No matter how good a country’s budget is, if inflation is not controlled as well as interest and exchange rates, it will be a tall dream to expect economic growth
The National Assembly has passed the 2015 Appropriation Bill of N4.493 trillion. The House of Representatives first passed it after increasing expenditure by N135.4 billion or 3.1 per cent, to arrive at N4.493 trillion. The Senate later passed its own version, based on a benchmark oil price of $53 per barrel, higher than the $52 it proposed earlier in February. This was as a result of its consideration of weaker global crude oil prices. The Federal Executive Council, FEC, had in November last year, proposed a budget of N4.357 trillion.
The structure of this budget is indeed disturbing because once again, capital expenditure is just about ten per cent, whereas recurrent expenditure runs to almost 90 per cent. We wonder why this is so. We are aware that past governments took a series of measures to reduce bureaucracy, which always consumes a large chunk of the country’s annual budget. This so-called bureaucracy comes in form of wages and personal emoluments. The introduction of the monetisation policy in the civil service is believed to be part of such desperate attempts by government to reduce recurrent expenditure. But, in spite of all this, Nigeria is still spending almost 70 percent of its total budget on salaries and wages when everybody expects such expenditure to have shrunk by now, to pave the way for the expansion of capital expenditure.
We find that over a trillion naira is already embedded in this year’s budget, which means that Nigeria will be spending more than the budget. The implication of this is that the country will be borrowing money to spend on things that may not benefit the majority of Nigerians. The country needs more functional schools, roads, hospitals etc. These are structures, which borrowed funds should be spent on and not abstract things that will prompt Nigerians to feel that they are being defrauded by government. The 2015 budget will not likely promote inclusive growth because government might borrow money that may not be put in use for the growth of the economy. Government has had to borrow money at high interest rate to mop up excess liquidity with a view to checking inflation. At present, the country seems to be borrowing at 15 per cent interest rate to mop up the so-called excess liquidity in the system.
Today, government has no rival as the greatest borrower in the economy, in the process, crowding out industrialists and entrepreneurs from the financial system, especially with its prohibitive monetary policy, that allows the commercial banks to fix a high interest rate. We expect the CBN to intervene by creating feasible and practical policies that will accelerate the growth of the economy. No matter how good a country’s budget is, if inflation is not controlled as well as interest and exchange rates, it will be a wishful thinking to expect economic growth.
