the budget?
It may not be the least because they may tell you that there is UBEC allocation of about N130billion, so if you put that together education may not be the least but the point is, even with the UBEC one added that will make it to over N200billion it’s still not in line with the expectation of the United Nations or UNESCO for 26 percent of allocations (budget) to be dedicated to education. So we have failed there. The same thing in the area of health, the amount being spent on health is also a far cry from what the UN has prescribed for countries in our position. You talk of power…..where are we there? In other words, it will be foolhardy to expect that this budget will change our lives especially when similar budgets have not had any meaningful impact on our lives.
You have to look at those other leakages such as the huge leakage from payment of petrol subsidies, anything from 1 trillion to 2 trillion is being speculated as the figure from time to time, you really don’t know the true figure, so if you added that one trillion as an expenditure item in 2019/2020 budget you will find that the budget becomes a porous basket which cannot deliver anything but since we are all keeping quiet and believing that doesn’t happen because it happens through the back door but whether it happens through the back door or the front door so long as it happens the indications are the same. It disrupts the system, it disrupts the market, and it disrupts free competition and creates all kinds of hurdles for our local manufacturers as well. So when you look at the budget along with these parameters it is very difficult to clap your hands and say, it’s going to be better, we don’t know. We should not forget that the budget is influenced by inflation fluctuations because even if you say N10 trillion, if the inflation goes from 10 percent to 15 percent or something like that, you are in trouble. Even 10 percent is bad enough because 10 percent means that this your N10 trillion budget is by the end of the year before you spend you might lose 10 percent or 1 trillion as a result of inflation. In other words, you will find that projects that are supposed to be completed were not done because of the effect of inflation. In any case you must also wonder why is it that every year when they budget so much even though the ratio between capital expenditure and recurrent expenditure is supposed to be tilting towards capital expenditure, surprisingly it has remained stagnant at around 30 percent or less for capital expenditure and 70 percent for recurrent expenditure annually and nothing is being done with this. With that kind of balance, it will be unexpected that capital infrastructure should improve at any commendable rate. But as I said if you don’t predicate your budget with inflation rate as well as the exchange rate base anything happens during the year then you are in big trouble. So looking at our budget rituals year after year, you can say this one will not be an exception because it won’t amount to any meaningful or genuine development.