OOn October 7, President Muhammadu presented his seventh budget to the National Assembly. It is, as one of my journalists never tires of saying, a whopping 16.39 trillion naira. That is a lot of money the government has to spend in 2022. The size of the federal budget is generally considered a good indicator of the health of the national economy. It should be taken for granted that the more money the government has in its coffers, the richer the nation. But nothing is so simplistic.
This rather simplified scenario does not tell the whole story of the budget as a reliable indicator of our country’s standing among the troubled nations of the world. The main reason is political. Political leaders and economic planners have the tendency to give in to the welfare temptation of human management. A budget, therefore, does not fully represent the facts about the national economy; it represents a mixture of expectations and ambitions which are both subject to the comings and goings of the world economy with ramifications for all nations. After all, the budget simply states what a government intends to do – if it has all the money it needs safely locked in the public purse.
Two problems creep into every budget proposal. The first problem is that there is not enough money to continue the planned government policies and programs. What is missing is called a deficit. It reflects the gap between what the government can earn from its many reliable resources and how much it intends to spend in the particular fiscal year.
The second problem stems from the first, how to bridge the gap between what is and what it should be in an attempt to fully fund the budget. The only option the government has is to borrow money to cover the deficit. Take other people’s money, make your people happy, and pay off debt later. It is an easy option that creates its own problems for a nation and its economy. Take the debt trap. Think of it as the trap you set for a rat with a piece of smoked fish. The rat sees it, it has mouth water and it rushes. He’s trapped. But in the case of the debt trap, the nation in question has to apply for more loans to pay off loan loans until it accumulates enough loans that they become an overwhelming burden.
In Buhari’s proposed “economic growth and sustainability budget” for 2022, there is again a huge deficit of 6.26 trillion naira. The government will borrow 5.01 trillion naira of this figure to finance the budget. It should be noted that since taking office six years ago, the president has had a recurring problem with a balanced budget and he has lost remarkably. Each of these years has seen a growing gap between the government’s revenue and its ambition to do more than the resources at its disposal. In other words, he constantly ran a deficit budget and resorted to loans from China, France and other countries ready to put money into the national treasury. The government feels good about it, but it is not a way to grow the economy or even manage it prudently.
The easy recourse to loans has been a major source of concern among economists and financial experts in the country since Buhari made a short cut in economic management. Buhari is aware that tongues are stirring loudly over the horrific implications of his accumulation of loans for the country. In his 2022 Budget Speech, he said: “Some people have expressed concern about our reliance on borrowing to fund our budget gaps. They are right to be concerned. However, we believe that the level of federal government debt remains within sustainable limits. “
Viable limits are flexible now, but loan repayments with interest tomorrow may not be sustainable. The nation is watching, with loans tingling through its treasury, as millions of its citizens fall below the poverty line almost daily. Poverty and the debt burden do not promote economic growth. No nation can be penalized for trying to live within its means. The administration’s ambition to do more must be tempered by the reality of its financial incapacity.
Neither the president nor his administration should lose sight of the fact that a debt burden is also a moral burden that one administration transfers to another. Eating now and letting future administrations pay later is cynical to say the least. One wonders why Buhari did not take the challenge of our dwindling financial resources as a call to arms in the radical management of the national economy? The economy is allowed to operate on its own. There doesn’t seem to be any incentive for innovation and creativity to jumpstart the economy and let the benevolent benevolent borrow elsewhere.
In his note to Buhari dated September 22, 2016, Nasir el-Rufai, Governor of Kaduna State, stressed that Buhari took the opportunity to do things differently. He wrote: “In every crisis there is an opportunity for fundamental change. The current crisis of reduced oil production, unit prices and profits, which has resulted in the deterioration of the exchange rate, escalation in debt levels and interest rates, and reduction in industrial production levels and jobs is an opportunity for our nation to change decades of bad habits and bad direction in our political economy and governance. This crisis should not be wasted.
The crisis has been ruined. The result is the growing loan burden of some 32.22 trillion naira in the third quarter of 2020 – and growing rapidly. According to the Punch newspaper of May 27 of this year, the debt of the country under Buhari between July 2015 and December 2020 increased by 20.8 trillion naira. And it gets heavier, not lighter. During the budget presentation, Senate Speaker Dr Ahmad Lawan advised the federal government “to also explore other sources of funding for its projects in order to reduce borrowing.” Perhaps the President could listen to the legislator if the Senate for once rejects another loan request on his part.
Tope Fasua, an economist, told The Guardian newspaper after the budget presentation: “The way we do it now, the fear is that we can never get out of the budget deficit circle. ” We are blocked.
Whatever Buhari intends to do with his legacy, he would do well to keep this in mind: a weak national economy will only worsen our poverty and thwart our development goals. And our country will not take this big leap.