By Omoh Gabriel, Group Business Editor
2009 is probably a year that Nigerians will be made to pay for the lack of policy direction of their leaders. The year seem to be the beginning of the biblical pharaohnic seven years of famine and bad harvest that followed a previous seven good years of harvest. Pharaoh the king of Egypt had been forewarned in a dream where he saw seven fat cows that were devoured by seven lean cows which afterward appeared not to have eaten any thing. The great dream interpreter, the proverbial Joseph asked the king to save for the seven lean years, his advise was yielded to and Egypt was spared the harrowing experience of famine.
In the eight years of Obasanjo reign crude oil prices were gyrating upwards and the price was always above the budget bench mark. Nigerian own Joseph, Dr. Okonjo-Iweala and her economic management team advised that the excess be saved for a raining day, thus the excess crude oil account was created. But soon afterwards the account became contentious and the need to share the proceed on that became a national issue. The account was shared to a point of depletion. If that savings made in the Obasanjo years were intact as advised by the IMF/World Bank Nigeria would have some funds to fall back on. Today the financial melt down has left the global economy into a deep recession almost of equal proportion to the great depression of 1930s. As a result of low demand for crude, prices of the commodity has crashed from $147 per barrel in July 2008 to about $40 per barrel in December. Crude oil delivery for January were sold at about $36 per barrel about $9 per barrel short of budget bench mark of $45 per barrel. The worries is that if prices remain below $40 per barrel the federal government budget and that of the states will be frustrated as their will not be enough resources to finance the recurrent expenditure of about N1.6 trillion not to talk of the capital projects. Government workers must know that if the situation in the oil market does not improve to at least the $45 per barrel bench mark, governments across the country that depends mainly on federation account allocation will face months of unpaid salaries, and the attendant industrial unrest and agitations. Teachers in some states are already facing the challenge of unpaid salaries which is the usual starting point.
What this means is that there will be no additional job created in 2009 and many who are currently on employment may lose their jobs. As the government resort to domestic borrowing, it will crow out the private sector from having access to bank loans as it will jack up interest rates. As interest rates goes up only the government can afford to borrow at all cost. Many manufacturers will be denied access to working capital and may either reduce their production levels which will lead to low capacity utilisation, cut back in production line, will not expand or invest in new production line or close down and send their work force to the labour market.
As this happen stock of inventory of finished products will stare manufacturers in the face as a result of low purchasing power of the citizenry. Inflation of course will take its toll on the economy. Already the government has forced the Central Bank of Nigeria to devalue the naira, it most likely that in the cause of the year the naira will be further devalued.
Reason to worry for 2009
The basic assumptions on which the projections for the 2009 budget were calculated seems not to be holding ground. The price bench mark of $45 per barrel is far from reality, the production level set for the budget is not achievable based on OPEC quota and the reality on ground in the Niger Delta.The naira denominated $500million bond proposed in the budget is being opposed by the National Assembly, the fiscal responsibility act limits government deficit to 3 per cent of the GDP, but the current deficit is 3.9 per cent and requires the National Assembly approval to implement. In the face of these reality government which is the biggest spender in the Nigerian economy has introduced austerity measures. President Umaru Musa Yar‚Äô Adua in the provision of the 2009 budget introduced austerity measure in Ministries, Departments and Agencies to combat the financial constraints facing the 2009 budget. This will in the course of the implementation of the budget bring about belt tightening of the every Nigerian. This is more so as the revenue expectation from oil is falling short of target as already the price of crude has slide to $36 per barrel below the $45 per barrel benchmark of the 2009 budget and the fact that OPEC has cut Nigeria quota to 2.05million barrel per day while the budget is predicated on oil production of 2.292million barrel per day. ‚ÄúDue to these serious resource constraints, the 2009 budget features certain cost saving measures which include no new procurement of new vehicles, no construction/acquisition/purchase of new office buildings, reduction in the provision for office furniture and equipment in non essential cases, reduced provision for international travels and transport, focus on priority sectors, reduced provision for workshops, outlays on meals and refreshment have been rationalised across the board, minimal capital votes for some MDAs. With fiscal restraint there will be limited money in circulation in 2009. As most businesses in Nigeria depends on government contracts it appears that business activities in 2009 will be on the low side. The 2009 situation is more dicing when
The former minister of Finance Dr. Shamshudeen Usman before his re deployment disclosed that ‚Äúthe deficit component of the 2009 budget was higher than what the fiscal responsibility act provided for and would require the approval of the National Assembly for the executive to implement‚Äù. He said that the act provision ‚Äúempowers the executive to raise a deficit of 3 per cent of GDP but that the current deficit is 3.3 which is above the provision of the act and would need the approval of the legislature for it to stand‚Äù. Making further clarification on the budget the minister said that the source of funding of the deficit has been well articulated. He said that ‚Äúthe deficit is to be financed by out standing signature bonuses, privatisation proceeds, recall of $200million from Africa Development Bank/ATF, unspent balances of 2008 budget and domestic borrowing‚Äù.
Giving the breakdown of the amount expected from the various outlined sources to finance the deficit the minister said that outstanding signature bonuses from oil block sales amounts to N155billion, Proceeds from privatisation N100billion, the recall of $200million from yields of Nigeria investment in Africa Development Bank Trust funds (which has grown to $400million) N25billion, Domestic borrowing will yield N420billion, Nigeria International Bond that will be floated will yield another N62billion and about N330billion from the unspent 2008 budget will all be put together to finance the deficit component of the 2009 budget.
What to do
2009 is a year that every Nigerian must learn to be prudent. Save more and invest in areas that can provide additional income. It is a time for individuals to spend only on essentials and the very necessaries of life food, shelter, education for the children, health care and clothing. It is not a year for parting as every kobo matters in the family. Except for those who stole government money. In 2009 putting two cars on the road could exert serious pressure on individual finances as inflation is most likely to be high. It is a year that every Nigerian should demonstrate some sense of patriotism by buying made in Nigeria goods to keep jobs at home and the few existing industry running. Industrial out put may face some challenges as disposable income will be low and finished inventory are likely to pile up in firms warehouses. Companies may be compelled to spend more on advertisement to attraction the few customers that will have the financial muscle to buy their products. It is a period that individuals are likely to seek more than one paid job, moon lighting to survive. Some who have space in their environment may as well do part time farming to help provide certain of their needs through self help.