Barely two weeks shy to the end of the year, there is a growing concern regarding a delayed presentation of the 2015 Federal budget as expert says this delay is unhealthy for Nigeria’s economy.
In a recent interview with the News Agency of Nigeria (NAN), a former President of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Okechukwu Unegbu said the delayed passage of budget will make the country largely dependent on borrowed funds from the Central Bank of Nigeria (CBN), and this is bad for the economic development of the country.
“What this means is that there is no development planning; there is nothing the country can work on and the country will depend on borrowing temporarily from the CBN.
“This money we borrow from the CBN is funding only recurrent expenditure without anything being done in the capital expenditures.” He said.
Bearing in mind the concerns of Mr Okechukwu, it is however important to look at the larger picture, which is the plausible reason for the delay in budget presentation.
The bigger picture
The price of oil, a commodity that accounts for more than 80 percent of government revenue and 95 percent of foreign-exchange income, has fallen by more than 37 percent this year, dropping twice below the proposed budget benchmark, hence the stall of budget presentation.
As explained by The Economist, “oil price has fallen by more than 40 percent since June, when it was $115 a barrel. It is now below $70. This comes after nearly five years of stability. At a meeting in Vienna on November 27th, the Organisation of Petroleum Exporting Countries (OPEC), which controls nearly 40 percent of the world market, failed to reach agreement on production curbs, sending the price tumbling. Also hard hit are oil-exporting countries such as Russia (where the rouble has hit record lows), Nigeria, Iran and Venezuela.”
In a reaction to this development, Prof. Adeola Adenikinju, Director of Centre for Petroleum, Energy Economics and Law, is reported to have said that there is need for the country to reset and re-balance the economy. “The current challenges with oil prices also have their own opportunities. In the short term, we will all pay the price for lack of fiscal discipline and wastes. For well over a decade we have benefitted from oil boom as oil prices have been on an upward trajectory. Actual oil prices have consistently been above the budgeted price. We should have saved enough to cushion the effects of current slide in oil price. Hence, ordinarily we should not be feeling the impact of the volatility almost instantaneously now on our economy.”
He added that Nigeria should learn from the current situation in the global oil market and begin to live out the mantra of diversifying her revenue base.
Availing fears
Sensing the fears of Nigerians and foreign investors, the President, Goodluck Jonathan, in a statement issued earlier this month by his Special Adviser on Media and Publicity, was quoted to have said that the falling oil price will not affect the country’s economy. “We promise our people that even with the drop in oil prices, the economy will be stable. I urge you to maintain the confidence you have in this country before the oil price drop, and even expect better management from us. Sometimes, it is when you are challenged that you do better than when everything looks good.” (VENTURES AFRICA)