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All is not well with Nigeria's 2010 budget and those who should know have since been warning that it might just collapse like a pack of cards in the next couple of months.

Already, there are fears that the current financial pressure on the Federal Government may just be one of the consequences of this development, which may affect project execution in several states and local governments where Internally Generated Revenues are (IGRS) not too robust.

But there are worries that if this trend of event were to continue for long, recurrent obligations of the three tiers of government may suffer severe set back as many may find it difficult to pay staff salaries and emoluments.

Having been formulated at the peak of political and economic stalemate occasioned by the ill-health of the late President Umaru Yar'Adua, coupled with the adverse consequences of the global financial meltdown, not many are surprised that its vital components have remained deficient and highly-flawed.

Although the N4.6trillion budget has already been approved by both houses of the National Assembly and accented to by President Goodluck Jonathan about a month ago, development and budget experts within and outside government have since concluded that the assumptions that informed its formulation were overtly ambitious and misleading when evaluated against the realities of the moment.

At the moment, sentiments so far expressed by various groups are considered too weighty that even the National Assembly and the executive are now contemplating a downward review of the projection made therein.

If these adjustments are eventually adopted, the implication is that several development projects meant to kick-start the economy may just be put in the cooler at least for now pending when the situation improves.

The latest turn of events could be worrisome for administration officials most of whom may just be planning to leverage on these projects to oil their political machinery ahead of the 2011 general elections.

It was perhaps on the basis of the above dismal record that the Jonathan administration (so it seems) set out to launch the 2010 budget which was anchored on the need to create a vibrant and robust economy that would ginger the productive capacity.

Addressing the newly-reconstituted Federal Executive Council (FEC) last month President Jonathan charged the ministers to hit the ground running with their work-plans for the implementation of the budget, considering the country has lost ample time due to the political stalemate arising from Yar'Adua's ill-health. The government had sent a proposal of N4.4 trillion to the National Assembly with a deficit of N1, 32trillion or 4.05 per cent of the Gross Domestic Product (GDP).

After due consideration of the Appropriation Bill, the National Assembly passed an appropriation of N4.4trillion with a deficit of N1.52 trillion or 4.66 per cent of GDP, which the executive council hopes to meet the targets set for Nigerians this year. Federal Government's assumptions for the budget were based on a production capacity of 2.35million barrels per day, a benchmark price of $67 per barrel and an average exchange rate of N150 per dollar.

However while signing the budget, the president expressed the hope that if faithfully implemented, it would accelerate national development and make life a bit more comfortable for the ordinary man.

It was therefore not surprising that the Minister of State for Finance, Mr. Remi Babalola, in line with these sentiments, early this year gave an insight into how the 2010 Appropriation Bill would liberate the economy in the interest of the citizens.

While acknowledging some of the challenges that tended to frustrate previous efforts at kick-starting the economy, the government vowed it would not fail to implement the budget seen as the largest in the Nigeria's history. It was obvious that government's optimism was predicated on certain economic fundamentals which it considered favourable to its course at the point of articulating the document, but which have since been faulted following some of the recent developments in the domestic and international economy.

With oil prices remaining well above the 2010 budget benchmark, government was convinced the amnesty deal brokered by the late President Yar' Adua would continue to guarantee uninterrupted seismic activities and crude oil production in the Niger Delta. It was in the light of this confidence, that government set some benchmark that many considered outrageous.

This thinking was further bolstered by the fact that the second round of banking reform which came on stream last August has reached a crucial stage where the government can easily predict the direction of the economy, considering it has been actively managing liquidity in the banking industry over the period.

Just like Mr. Babalola explained, the government had already put in motion a series of fiscal measures to further stabilize the economy.

His argument was further bolstered by the Finance Minister Olusegun Aganga, who assured the budget would not suffer any significant setback in terms of financing and implementation. According to him one ways to finance the staggering deficit was through government's plans to raise about $500 million bonds from the international capital market, stressing that the Jonathan administration would encourage heavy spending in productive areas that will yield social and economic returns to the citizens.

Aganga said the Finance Ministry would in addition focus on managing national revenue to guard against leakages in the system, enhancing the quality of expenditure and managing excess revenue. One area of leakages that Aganga may need to take a serious look at, according to some observers, is the emoluments of members of the National Assembly and top administration officials. But notwithstanding the high hopes the government had about the budget, critics and even some of its officials have not hidden their fears about the budget and its faulty foundation.

Outside the bogus and glaring discrepancies contained in the budget observers are deeply pained that emoluments of public officers would eventually take a sizeable portion of the appropriation, leaving the rest of the citizens poorer. The claim by public officers, deficit finance and debt service commitments are too phenomenal for comfort, said a top government official who pleaded to remain anonymous.

He was concerned for instance, that the budget made provision of N200million for the rehabilitation and furnishing of the houses of 10 principal officers of the Presidency and an additional N100million for IT installations in the President's Office.

In addition, the Senate is to spend about N15billion as sitting allowance and another N270million for retreats. In the budget, N2.077 trillion has been earmarked for capital expenditure while N1.85trillion is for recurrent expenditure. However, even as there is an indication the Federal Government have may review the basis of the budget, it has been reported that members of the National Assembly are already agitating for increase in their emoluments from N9billion to N15billion an indication that quarterly allowances for each of the 360 members from N27billion to N42billion with each member expected to part with a minimum of N150million annually.

There are also hints that Senators are also warning up to seek about N10illion each in a quarter.

It was further muted that a $915million World Bank loan recently granted the country was meant to enable her pay the huge wagebill of public officers including governors, local government officials and senior officials of government.

However, midway into the budget implementation, there are fear in that the budget may hit the rock if urgent measures are not taken to fine tune its contents against current realities. The reality is that Nigerians may soon be confronted with some of the worst economic realities of the generation as the country may end this fiscal year more broke and devastated. Only last week, speculations were rife that the National Assembly may scale down the budget by between 35-40 per cent, an indication that several critical projects may be abandoned by the administration for lack of funds.

Director-General of the Budget Office, Dr Bright Okogu, recently confirmed for instance, that the final figures signed into law by President Jonathan was about N200billion above the N4.6 trillion approved by the National Assembly, even as he stated that efforts are being made to harmonize the figures to ensure easy implementation. As expected, a meeting of the Federal Accounts Allocation Committee FAAC and the executive scheduled penultimate Friday was deadlocked as state Commissioners for Finance, who are members of the FAAC, rejected the N452billion presented for sharing among the federating units by the government.

The FAAC members had wanted government to pay arrears from an already depleted $4.3billion Excess Crude Account which had accumulated since January, from the $57/ pb and the $67 benchmark for this year, forcing the, Mr. Babalola to warn that government may be compelled to review the basic assumptions for the budget if the trend continued.

He noted that if the government continues to augment revenue sharing from Excess Crude Account, the country may run into serious problems over the next three months since the account was currently not quite healthy Speaking in a television programme recently, Governor of the Central Bank, Mallam Lamido Sanusi, predicted that the 2010 budget may not succeed since it was premised on totally unrealistic oil price assumption.

The CBN boss said the apex had advised the government to hedge its oil price to minimize the impact of any future decline in oil prices. According to him, the production quota of 2.3million barrels per day was unrealistic since the oil fields in Iraq are coming back to production in 2010, while President Barack Obama has allowed oil companies in the US to drill in the offshore of locations in the United States, pointing out that these developments were likely to reduce Nigeria's OPEC quota this year.

So, we have defined a budget that is not likely to succeed, stressing that the only way out was for the nation to hedge the $67 benchmark price against any fluctuations in the course of the year.

However, doubts about the budget has not stopped from acting out its interventionist roles where necessary to ensure the basic components of the economy do not grind to a halt. Only recently, the CBN provided a total of N500billion for intervention in the energy and agricultural sectors.

According to the apex bank, the whole idea was to ensure effective refinancing of existing loans owed banks by the real sector particularly the SMEs. Meanwhile as if to confirm fears of the looming dangers ahead, Nigerians woke up recently to the startling revelation that the foreign reserves which rose to an all-time high of over $65billion under the immediate past Obasanjo administration has suddenly been depleted by the current administration in its attempt to augment the lean inflows into the Federation Account, raising fresh doubts as to how the Jonathan's government intends to finance an estimated N1.5 trillion deficit in the 2010 budget.

The reason for this apprehension is the fact that the Budget which is unarguably the highest in the nation's history, may hit the rock due to the non-availability of funds to prosecute key developmental projects earmarked for implementation. With a budget size of N4.6trillion and a deficit of N1.5trillion which observers consider a threat to price and exchange rates stability, given the benefit of hindsight of history with regard to deficit management and the impending general elections early next year, raising fears in some quarters that tougher times awaited Nigerians in the months ahead.

But while there are strong indications that the National Assembly may be forced to scale down the appropriation bill by as much as 35 to 40 per cent due to concerns that revenue forecasts may not be achieved at the end of the day, many still think that the lack of appreciable progress in infrastructural rehabilitation would indeed rob off adversely on various sectors of the economy and possibly make things more difficult of the ordinary man.

The earliest signs that all may not have been well with the Nigerian economy came only last month, when the Accountant-General of the Federation (AGF) Alhaji Dan Kwanbo, raised the alarm that the Federal Government may have been broke and might therefore, find it a bit difficult to finance and implement the 2010 budget. The AGF, for instance was worried that the administration had in an attempt to augment the deteriorating resources continued to dip hands into the foreign reserves meant to sustain her import bills.

Only recently, the Ikeja branch of Manufacturers Association of Nigeria (MAN), issued a statement that capacity utilization has dropped to about 27 per cent from 40 per cent at the end of 2009, with growing concerns that the situation may deteriorate further if government fails to take urgent corrective measures.

Among other considerations, the association cited harsh operating environment including high energy costs among its major challenges.

The Organized Private Sector (OPS) still believes that the biggest challenge facing manufacturers remains the power sector, because despite being rated as the greatest obstacle to economic development, job creation and poverty alleviation, the sector has failed to improve even with the huge injection of public sector funds by the administration. Not even the decision of President Jonathan to personally manage the sector has given manufacturers any hopes that the situation would improve at least within the current financial year.

Commenting on the direction of the budget early this year, Minister of State Babalola, explained that the economy will run on a positive and optimistic note as the Federal Government would establish special intervention funds to provide credits for commercial farming and support necessary agro- processing linkages to sustain the industry. He added that improvement in the rating would depend on the nation's ability to sustain non-oil growth and raising capita income by addressing infrastructure through investment and reforms.

Babalola said the government has set up a monitoring and evaluation system that uses special electronic templates to track and report on actual output and outcomes achieved by Ministries, Departments and Agencies of government to what was actually delivered by them. The minister pointed out that policy priorities of the government will include building a robust and resilient economy, improving public finance management, enhancing the efficiency of the government expenditure as well as eliminating inefficiencies, leakages and rents, seeking activities in the downstream petroleum sector through deregulation.

He also listed diversification of the productive structures in agriculture and SME sectors, enhancing domestic resource mobilization and putting additional fiscal measures that would help stimulate the economy. While enjoining the citizenry to look beyond the immediate challenges to build a new and strong Nigeria that represents the collective pride of present and future generations he stated that the economy would record appreciable performance and remain resilient in 2010 given government's efforts.

But in an interview earlier in the year, the Lagos State Commissioner for Local Government and chieftaincy Affairs, Mr. Rotimi Agunsoye, attributed the problem with Nigeria's economic growth to government's failure to allocate substantial amount of money to the local government to boost grassroot economic growth.

According to him, 'The economy is not growing as expected because some powerful people believe that there is the need to have a powerful centre that is not serving the economic benefit of the larger population of the country'. He said that the country can develop faster if states and local governments are constitutionally empowered to handle most of the activities that are critical to the well being of the people.

Commenting on the latest inflation figures released by the Federal Bureau of Statistics, an economic commentator, Razia Khan, warned that tougher times awaited Nigerian if the current increase in inflation rate fails to abate in the near future.

Khan, who is the Head of Macroeconomics and Regional Head of Research, Africa Global Research at the Standard Chartered Bank, noted that the rise in inflation to 12.5per cent in April from 11.8per cent year on year in March was a worry in the context of continued easy monetary policy, and the looming inflation risks ahead. She, however, pointed out that the development was unlikely to signal any change in policy rates.

According to her, 'With monetary growth still subdued, higher food inflation – up from 13.5per cent in March to 14.3per cent y/y in April – appears to have been a key driver of the increase in the headline rate of inflation. The reasons for this are most likely structural, and there is little that monetary policy can do to rein in 'inflation' of this nature.'

Going forward however, whatever the short-term dispute around arrears and the delay to the FAAC allocation currently pressuring liquidity in the money markets, warning that the amount of government spending envisaged pose considerable risks to the likely inflation profile.  In the absence of reforms that might help the economy overcome some of its structural rigidities, any further substantial rise in monetary aggregates will pose some risks to prices, given the backdrop of still-weak demand.

Rather than react by increasing policy rates - the effect of which would be somewhat questionable, she advised there should be a deliberate effort by government to allow for gradual appreciation of the naira to rein in any future price pressures.  Given that banks are in aggregate still flush with liquidity, she argued that the transmission mechanism of Naira (NGN) appreciation was likely to be more effective than conventional interest rate policy in containing future inflation.

An analyst, Mr. Eze Onyekpere stated recently that the budget was doomed to fail from inception, stressing that the huge deficit was not a good measure of fiscal prundence and does not augur well for predictability of funding. He contended that although fiscal deficits may be premised on the need for substantial intervention in essential services to maintain aggregate demand, promote economic growth and reduce poverty, this should be balanced against the hazards of unsustainable government expenditure.

Even within government circle, there are apprehensions that the budget may fail to achieve its targets.

His views were in tandem with what the Director General, Nigeria Institute for Social and Economic Research (NISER), Prof Tunji Akande, who warned that prospects for economic growth were uncertain amidst lingering economic challenges. The NISER boss noted, among other things, that the international oil and gas market has remained unstable while prices have been largely volatile.

With manufacturers still operating below 29 per cent capacity, overall 7.53 projected GDP growth may be difficult to achieve. According to a former president of the Lagos Chamber of Commerce and Industry, (LCCI) Asiwaju Solomon Onafowokan, the level of deficit in the economy will pose serious risks to the economy which can trigger inflation, swell lending rate and weaken the purchasing power of average Nigerians.

The former LCCI boss was also not comfortable with the level of debt service projection of N517billion, warning that if the situation was not well managed Nigerians may soon land in another domestic debt trap

He described the provison as amounting to about 40 per cent of total capital budget pointing out that the development was indefensible.

But if the budget fails as predicted, it may be because government policies over the years have failed to address the challenges of the real sector. It was against this backdrop that the President of NACCIMA, Chief Simon Okolo, advised the Federal Government to urgently implement policies that will energize the interface of industry and agriculture as part of efforts to attain the millennium development goals.

By October 1, 2010, Nigeria would have attained 50 years as an independent sovereign state. Ordinarily, this proverbial golden jubilee of her nationhood calls for celebration since it is a point where her economic and political potentials ought to have given hope to her distraught citizenry as with other nations currently rated in her category.

Indeed for most, golden years are epochal and usually the peak of most lives and careers. It should also be a period for stocktaking that helps those involved to set new goals and pursue new priorities.

But whether this can really be said of Nigeria in the light of recent developments, as she turns 50 in October would indeed be a matter for debate. This is because rather join in the celebration of quality achievements by leadership, the citizens have continued to recount tales of woes expressed in mindless deprivation of the people, unemployment, disease, hunger and corruption in high places.

With the abysmal degeneration of basic infrastructure across the country, the global assessment of Nigeria as one of the poorest in the world at the moment can be directly linked to her inability to invest in the lives of her people despite the huge provisions often made for such purpose. A cursory look at the history of budgeting in the country since 1960, shows that the successive administrations have failed to implement up to 70 per cent of budgets meant for any given financial year, a development that has affected the financing of development projects.