The 2019 budget tagged “Budget of Continuity” presented by President Buhari before a joint section of National Assembly members was accompanied with jeers of boos of “Sai Barawo” and “Liar” from the opposition lawmakers but he was also applauded “Sai Baba” from his party members.
Before presenting the budget, President Buhari mentioned the achievement of his government and this was accompanied with loud jab of “Lie” and “not true”. He also quoted some statistics and made some claims such as “the completion of the Niger Bridge” which is known to be equally false.
It was quite an unfortunate event to see Nigeria lawmakers disintegrate to such lowness but it might not actually be beneath them after all. The lawmakers are suppose to be the “maker” of the law of the land and hold the president accountable and not “booing” or “jeering” at the president. This is because the power is in their hands to change anything they find faulty in the budget. However it is known that many of them there are only on seat to fight for their pockets.
It should be known that Nigerian lawmakers had made changes in the budget for the past three year and that change is not to favour the masses but to bring increment in their allowances.
How Realistic is the 2019 Budget Presented
The 2019 budget has a total expenditure of 8.83 trillion naira. Capital expenditure is pegged at 2.031 trillion naira and recurrent expenditure is at 4.04 trillion naira. Sinking fund, statutory transfer and debt services gulp the balance of 2.79 trillion naira.
Though this government have been trying to diversify its revenue mix, oil revenue still carries the bulk of the revenue. It has always been proven that this type of revenue generation is beyond our control. According to the budget presented, a revenue projection of 3.73 trillion naira was projected just from oil revenue when in actual fact, a breakthrough of 3 trillion naira have not been surpassed in recent years in that sector.
In the budget presented, some assumptions towards oil revenue were made;
Oil price benchmark of $60 per barrel
Oil production estimate of 2.3 million barrels per day
These assumptions might not hold water because what has been put in place to give such results. When a production level of 2 million has not been reached comfortably, an assumption of 2.3 million barrels per day is made. It was even reported that Nigeria will be producing 1.7 million per day for the first half of 2019.
Also no assumption can benchmark the oil price due to unforeseen circumstances and OPEC cut. Recently there have been a drop in oil price and $60 per barrel looks unrealisable.
Also assumptions made in the proposed budget presentation by the President include;
Exchange rate of N305.5
Real GDP growth of 3.01%
Inflation rate of 9.98%
Capital expenditure is the driving force of every nation and in Nigeria is in dire need of infrastructural development. However it is sad when a quarter of the budget is dedicated for debt servicing and another quarter for recurrent a meagre portion is allotted for capital expenditure.
Though this might be beyond the capacity of the government but little things such as cutting down the cost of governance could go a long way but nothing is ever done in the aspects and Nigerians are beginning to sound like broken record because nothing is ever done to bring down the cost of governance.
The way governance works in Nigeria has made wastages abound. For example it is in the constitution to have 36 ministers in Nigeria for ample representation of the 36 states whereas 10 ministers can carry out the job of the 36 effectively and efficiently.
Then each minister is entitled to like 20 aides, 5 drivers and all sort of workers attach to the office of the minister. Take the United Kingdom for instance, when the prime minister is on the highway, you barely even know because you do not see any convoy behind her. That is not the case in Nigeria because even a minister’s wife who is not even the holder of the appointed office has like five expensive cars behind her blaring the siren. Isn’t it also absurd that Nigerian lawmakers spend $43 million for wardrobe allowance from the Nigeria budget?
Though it might sound unpopular but government need to cut down the number of persons in the federal and state payroll in order to reduce the amount spent on salaries. I do not see a reason why a federal office should have branches in all the 36 states in Nigeria with workers who come to work every day just to sit and gossip. How long shall we continue to use federal and state budget to pay salaries. This money can be diverted to some other slots that will benefit the people of Nigeria as a whole.
This is because it is not the duty of the government to give jobs to its people but to create enabling environment for job opportunities.
What hope does the Nigerian youth see in this budget?
Recent increase in unemployment from 17.3 million to 20.1 million shows that the government needs to provide the right environment for jobs to grow and also invest more on skill acquisition.
In the past three years, Nigeria have seen international investors and private companies folding up and running to neighbouring countries because Nigeria has become harsh and expensive to do business in. This has rendered many Nigerian youth jobless.
The government needs to adjust its reforms and invest in infrastructure particularly power and road network for adequate job growth in Nigeria and more importantly create an enabling environment for international and even local investors. This will empower the private sector to be an engine for growth of jobs in the economy.
According to the component of revenue generation for 2019, we have the oil revenue generation, taxes and others.
The Minister of Finance department says “government plans to roll out new taxes as part of effort to fund the proposed 8.83 trillion naira 2019 budget”. From the minister’s statement, it could be insinuated that the government plan to be aggressive with tax generation.
Tax revenue is something that is planned for and with what is on ground in Nigeria, any stringent measure taken by the Nigerian government will only backfire on its citizen.
Looking at the taxes we have; these include income tax, Value Added Tax (VAT), custom tax and other types of taxes, what stance can the government take towards this type of revenue generation and its effect on the nation?
Can Nigeria increase Company Income tax?
Presently Nigeria has a company income tax of about 30%, this is one of the highest in the world. Many developing countries in order to attract foreign investors and encourage the private sector companies do not bother about them with taxes. Even the US with the level of development has a company income tax of 15%. But in Nigeria, these companies are burdened with tax till they crumble under its weight.
The individual tax is around 20% in Nigeria, though this is not too bad compared to the rest of the world but increasing the individual tax will create more problems than solution because of the high rate of unemployment in the country. This is because this tax only targets the poor. A trader that made a sale of 1000 naira is made to pay tax and a young man with a salary of 18000 is made to pay this tax. This will only stiffen the room for business growth.
The VAT rate in Nigeria is 5% and that is low but increasing it will only create problems. There is wide spread non compliance of this tax payment. As reported by the International Monetary Fund (IMF) some months back in Abuja, “only 3% of tax payers pay 97% of VAT”. Increasing the VAT rate will make the good guys unwillingly to comply with payment of VAT.
Revenue generation and job creation will not be solved by introducing new taxes but reforming the tax system from policy to legislation and also focus should be shifted from company income tax. The government should lead by example.
It is sad that presidency and the national assembly have not reemitted the PAYE of their staffs. Even, it was removed in the requirement for political parties to demand for tax certificate as a pre condition for vying for a political office five years ago. This should not be. The top 1% of the society should be taxed and not the bottom 90%. Therefore it should only be fair that the political leaders who make up the top 1% of the society should be taxed individually and through VAT.
Production or investment should not be targeted. This is to encourage investors both locally and internationally either on a small scale or large scale. The tax imposed on foreign investors and private companies’ owners should be drastically reduced.
Other sources of income include independent sources such as recovery from loots and all others that cannot be relied on. This is not a sustainable source because it is not the wish of nation to recover loots every year unless the nation plans to steal every year.
Though I am of the opinion that this budget might just be a lip service because the lawmakers will only sit on it after the February election. Whatever is done now is will be to gather support for a return back into position of power.
Whichever way it goes; this budget does not signal hope for the citizens because it is hinged on a support by the revenue generated in 2019. This only means that working on a 8.83 trillion naira expenditure projection is unrealistic and to actually come a tad close to making it become a reality, the government will only have borrow even much more this year, thereby sinking the nation in more debt.