Atiku & Buhari. |
The
presidential candidate of the Peoples’ Democratic Party (PDP), Alhaji Atiku
Abubakar, last weekend, issued a statement in which he described President
Buhari’s 2019 budget proposal as fundamentally flawed and failing to address
current realities. He went on to identify the said “current realities”, which
in any case were issues already highlighted in President Buhari’s budget speech
and further amplified in the detailed presentation by the Minister of Budget
and National Planning, Senator Udoma Udo Udoma. Regrettably, however, Atiku
Abubakar offers no substantive and workable solution to the identified
“realities”.
Atiku
describes the underlying assumptions of the budget as generous, wild and
untenable but does not propose alternative assumptions that would have been
more appropriate. He argues that the economy is yet to recover from the
2016/2017 recession. Unfortunately, he cannot create his own definition of an
economic recession, which is a technical term with a universally applicable
meaning. When an economy experiences two consecutive quarters of negative GDP
growth, it is said to be in recession and whenever it returns to positive GDP
growth of whatever rate, it is said to have exited recession. It is doubtful if
he understands the simple meaning of recession.
Atiku
attributes the sustained accretion to foreign reserves to “increases in
international prices of Brent Crude and foreign borrowing”. But he conveniently
forgets that under the immediate past federal administration oil prices were at
an all-time high with substantial growth in foreign borrowings, and yet foreign
reserves nose-dived from a peak of $62 billion to as low as $24 billion. His
repeated reference to the price of Brent Crude throughout his statement may be
indicative of his lack of knowledge that Nigeria’s Bonny Light Crude trades at
a premium of at least $2 per barrel over the price of Brent; just as his
reference to Nigeria’s OPEC quota may also suggest that he does not know that
Condensates do not count in measuring compliance with the quota.
The
PDP Presidential candidate faults the provision of N305 billion for NNPC’s cost
under-recovery on Premium Motor Spirit (PMS) but does not say exactly what he
would do about PMS pricing. If however we are to go by an earlier statement
from his campaign organisation, which promised to reduce the price of petrol to
N87, then we can expect a much higher subsidy provision from an Atiku
government; because he is not going to perform magic to get the refineries
working at peak capacity immediately.
He
describes the 2019 budget as being very small, but does not offer any
implementable options for improving domestic resource mobilization, which is
the only sustainable means to achieving larger budgets. It does seem that he
does not understand or is just feigning ignorance about the critical role of
revenue in budget preparation.
A
careful look at Atiku’s statement would show that there is nothing original
about his identified “realities.” These are areas President Buhari had already
identified in his speech. For instance, the President recognised that the
revenue performance of the Federal Government up till September 2018 has been less
than spectacular. Leaving aside for a moment the fact that there has been a
remarkable increase in Federal Account receipts in the last three months, a
look at the budget speech will show that the President specified a number of
actions to tackle revenue weakness including strengthening on-going efforts at
tax collection, liquidation of recovered assets, immediate recovery of past due
oil royalties charges and deployment of the National Trade Window to improve
customs collections.
His
most laughable criticism perhaps was his claim that “there is little evidence
to show that increased investment in agriculture has yielded positive results”.
Even the worst adversary of the Buhari administration would acknowledge that
significant progress has been made in the agriculture sector.
In
his often desperate attempt to rubbish the 2019 budget, Atiku conflates foreign
direct investment with capital inflows. This is wrong as capital inflows covers
foreign direct investment, foreign portfolio investments, international
borrowing and short-term deposits in money market instruments. He complains
about movements in foreign portfolio investment which are often volatile and
reflect monetary policy normalisation in the United States, meanwhile he is
silent on the positive trade surplus mentioned in the budget speech which truly
reflects living within our means as a nation.
Atiku
also calculates the budget deficit as a percentage of current revenue rather
than as a ratio of gross domestic product which is the preferred standard for
inter-temporal measures of the deficit. Using this more appropriate measure the
national fiscal deficit is 1.3% of GDP which is well below the 3% specified in
the Fiscal Responsibility Act and well within the best global norms. So much
for those who claim they have the magic wand to grow the economy.
A
most glaring weakness in the statement by Atiku is that he does not take a
stance on issues of public interest in the budget, which is utterly regrettable
from someone who aspires to lead Nigeria. As President Buhari explained, the
subsidy/under-recovery has been retained to reduce the burden on ordinary
Nigerians at a time of weak purchasing power in a manner that avoids the abuses
of the past. The truth is that contrary to the belief of people like Atiku that
low fuel prices only benefit the rich, a large number of ordinary Nigerians
rely on PMS to operate ‘keke’, ‘okada’, taxi, and ‘danfo’. A lot of the
generators used by small businesses also use PMS. Indeed, it is amazing
that a man who has promised N87 per litre of PMS can criticise a process of
under-recovery/subsidy that is not being abused as it was in the past.
To
further show Atiku’s lack of knowledge about basic issues in the petroleum
market, he contradicts himself in his quest to make a non-existent point. He
complains about the benchmark price of $60 per barrel used for crude oil
exports in the budget and tries hard to show understanding of the dynamics of
the global oil market by referring to US shale oil production and pressures on
the Saudi regime. Yet Atiku expects that OPEC quotas will come into force, in
which case the price of crude oil may rise in international markets. What is
obvious is the fact that low oil prices impact negatively on shale oil
production. For instance, recent reports from a Permian producer show that with
West Texas Intermediate at near $45 per barrel, they have already cut back on
rig count and use of completion crews. There is more over the demand side
which remains extremely strong in the United States, while large economies like
China and India will continue to grow at over 6% and 7% respectively in 2019,
which will also impact on crude oil prices.
Finally,
Atiku moans about the capital budget without acknowledging the historically
high capital expenditure over the past two budget cycles continuing into the
current 2018 budget cycle. Apart from the fact that the Federal Government has
kept to its promise to keep capital expenditure at 30% of the budget, the PDP
Presidential candidate is quiet about his plans to raise capital expenditure
and reduce recurrent spending. The reality is that it can only be done by
retrenching public sector workers and by not increasing the minimum wage to
which this government is fully committed.
It
is therefore obvious that Atiku’s statement on the budget was a poor attempt at
playing to the gallery. Without a doubt, the country faces significant fiscal
challenges. The administration of President Buhari understands these
challenges, as well as workable solutions thereto. The implementation of some
of the solutions however needs to be paced and well-timed to avoid dislocating
the growth trajectory of the economy. Atiku’s criticism of the 2019 budget
proposal can best be described as high on populist rhetoric but low on any real
solutions to the identified challenges.
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