Zainab’s scary economy statistic

Monday Column By Hameed M. Bello, PhD

hamdbelo@yahoo.co.uk

The Finance Minister, Budget and National Planning, Mrs Zainab Shamsuna Ahmed has been in the news lately with some scary economic figures that send shock waves down the spine.Those figures, to a curious mind, have the potential of taking a toll on the economy that is already smarting from the shocks of Covid 19 pandemic, as well as higher food and fuel prices due to the Russia/Ukraine war. The figures on their face value, though products of deliberate policy of the government to respond to emerging challenges, seem to have the propensity to expose the country to liquidity and fiscal maladies that require some diagnosis and prognosis. The concern is to express caution to prevent likely adverse effect on macroeconomic stability that can undermine long term survival. 

First, the Minister released a depressing statistic that the federal government spends N18.39 billion daily to subsidise petrol for Nigerians. If you do a simple Mathematics of multiplying N18.39 billion by 360 days making up a year, you will get a staggering figure of N6.620.4 trillion,  which represents the total sum spent by the federal government to subsidise fuel for Nigerians in one year. What a whopping figure! The 2022 budget was N17.126 trillion, and if you subtract the yearly subsidy of N6. 620trillion from that amount, you will be left with N10.506 trillion. The implication is that the performance of the budget in the areas of infrastructure and capital projects will suffer since a huge chunk of the budget,  over 35% of it, is spent to subsidise fuel for individual consumers only. 

The same fate will befall the  proposed budget for 2023 standing at N19.76 trillion under the current subsidy regime. Moreover, in the case of 2023 proposal even, the government has already sounded an alarm that the deficit for the 2023 fiscal year may run between N11.30 trillion to N12.41 trillion depending on the choice that will be made by the government on the issue of subsidy payment on premium motor spirit (petrol).

And that the federal government,  as conveyed by the Finance Minister, will borrow over N11 trillion and sell national assets to finance the budget deficit in 2023. To my mind, project-based borrowing sounds plausible because even bigger economies like the US still borrow to finance projects. But selling national assets would seem like stripping the country of its national or legacy assets. The economists however know better. 

I guess the choice the minister referred to in respect of subsidy will be whether to retain or discard the subsidy regime. I believe the disclosure of the daily spending on subsidy by government is to underscore the enormity of the volume of money that goes out of government purse and to prepare the minds of the public to an imminent decision on the feasibility of retaining the fuel subsidy payments. I am not an economist but common reasoning will suggest that if the federal government subsidy payments continues on this trajectory without a deliberate and sustained policy to get out of it,  the economy will most likely become bankrupt in no time. This is also not to say that the government should abandon its social responsibility for the welfare and well being of the people by providing cushioning measures to mitigate hardship. So we need to think outside the box to balance the equation. 

A budget deficit occurs when expenses exceed revenue, and it can indicate the financial health of a country, and when deficits accrue over time, they constitute national debt. The opposite of a budget deficit is a budget surplus. When a surplus occurs, revenue exceeds current expenses and results in excess funds that can be channelled to other sectors of need. In situations in which the expenditure equals revenue, the budget is said to be balanced – In simple investment or business parlance,  the economy is said to have broken even. 

And in  view of the huge deficit anticipated in the 2023 fiscal year, the government has ruled out capital projects as a way of cutting back on expenditure, ostensibly to reduce the effects of the deficit on the economy. The government also plans to access external loan to finance the deficit in the budget. It is also keeping an eye on improving revenue contributions from the non oil sector. These are lofty initiatives and should be sustained to boost back the economy and bridge the deficit gap. 

To my mind, the urgent step the  government must take, or to fast track their realisation if  actions have been taken in that regard already, is to quickly rehabilitate the local refineries to curtail or even end the importation of refined fuel. That way, the collosal amount of money paid to subsidise fuel will be saved and channelled to other sectors of the economy. The NNPCL Group Managing Director, Mele Kyari had signalled the coming on stream of some refineries in the country in the coming year. He must not rest on his oars in bringing this to fruition because all eyes are on him. 

Also, the Federal government needs to consult more closely with Alhaji Aliko Dangote to see to the timely completion and operation of his refinery in Lagos to help curtail importation of refined oil. We are mindful of the existence of some powerful cartel,  or cabal if you like, of fuel importers along with their foreign collaborators who benefit hugely from continued importation of refined petrol at the expense of the nation’s growth. They must bear in mind that Nigeria is greater than any individual(s), and if individual interest is in conflict with national interest, the interest of the nation necessarily supersedes and must be of priority. Any act of sabotage in this regard must be met with stiff resistance by the authorities. 

 Meanwhile,  it came as soothing turn of events when Mrs. Zainab Ahmed recently unveiled the details of what propelled a strong economic showing resulting in the attainment of Gross Domestic Product of 5.01 by Nigeria in the second quarter of 2021. The Minister, while presenting the economic performance index at a news conference in Abuja, described the second quarter GDP as the strongest growth in the economy since 2014.