THE life of man has been known to be full of anxiety. Man has always been very concerned about the future. So are nation states.
The concern for the future has led modern nation states to design a kind of financial blueprint that guides their annual decision making process. This financial blueprint is what has come to be known over the years as budgets. It contains proposals for aggregate revenue estimate, and expenditure proposals. These various proposals are put in policy strategy to steer the economic course of a given country and enhance the living condition of citizenry,
For Nigerians, 1987 has gone into the annals of history. What has in stock for Nigerians s been the subject engaging those who matter. Every so often in the past few weeks, discussions are held over the preview of the 1988 budget. One of such gather-to preview the budget was the Nigerian Institute of Directors’ gathering at Eko Holiday Inn. At the lecture, Messrs Silvester Ugo, Ime Ebong and Allison Ayida gave talks on the 1988 budget.
Basically in any budget proposal, there are sources of revenue for the Nigerian government. These are oil customs, dn excise tariff, company tax and other receipts. Over the past years oil companies to be the dominant source of government revenue. The significance of this reality is that government has virtually no control over such a major source of its revenue.
OPEC in response to the forces of world demand for oil determines what quantity Nigeria should produce and at what price it should sell. This being the case, government estimates what the world oil situation will likely be in the incoming year and then settles on some reasonable price use for its estimates.
The expectation here is with the hostility in the Gulf, price are to settle at lease at $18.00 per barrel.
It would be wise for Nigeria to budget at something below $18. $15 would be reasonable for the 1988 budget. What this implies is that if on the average, OPEC’s present price is maintained in 1988, revenue from oil will not be more than it is in 1984, If there will be any change it will be more likely downwards than upwards.
Revenue from customs and excise are usually windfall as they are not designed primarily for revenue generation. In the pre-SAP days, they were instrument for industrial promotion and for trying to tackle Nigeria’s balance of payment problem. With SAP and FEM, this role has been eroded and much more what obtains now cannot therefore be expected.
The present government has stated its policy to encourage the development of non-oil exports as well as make Nigerians industries more reliant on local sources of raw material and intermediate goods. In the 1988 budget, industrialists expect that the customs duties have to be restructured to aid in the achievement of these SAP objectives.
The constraint on the volume of imports now is the availability of foreign exchange in FEM. The main source of ths outside some loan from the World Bank, is the receipt from oil exports after taking into account Nigeria’s foreign obligations that are due for servicing.
Nigeria does not expect any significant increase in foreign exchange earnings from oil since the price and quantity might not change from what it is now.
Although some agricultural exports are now in high demand internationally and this may continue until next year, the foreign exchange earning from source which will be made available to FEM cannot be expected to be such as to increase the volume of imports substantially.
The other source of government revenue is company tax. Since the introduction of SAP, most companies have been operating below their installed capacity. For once in recent years, Nigeria is experiencing a buyer’s market where consumers pick and choose. As a result most companies are barely breaking even. Without a buoyant economy, there will not be much profit and so company tax will yield only a small revenue.
In 1988 budget, government pressed for revenue might want to have a look at subsidy in various area. Most important is the petroleum subsidy. This is a situation government has to exercise caution. Nigerians have borne a lot of burden over these past two years. It might not be in the overall welfare of Nigeria to withdraw completely the imagined subsidy on petrol.
Already transportation in Lagos metropolis and other areas has been chaotic. The only means of transportation available to most Nigerians is public transportation. If subsidy on petrol is withdrawn completely, fares will be hiked and the poor man will have no means of movement. Besides, crude oil is produced by Nigeria and as such they have a right to taste the same.
Those who argue that the Western countries pay higher should realise that apart from the fact that they import crude, higher taxes are paid there on the refined products before they sold to the consuming public. Incomes there are much higher than you have here and the rate of inflation, much lower. If government had the intention of withdrawing subsidy on petroleum in the 1988 budget it had better reconsider it and better look at subsidy on fertiliser.
Nigerians will no doubt expect the Federal Government in 1988 to come out strong on privatisation. The present feet-dragging by government is not doing any good to its image.
If by 1988, the government is not seen to have started implementing its privatisation programme, this may reflect adversely on its credibility.
There are rumours that digital telephones are being considered for some towns and there have been talks of developing the black bomb. These are attractive bu! expensive project; which the state cannot afford now. Nigerian do not expect them ii the 1988 budget. Government must for 1988 come up with lands and moves for a lead count. Nigeria needs a population census quite urgently.
The present inflationary spiral needs to be contained. In this regard, government’s use of ways and means to fund its deficit financing has to be checked as it is inflationary. The government cannot
continue to put a squeeze on bank credit to the private sector while it goes on through deficit financing to fuel the same inflation it wants to contain.
Already the credit squeeze is adverse affecting the1 capacity utilisation in industries as well as the employment situation in the country.
Also expected In the 1988 budget is the review of various monetary policies. One of
such is the current high interest rates occasioned by the recent deregulation of interest rates. It is expected that the prime rate will be lowered to reduce bank lending rates. This has become necessary because the current high interest regime taken by, itself alone cannot be expected to impact favourably on the flow of foreign funds and investment into Nigeria. The high interest rate regime if allowed to remain in force for too long, discourage domestic investments. To successfully adjust an economy which is suffering from structural disequilibrium, the policy makers must be willing to encourage investment in important sectors of the economy such as agriculture, ex port and manufacturing so that activities am employment in such sectors can be stepping up. In this connection in 1988, the amending had to come with-i the aforementioned filings. Since these sectors are vital to the overall success of SAP hey deserve preferential treatment in monetary policy considers-ion. The 1988 budget should treat this sector as such.
It is also expected in the 1988 budget that policy makers will take all necessary steps that will, in the medium term at least, bring the exchange rate of the naira back to an economically realistic and psychologically tolerable level
The only way open to do this is to increase Nigeria’s foreign exchange earnings. Since our earnings from oil are pre-determined by OPEC, the only way to do this is through the non-export Much, of course, has so far been done by the authorities in recent times to encourage the growth of non-oil exports and the earnings dire from. Exporters have so far not cooperated fully as they have failed to repatriate their in foreign earnings. This situation could be ameliorated if the credit policy adopted for the sector was different from that applied to other sectors of the economy.
