At the just-concluded International Monetary Fund/World Bank Group Annual Meetings, all the finance ministers of the world and the governors of central banks met to assess the state of the world’s economy and finances so that each country will get to know what is happening and take adequate measures to either protect its economy or adopt measures to foster its economic growth in the content of trends and developments around the world. This is the major reason of the annual meetings. It was also a venue where nations seek advice on how they can manage their economies in the context of the global environment and many shared experiences.
Nigeria was represented at the meetings by the Finance Minister, Dr. Ngozi Okonjo- Iweala and CBN Governor, Mallam Sanusi Lamido Sanusi. From the various seminars, papers and discussions at the meetings, it was clear that there was high level of uncertainty in the global economy. Several discussants submitted that there may be further slow down of the global economy describing the gains so far made as very fragile.
Two central themes came on board the discussions – that of ravaging disaster wreaking havoc across the globe as a result of climate change and the need to build into national planning, disaster management; and the urgent need for nations to build buffer to contain external shock in the event of economic recession and for managing disasters when they do occur.
While these issues took center stage in Tokyo, Japan, President Goodluck Jonathan presented the 2013 appropriation bill to the National Assembly. The bill has since generated heated debate especially on what should be the right benchmark for crude oil price for the 2013 budget proposal before the National Assembly. In the current budget debate as to the rationale for using $75 as benchmark price for crude instead of $80, it is pertinent that Nigerians take cognisance of what is going on globally, in order to position the nation for economic development to take place. It must not be personalised and it should not be about who wins the argument. It should be about what is good for Nigeria in the context of present realities.
If the budget benchmark is moved from $75 to $80, the question to ask is; what advantage will the ordinary Nigerian derive from it? Moving the benchmark to $80 or more, will not in any way increase the revenue accruing to the nation. If Nigeria produces two million barrels per day and sells at the international market for $100 per barrel, the revenue generated will be $2 billion. That the budget is based on $75 will only mean that Nigeria will spend $75 from every $100 earned and save $25. If the benchmark is moved to $80 per barrel, Nigeria will spend $80 of every $100 earned and save $20. What this means is that the executive arm of government is saying ‘let us save an extra $5 now that prices are good’ while the National Assembly members are saying ‘no, spend $5 more now and save less.’ It also means increasing the amount available for sharing among the three tiers of government from the common pool. There is no increase in revenue generation into the federation account.
As it is in economic history, a poor country caught in poverty trap will always want to consume every kobo it earns while those climbing the ladder of wealth would always save part of their income. It is from savings that funds are released for investments to be made whether at household, corporate or national level. Without savings, no investment can take place. Nigeria needs to save now instead of squandering what it earns now on subsidy that is fraught with corruption.
A budget oil benchmark price of $75/barrel for the 2013 period is below current world market prices and based on moving averages of the world oil price, allowing for uncertainty in world oil price movements. The question is what the extra amount will be spent on? Already, the budget is 72 per cent recurrent and 28 per cent for projects that will benefit the common man. Will it not be better for Nigerians to focus on areas where additional revenue will be generated from? Why are we so fixated on sharing and not on baking the proverbial national cake?
The bigger the cake, the larger will be each component’s share of it. Nigerians keep thinking that oil price will hold firm, of which there is no guarantee, nobody can guarantee that. Nigeria needs to make sure it has alternative resources in the event of the collapse in the price of oil. Has the National Assembly given thought to the fact that the various reforms going on in the power sector, port, and infrastructure can generate much more revenue for the country than oil? Is it not shameful that Nigeria still imports fuel and spend billions on fuel import subsidy? The National Assembly should convince the nation why the benchmark should be $80 outside spending more on wages, salaries and entitlement of a few privileged Nigerians in public service.
