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Introduction
Our Lord Jesus Christ, in the Good Book says “Give unto Caesar the things that are Caesar’s, and unto God the things that are God’s.”
I know that President Obasanjo has been angry lately, and that I tread on dangerous grounds, but here I give unto Caesar - in this case, President Obasanjo - what I can: some critique and some pieces of advice.
In the event that President Obasanjo is a candidate for re-election, the performance of his 2002 Budget will be crucial in his re-election bid. In the event that he is no longer President after mid-2003, the present Year 2002 budget of Obasanjo is the last FULL-YEAR national budget that he will ever preside over. Whatever be the case, his present 2002 Budget is a crucial one, and it is in that spirit that it should be scrutinized.
One thus hopes that President Obasanjo understands that when his economic policies, and particularly his budgets, are scrutinized by his “subjects” far and near, it is “nothing personal.”
So today, I join the fray and look at the proverbial Caesar’s budgets. At least at my youthful age (!), I can be accused of impudence, but not of senility.
Please read carefully.
Cash Flow Problems and the Budgeting Process
According to President Obasanjo, Minister of Finance Adamu Ciroma, and Accountant-General S.K. Naiyeju, it has become clear that the government of Nigeria has a serious self-induced cash-flow problem.
Let me briefly explain using round figures.
Suppose in Year 2002 you will earn a total of N120,000, and you will have a MONTHLY bill due of N10,000. If you are given the option to take ALL that money
- at the beginning of the year,
- at a monthly rate of N10,000 or
- at the end of the year,
Then you will have a CASH-FLOW problem if you decide on Option (iii), particularly if you have stern creditors. Cash-flow problems occur when funds are UNAVAILABLE if and when due to creditors - and citizens of the nation.
Noting that at the beginning of each year, a budget proposal should be based on:
- Money you have at hand:
- Earned Money that is still unused (earned revenue reserve) - A
- “Gift” Money that is still unused (grant money reserve) - B
- Borrowed Money that is still unused (loaned money reserve) - C
- Money that you will later have:
- Money expected to be earned (revenue estimates) - D
- Money expected to be given (grant estimates) - E
- Money expected to be borrowed (loan estimates) - F
It is clear that you may EVENTUALLY have the cash, but not in a timely manner. With Option (i) of our hypothetical Year 2002 budget of N120,000 above, with adequate RESERVE (A+B+C) and with proper investment (eg deposit in an interest-bearing account) of the monthly balance, you will come out in the black at the end of the year. However, with Option (iii), interest on debt would even make you worse than when you began at the beginning of the year.
The inability to properly control cash flow is the cause of demise of most business enterprises. Consequently, when the managers of our economy admit that they have a cash-flow problem, that is serious business, not to be taken lightly.
One solution would be not only to have a national budget based on gross annual estimates but one based on quarterly revenue and expenditure estimates, which can then also be reviewed AND revised by supplementary budgeting on a quarterly or mid-year basis. Our present mono-cultural dependence on oil - which in itself has seasonal (possibly quarterly) demand variations - requires such an unusual budgeting process.
We should of course move away from the mono-cultural dependence on oil, but in whose lifetime, I ask?
Budget 2001 Performance
In presenting and later on in discussing the 2002 Budget, there is apparently some confusion in the Obasanjo administration about the state of affairs of how much was actually earned in Year 2001. In a statement credited to the president, he states viz:
QUOTE
'Nobody Can Impeach Me' - Obasanjo
Daily Trust (Abuja) November 27, 2001
Only last week, the Senate tongue-lashed the Finance Minister, Mallam Adamu Ciroma over what it described as shoddy implementation of the 2001 budget, and demanded for explanations before scrutinising the N843 billion 2002 budget presented by President Obasanjo on November 7. However, the president who was visibly angry explained that budgets are made out of anticipated revenue, and that the 2001 budget cannot be fully implemented if the expected revenue is not realised. >>> Read Entire Article
UNQUOTE
Yet, in his budget speech of November 7, 2001, this was what he had to say:
QUOTE
Sharing the Fruits of Economic Reforms
I am pleased to address you on the Appropriation Bill of the Federal Government of Nigeria for the year 2002………..The performance of the economy during 2001 was mixed. Total of federally collected revenue from January to September amounted to over 1,679 billion naira, indicating an increase of more than 91 billion naira over the corresponding budget estimate of over 1,587 billion naira. The oil sector recorded a positive variance of over 108 billion naira while the non-oil sector showed a negative variance of over 16 billion naira. The overall fiscal performance is showed that federally collected revenue exceeded its level in the corresponding period of last year and the budget estimate for the review period, by 51.7 and 6.4 per cent, respectively. The enhanced revenue was due to improved market price for crude oil. Consequently, total revenue that accrued to the three tiers of government rose significantly and thus, induced comparable increases in spending during the period...
Capital Expenditure: The proposed capital expenditure for 2002 is 297 billion naira. Ministries/Extra-Ministerial Departments submitted proposals well above the provided ceilings for year 2002 and in most cases without due regard to available revenue or their priorities.
>>> Read Entire Article
UNQUOTE
The contradiction is therefore glaring, indicating in fact that there was a cash flow problem rather than a cash problem.
Not only should the contradiction be cleared up, but notice the curious sentences:
“Consequently, total revenue that accrued to the three tiers of government rose significantly and thus, INDUCED COMPARABLE INCREASES IN SPENDING DURING THE PERIOD….. Ministerial Departments submitted proposals well above the provided ceilings for year 2002 and in most cases WITHOUT DUE REGARD TO AVAILABLE REVENUE OR THEIR PRIORITIES…”
These are self-admission of “profligate spending” if there was one - and alleged incompetence of those “ministerial departments.” Why would “increased revenue” induce “increased spending” if the financial managers were disciplined? Is there an automatic spending trigger at Aso Rock? Why would ministerial managers present proposals - presumably to the president - outside set guidelines, and be so unscrupulous as to do so “without due regard to available revenue or their priorities?” Of course, managers tend to ask for more, so that their budgets can get down to what they really can live with. But if such proposals were presented, did the president turn them back for revision? If he did, did they comply? If they did not, what has he done about that indiscipline? If they did comply, why bring it up in a budget speech?
To the common-sense man, it appears that his ministerial managers refused to comply, hence President Obasanjo’s having to bring it up in his speech. Quite a funny happening, I imagine.
But even if the spending has been profligate, what has it been on? Certainly not on NEPA which we need badly, for we now read:
QUOTE
NEPA to exceed December mandate by 126mw
(Tuesday 4th December, 2001)
Senator Imoke [THE chairman, Technical Board of National Electric Power Authority (NEPA)] stressed that out of the N75 billion 2001 budget, the authority has received only N34 billion, and it is improbable that remaining amount of N41 billion will be released to the authority within the year. >>> Read Entire Article
UNQUOTE
The profligate spending was certainly not on the Federal Capital Territory, for we also now read that:
QUOTE
Federal Capital Territory Minister Laments Poor Allocation
Minister of the Federal Capital Territory, Engr. Mohammed Abba Gana yesterday briefed members of the House of Representatives Committee on FCT on the implementation of the 2001 budget where he complained that the lack of funds has hindered the aspirations of the territory from opening up new districts for the benefit of Nigerians. >>> Read Entire Article
UNQUOTE
So where has the spending money gone to? This has also led legislators to question the president’s submission of supplementary bills during the 2001 cycle when in fact he claims that there was insufficient funds:
QUOTE
But the legislators who appraised the President’s defence said that if there was actually a shortfall in revenue the President could not have come up with a supplementary budget.
Honourable Ita Enang, Deputy Chairman, House committee on Rules and Business, queried the essence of a supplementary budget when there was inadequate revenue.
He raised a poser: "Why did the President declare excess income from oil and shared to the states and at the same time said that there was shortfall in revenue generation?"
Segun Damiro who represents Mushin in Lagos State agreed with Enang that it was a contradiction for the President to say that there was inadequate revenue to implement the budget the same year he declared excess oil revenue.
He wondered why the President did not use the oil windfall to implement the budget to the letter.
"Let the President come out to tell us the truth about the matter so that we know how to evolve measures of solving the problem," he said.
UNQUOTE
There is a key worrying phrase here: “excess income from oil…..shared to the states”. All through the past years, the president has “succumbed” to pressures from the States to receive EXCESS INCOME from oil AS EARNED and yet he has not FULFILLED the budget APPROVED by law! Would it not appear reasonable to:
- FIRST ensure that there is enough money to fulfil the budget law for the rest of the year, then use
- One-third (say) of the excess money to pay down our domestic and external debts;
- One-third of it to PUT away in reserve for the rainy day, THEN
- One-third shared among the states?
Therefore the evidence is in: Certainly, better budgetary prudence is needed in FY 2002 and henceforth.
On budget issues, the president should not allow the states to push him around beyond the funds already allocated in the Federal Budget presented and agreed, within certain limits of flexibility.
Budget 2002 and Earlier Ones
I have looked at ALL three of Chief Obasanjo’s Appropriation budgets - not the approved ones, but his initial proposals - as well as his several supplementary budgets since he became president in May 29, 1999 in order to get an idea of his priorities. I also inspected the prior budgets of 1998 and 1999 of his predecessors, albeit military, for good measure. Due to the magic of the World Wide Web archiving, those budgets - and some - will be found in the Appendix for your own independent verification.
The first issue that one notices from reading the budgets is their UNIFORMITY in format: one cannot really tell apart the three CIVILIAN budgets from the two MILITARY budgets. They all “sound” alike, except for the numbers.
Secondly, they have monikers: 1995 “Budget of Renewal”, 1996 “Budget of Consolidation”, 1997 “Budget of Economic Growth and Development”, 1998 “Budget of Transition”, 1999 “Budget of Realism”; 2000 “The People’s Budget” and 2001 “Budget of Recovery”. Even the states too give their budgets names (this year, Kaduna's name is "Budget of Accomplishment"), as if the year of the Budget is not sufficient identification.
Strangely, the 2002 Budget has no name yet. I suggest “Budget of Hard Times Ahead”.
A third note: the 1999 budget speech was the clearest and most comprehensive of the lot, while the 2001 and 2002 budgets provided the least information. In fact, some information normally given in previous budgets were completely omitted in these last two budget speeches (see Table 3 below), while in the 2002 budget, some numbers simply did not add up. For example, in the 2002 budget, we have the following excerpt:
QUOTE
2002 Revenue Estimates
The estimates of federally collectible revenue in 2002, is about 1,156 billion naira.
Oil Revenue: For fiscal year 2002, we have adopted a price scenario of 18 Us dollars per barrel and an export volume of around eight hundred thousand barrels per day. The total receipt from this source is estimated at 545.7 billion naira. Petroleum Profit Tax (PPT) is projected to yield 175 billion naira, while Royalties, is projected at 128.8 billion naira.
Non-oil Revenue: Total receipts from the non-oil sector are projected at 513.3 billion naira. Total receipts from non-oil is made up of Customs & Excise at 150 billions naira, Import Duty at 132.4 billion naira, Excise Duty at 8.6 billion naira, companies Income Tax at 90 billion naira. In addition to these receipts, government expects to earn a total sum of 75 billion naira from privatisation Proceeds, which us largely from the sales of NITEL and NIGERDOCK.
UNQUOTE
How the estimate of federally collectible revenue of 1,156 billion naira was arrived at, or the non-oil figure of 513.3 billion naira, from the items written following them remains a mystery, a matter which is easily unravelled in ALL the earlier budgets. I suspect that there is some arithmetic error somewhere having to do with the double-addition of the import duty figure. Who knows?
Anyway, I am sure that Finance Minister Adamu Ciroma will clear that alleged arithmetic snafu up.
A third and final note is in order here: with the way the 2000-2002 budgets have been greeted in the National Assembly with hoots and guffaws, it is clear that hardly any consultation went on with the National Assembly before the reading. I trust that our CIVILIAN executive cabinet realises that we no longer have a Military Provisional Ruling Council, handing over budgets to a nation, but rather a CIVILIAN National Assembly which should be consulted both in the formulation AND approval process of the budget.
One would hope that in future this budget naming, minor as it is, would change. One would hope that this prior consultation, major as it is, would change. Investigation of how the budgets of long-established democracies are presented would help. That would sure be a “dividend of democracy” of form as well as of functionality.
Revenue Extimates - Budget 2002 and Earlier Ones
A few things are curious about the Revenue Profiles, if we inspect the following Table 1:
TABLE 1: REVENUE ESTIMATES
Budget Year 1998 1999 2000 2001 2002
Oil Export sale based on:
Million barrels per day 2.0* 2.035 1.836 2.4112 0.800
$ per barrrel 17 9 18 22 18
Naira-to-$ exchange 22/75 86 95 100 113*
Federally Collectable Revenue (In billion N):
From oil sector .. 257& 453.7……… 1014.1……..1136.145 545.7
Transfer from Ex Crude Acct 0 0.0…………. 0.0……… 99.73 0.0
Total Oil sector 267 453.7 1014.1 1235.875 545.7
%oil sector 61.5% 67.9% 80.5% 73.2% 51.0%
Non-oil sector 167 214……………245.9…….. 453.3 513.3
Total Revenue Estimate 424 667.7 1260.0…… 1689.175 1059 [1156a]
Change from prev. year +4.95% +53.8% +88.7% +34.1% -36.7%
* information not provided in budget speech. A nominal figure has been chosen
& denominated at $1 = N22 a figure given in the budget speech
Note that from the 2001 Budget to the 2002 budget, our estimated revenue dropped by about N533 billion, which is almost 26% HIGHER than the TOTAL budget of 1998 and just about 20% BELOW the total of that of 1999.
That is a whopping drop for just one year. Imagine if any one of us had an income drop of almost 40% in one year: we would be on the streets!
It is clear from Table 1 that our budgets are buffeted by two uncertainties: the amount of oil that we export annually, and its price. For every dollar reduction in oil prices prices, we lose almost $600 million revenue. For every 0.1 billion barrel that we do not sell annually, we lose about $2 billion. One SERIOUSLY wonders why such a low figure of 0.8 billion barrels to be exported was used in our oil revenue estimates of the 2002 Budget, when in previous years we used nominally 2 million barrels per year as estimate: can we find nobody in the world to buy an addition 1.2 million barrels per day from us, or is there a secret OPEC deal to limit our exports to this puny amount?
In any case, judging from the fact that the oil sector, which due to its impact on the non-oil sector, contributes in real terms possibly 85-90% to our federally collectable revenue, a combination of both uncertainties in the present 2002 budget is debilitating. Substantive steps, rather than the usual bromides, must be taken by this and succeeding administrations to wean us away from this mono-cultural dependence on oil.
External Debt Management - Budget 2002 and Earlier Ones
What about our external debt payment situation? This is shown in Table 2.
TABLE 2: EXTERNAL DEBT EXPENDITURE ESTIMATES PROFILE
External Debt Management
Budget Year 1998 1999 2000 2001 2002
Ext. Debt Stock in billion $ 27.087 28.77 28.77 28.5* n/a
(beginning of year)
Ext. Debt Pay in billion $ 2.0 1.5 1.5 1.5 1.7
Naira-to-$ exchange 22 86 95 100 113
Ext. Debt Stock in billion N 596 2474 2474 2850 n/a
Ext. Debt Pay in billion N 44 129 142.5 150 192.1
Total Rev. Est. billion N 424 667.7 1260.0…… 1689.175 1069.0[1156]
Debt pay % of total revenue 10.4% 19.3% 7.9% 8.9% 16.6%
End of Prev. Year Res. $b 7.7** 7.6 7.0 10.5 n/a
End of Prev. Year Res. Nb 169.4 167.2 602 997.5 n/a
*As at September 2000, according to the 2002 budget speech
& would be 35.5% if denominated at N75/$1
** Previous Year External Reserve balances are at December of the previous year. This figure was $1.441 b at Dec. 31, 1995 and $4.086b at Dec. 31, 1996 according to the 1998 budget speech
As we can see, despite our yearly minimum payments of $1.5 billion, our debt stock has remained essentially flat over the years, and the naira impact of our debt has been increasing due to a weaking exchange rate. However, the real questions are the following:
How much annual debt payment must we make to yield REAL reduction in IN TERMS OF DOLLARS? It is mind-boggling to always read even from President Obasanjo that over the years, we borrowed $7 billion, payed $18 billion and still owe $28 billion! Is there a set policy of pegging our debt payment Naira equivalent to our total revenue estimate, or pegging it in terms of a percentage reduction in its outstanding dollar amount? If we believe that 15% or 20% of our total federally collectable revenue estimate should be budgeted for external debt payment, so be it: let us fix that percentage BY LAW and move on. If we believe that our payment should reduced by a certain amount AFTER INTEREST PAYMENTS, fine, let us fix it. We can always suspend the law in an emergency.
In any case, can't we choose how we pay off our creditors? For example, we owe 15 countries of the "Paris Club" $22 billion. That means that we owe ON average roughly $1.5 billion per country. Some countries we owe more - say 5 billion, some countries less - say even $200 million.
Since we pay out roughly $1.5 billion per year - in 2002, that is scheduled to be $1.7 - why don't we just start from the least owed country, pay them off and then go to the next one? Or start with the ones with the highest interest and steepest fines, and pay them more quickly? After all, we borrowed money from individual countries, not from the "Paris Club", which then acts like a cartel.
When we pay $1.5 billion to the Paris Club, it appears that the countries share it among themselves in a manner not beneficial to us, resulting in the fact that at the end of the year, we are still owing the same amount at the end of the year! If such a rescheduling of old money is not agreed, then new monies, if borrowed at all, should obviously not be under those old arrangements.
A related question: When is this debt payment made: beginning of year or end of year? Obviously, payments made at or near the end of the year - as I understand payments are made - are hardly effective compared with when made in lump sum at the beginning of the year. For example, Table 2 certainly shows that AT THE BEGINNING OF EACH YEAR we have at least $7 billion in reserve. Why are we not paying our debts from our reserves?
Furthermore, why can we not just use ANY and in fact ALL of our recovered loot - by some accounts $3 - 6 billion - to pay off as much verifiable debt as possible? We would not have been able to use the money anyway if we had not recovered the loot, and those to whom we would pay are only having access to the interest of the loot anyway, if at all - so what difference does it make?
Bottom line: Our debt management requires some "visionary" approach, not endless "non-concessionary" re-schedulings.
More on our debt situation can be read in this write-up:
Tackling Nigeria's External Debt by Mobolaji E. Aluko May 2001
Revenue Estimates and Gross Budget Allocations: Budget 2002 & Earlier Ones
Table 3 below shows budget estimates of how the federally collected revenues were to be distributed in each of the Years 1998 - 2002.
TABLE 3: REVENUE DISTRIBUTION ESTIMATES
Budget Year 1998 1999 2000 2001 2002
In billions of Naira
Total Revenue Estimate 424 667.7 1260.0…… 1689.175 1069.0[1156]
Total Recurrent + Cap. 260 300.5 470.0 894.2 780.0
Fed. Acct. Revenue (1) 284 262.4 709.5 * *
VAT Acct. Revenue (2) 40 50 60.7 * *
Total 324 312.4 770.2 * *
Fed. Allocation (3) 148 134.7 353.2 * *
State Allocation (4) 86 88.0 200.7 * *
LG Allocation (5) 68 70.0 163.1 * *
FCT a 2.6 a * *
Special Funds (6) 22 17.1 53.2 * *
Total 324 312.4 770.2 * *
Federal Retained Revenue (7) 148+ 146.7 387.3 * *
* Not provided in budget speech
a Not provided explicitly in this part of the budget
In Table 3, all of (1) and (2) (which are derived from the federally collectable revenue) are distributed to Federal government, state and local governments as well as special funds according to set percentage formulas. The difference of the total federally collectable revenue and the sum of (1) and (2) goes to first charges: external debt service, joint venture calls and any special projects.
(3) - (6) includes federal governments allocations from (1) and (2) (according to set percentage formulas), (7) includes (3) plus Federal independent revenue and privatization proceeds, if any. It is from (7) that capital and recurrent expenditures are made from the federal government, which may result in a budget deficit (if (3) is less than the sum of capital and recurrent) or surplus. The much-touted Derivation Principles are applied only to a portion of Special Funds.
See: SUNDAY MUSINGS: The Un-Federal Nature of Nigeria's Fiscal Federalism by Mobolaji E. Aluko; January 18, 2001
The significant lack of information as depicted in Table 3 in the 2001 and 2002 Budget speeches is interesting. One wonders why the omissions in these speeches themselves. Of course, the omissions must have been corrected by the Federal Ministers of Finance in their follow-up briefings.
Recurrent & Capital Expenditures - 2002 Budget & Earlier Ones
Let us look at federal recurrent expenditure estimates (which in general cover personnel costs, overheads and domestic debt service) and capital costs (for buildings, roads, water, electrification, agriculture, etc.)
TABLE 4: RECURRENT & CAPITAL EXPENDITURES
Budget Year 1998 1999 2000 2001 2002
In Billion of Naira:
Total Revenue Estimate 424 667.7 1260.0…… 1689.175 1069.0[1156]
R + C 260 300.5 470 894.2 780
% of tot. revenue 61.3% 45.0% 37.3% 52.9% 67.5%
Recurrent Expenditure 117 211 300 414.2 483
% change from prev. yr +15.8% +80.3% +42.2% +38.1% +16.6%
% of R+C 35.6% 70.2% 63.8% 46.3% 61.9%
Capital Expenditure 143 89.5 170 728 297
% change from prev. yr +36.2% -37.4% +89.9% +182.4% -38.1%
% of R+C 64.4% 29.8% 36.2% 53.7% 38.1%
Personnel Costs 56 100 170 204 283
% change from prev. yr * +78.6% +70% +20% +38.7%
% of R 47.9% 47.4% 56.7% 49.3% 58.6%
Domestic Debts 22 [39 70 100 134 ]
Local Contractors Debt 3 [ 1 0 0 0 ]
External Debts 44& [129 142.5 150 192.1]
Total Expenditure 329 300.5 470 894.2 780
Change from prev. yr 33.2% -8.66% +56.4% +90.3% -12.8%
&denominated at $1 = N22. In any given row, numbers within brackets are not added to the numbers in their columns to give the total expenditure.
Only in the Year 1998 Budget were Domestic debts, local contractor debt and external debt considered as part of Recurrent and Capital Expenditure categories.
From Table 4, we see that since 1998, while the Recurrent expenditure estimates have been steadily increasing in absolute amounts, the Capital Expenditures have been having extremely bumpy rides in terms of absolute amounts; as a percentage of the total Recurrent + Capital expenditures; and as percentage change from year to year. Such a situation does not seem to show an appreciation for the serious situation of our crumbling infrastructure, which are essentially capital projects.
They deserve better treatment.
Sectoral Allocations - Budget 2002 and Earlier Ones
Allocations to the ministries have also been somewhat intriguing, as Table 5 below shows.
TABLE 5: SECTORAL ALLOCATIONS (billion Naira)
Budget Year 1998 1999 2000 2001 2002
R + C 260 300.5 470 894.2 780.0
Agriculture * 7.60 5.80 18.1 3.87
% Agriculture of R+C * 2.59% 1.02% 2.02% 0.50%
Change from prev. year * * -23.7% 212% -76.8%
Transport * * 3.93 23.0 11.4
Internal Affairs * 11.555 112.0 * 13.59
Health * 13.747 5.82 29.1 14.9
Education * 27.713 21.3 24.8 17.7
FCT * 14.189 10.9 * 22.0
Water Resources * * 5.4 49.8 30.2
Works & Housing * 11.05 * 53 32.9
Power and Steel * 4.474 41.1 69.8 38.5
% Power & Steel of R+C * 1.49% 8.74% 7.81% 4.94%
Sum of the Expenditures Above * 90.38 206.25 267.6 185.1
% of R+C * 30.1% 43.9% 29.9% 23.7%
External Debt Payment 44 129 142.5 150 192.1
R+C = sum of Recurrent and Capital Expenditures
* Not available from the Budget speech
From the table, we see that probably for the first time since 1999, our external debt payment might exceed our expenditure on these nine important ministries.
It is also clear from the Table that even in the best of years, Agriculture - of which 70% of Nigerians participate - has been at the bottom pile of allocations, with this 2002 budget allocation being the lowest BOTH in absolute value AND as a percentage of the recurrent and capital expenditures! Furthermore Agriculture took the greatest percentage hit: a 78.6% reduction! The president can argue that it did receive a 212% increase in the previous year, but so did Water Resources (822% increase), Transport (485% increase) and Health (400%). [From the budget speeches, there is not information on the Ministry of Defence to include it in Table 5. ]
In his 1999 inauguration speech, President Obasanjo listed his priorities as follows:
QUOTE
I believe that this administration must deal with the following issues even in these difficult times of near economic collapse.
- The crisis in the oil producing areas.
- Food supply, food security and agriculture.
- Law and order with particular reference to armed robbery and to cultism in our educational institutions.
- Exploitation and production of petroleum.
- Education.
- Macro-economic policies - particularly, exchange rate management, etc.
- Supply and distribution of petroleum products.
- The debt issue.
- Corruption; drugs; organized fraud; called 419 activities; and crimes leading to loss of lives, properties and investment.
- Infrastructure - water, supply, energy, telecommunications, ports, airways, national shipping, Nigerian railways, etc.
- Resuscitation of the manufacturing industries.
- Job creation, and creation of conducive environment for investment.
- Housing -
UNQUOTE
Quite a long list, for "priorities!" Nevertheless, assuming - and this is a big assumption - that the priority list was also in order of DECREASING priority, that sentiment should reflect in his budgets.
One would also like to know for each sector an itemization of how much has ACTUALLY been disbursed and SPENT so far. Just a simple itemization would do, thank you.
Foreign Exchange - 2000 and 2001
Finally, our oil brings in dollars, and being our largest money-earner, it inflates the effect of the strength (or weakness) of our dollar/naira exchange rate.
Curiously in the 2002 Budget, and unlike earlier budgets, no explicit mention is made about our currency exchange regime. A back-calculation from the oil revenue yields an exchange rate of $1 = N105, but even that is arguable.
The following Table 6 tells the true picture:
TABLE 6: NAIRA/US DOLLAR EXCHANGE RATES 2000 and 2001
2000 2001
IFEM PMER BDX IFEM BDX PMER
January 98.73 103.5 103.75 109.0 120.0 122.0
February 99.89 106.07 106. 5 110.0 123.5 122.5
March 100.65 105.83 106.3 110.2 125.0 127.5
April 100.4 106.3 106.1 114.0 130.5 132.0
May 101.17 106.13 105.75 113.1 137.0 140.0
June 101.83 105.79 106.13 112.2 133.0 139.0
July 104.9 111 110.9 111.3 134.0 137.0
August 103.36 113.87 114.87 111.2 133.0 135.8
September 102.36 119 118 111.1 133.0 135.0
October 102.48 119.14 119 111.1 132.0 133.0
November 102.52 120.28 119 111.6* 133.5* 134.0*
December 106.19 122 121.83
** Last Working day of the week. (16/11/2001)
IFEM - Inter-bank Foreign Exchange Market
PMER - Parallel Market
BDX - Bureau de Change
SOURCES: Field Survey, Central Bank of Nigeria and Major Bureaux de Change
The pressure on our currency is quite apparent, and the 20% difference between the IFEM rate and the Bureaux de Change/Parallel Market rates is quite significant. Next to infrastructural weakness and personal safety issues, our foreign exchange rate instability remains the one single most important disincentive for long-term investment in an import-dependent economy such as Nigeria.
For further discussions, please see:
The Black (Parallel) Exchange Market Should Be Banned in Africa
by Mobolaji E. Aluko, Monday, June 11, 2001
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