We can’t direct the wind but we can adjust the sails
– President Thomas S. Monson
President Muhammadu Buhari on Tuesday sent the 2017-2019 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), ahead of the 2017 budget, to the National Assembly. From the MTEF estimates, overall spending for 2017 is expected to reach 6.866 trillion naira ($22.57 billion), increasing from 2016’s budget of 6.06 trillion by 860 billion naira.
The Nigerian Government has found it challenging funding their 2016 budget which has a deficit gap of N2.2 trillion naira. This deficit has led the Nigerian Government to put up two of its private jets for sale and it is still searching for alternative ways to fund the budget even when the year has less than three months to go.
Nigeria needs to act urgently in order to prevent a reoccurrence of the 2016 funding dilemma. It must ensure that the 2017 budget does not pose the same challenge the 2016 budget did. Desperate times call for desperate measures. This requires an urgent reflection on its recurrent expenditure, revenue and debt financing.
Here are 3 ways the government can fund its 2017 budget:
Support the local community
As the government shifts from oil-dependency to relying on tax payments to generate revenue, the government must ensure that taxpayers become comfortable with paying taxes. One of Adam Smith’s canons of a good tax system is the canon of convenience – taxes must be convenient to be paid by taxpayers to prevent tax evasion. The cost of doing business in Nigeria is high and cost of debt keeps increasing, making it hard for businesses to assess capital from banks.
Erisco Managing Director, Chief Eric Umeofia recently threatened that his company could sack 1, 500 workers in his Lagos Factory and move his factory to another country because it’s been finding it hard to assess foreign exchange from the banks. This is after the Central Bank had promised 60 percent of its forex allocations to manufacturers. If a country cannot protect its local industry, how does it expect the economy to grow? A prosperous economy is as a result of prosperous businesses and people. If companies don’t make profit, then there would be no tax to pay and no revenue to fund the budget. Rather than hurting the private sector, the government should help boost the private sector which would ultimately increase the revenue flow of the government.
Reduce recurrent expenditure
Excesses need to be cut to reduce recurrent expenditure in the country. Estimates reveal that Nigeria can save a whopping N 1.3 trillion on excessive spending by states governments in Nigeria. Nigeria has the ability to achieve its potential but it relies on the will of its leaders to direct and govern its people during these tough times.
Sierra Leone President Ernest Bai Koroma said that his government would cut its running cost by 30 percent to fund its 2017 budget. He said all government departments would be tasked with 50 percent cut to fuel allocations, travel budgets and vehicle maintenance. It would also increase restrictions on overseas travel, and place an outright ban on buying office equipment.
Nigerian politicians are known for having several cars in their convoy. It is extremely noticeable when a “very important person” is passing an area because of the noise they attract when passing. Peter Obi said in his speech at the Platform that the motorbikes used by dispatch riders in convoys cost between N12 to 15 million. He said some states have as much as eight. Selling these bikes could fund each state’s budget with an additional 120 million naira.
Utilize recovered funds
Minister of Information and Culture, Alhaji Lai Mohammed, in June, said the cash recoveries made between May 29, 2015, and May 25, 2016, including recoveries under interim forfeiture (cash and assets), amounted to over N3. 4 trillion. However, Nigerians are yet to see the effect of these funds. If these monies are truly within the coffers of the government, then these funds should be deployed towards developing the country.
Nigeria is losing a lot of productivity to inaccessible funds. Lai Mohammed has said that $9 billion is been held by the governments in frozen accounts. The inability to use these funds has slowed the growth process of the economy. It’s boggling to question why the government is not considering granting a plea bargain to the looters but would rather let these cases drag for years. A plea bargain will allow the government to create some concessions if the looters plead guilty. Backdoor agreements should be considered to speed up the release of these funds so that the government can assess these funds for economic development.
The International Monetary Fund (IMF) has predicted that the Nigeria’s economy would contract by 1.7 percent this year and expand 0.6 percent in 2017. These forecasts can only be achievable if the Nigerian government is truly ready to take responsibility for the growth of the country.