A lecturer in Nigeria’s Kwara State University, (KWASU), Dr. Shehu Salau, has said that the provision of N25.92 billion for internet, food, travelling allowances and other items for President Muhammadu Buhari and the Vice-President, Professor Yemi Osinbajo (SAN), is outrageous. Salau, who is of the Department of Agricultural Economics and Extension Services, in a recent interview with New Telegraph said such allocations did not take into consideration the current poverty level of the country or its huge debt profile. According to him, it is unimaginable that not much was allocated for agriculture or food security and education. He urged the National Assembly to reallocate some of the items in the budget in such a way that it would be more productive and beneficial for the country.
President Muhammadu Buhari in his 2023 budget proposal bill, which was sent to the National Assembly, allocated about N14 billion for internet subscription, telephone charges, stationery, computers, books, newspapers and personnel costs to the presidency. He also allocated about N11.92 billion for the food items, refreshments, kitchen accessories and related items, and for foreign trips for him and his Vice.
Salau said: “The allocation of N14 billion for internet subscription, telephone charges, stationery, computers, books, newspapers and personnel costs for the presidency is outrageous. One of the problems we have is that everybody keeps saying that the economy is on the verge of collapse and by the time you see allocations to some sectors, for instance, to the presidency for fueling, diesel, internet services, you will be amazed at what is going on here.
‘’It is not just the presidency, even the National Assembly, whether upper or lower. These are some of the things that we need to look into. It is too outrageous. It is not supposed to be what it is. Nigerians should rise up to some of these challenges. As a nation, we are too conservative. We do not respond. We just complain. We do not do the needful to change bad situations. Nigerians should not accept what is going on now in the economy. The National Assembly should, in fact, be the ones to protest on our behalf. They should say, no, what internet services are you talking about? The funniest thing is most of these products are not even from Nigeria. So you have what is called capital flight from Nigeria. Most of our monies go abroad.
‘’Also the N11.2 billion allocation for food and other items is outrageous. Those things are bad for the country. As President and Vice-President, they should also check themselves. Travelling to where? For what? How many times have they seen the US President come to Nigeria? How many times have they seen the Presidents of Ghana, Tanzania, and Egypt come to Nigeria? How many times? This is waste of money. That is why the naira keeps depreciating. What are they going there to do? You only go there on invitation and even at that, not allocating so much for travelling. It is wrong to do otherwise. The National Assembly should slash some of these allocations and reallocate them to productive areas. There are productive areas that are lacking. Look at the Education sector. Look at the budgetary allocation to Education. Very small. Education is a fundamental right of all Nigerians and look at the allocation. Look at the allocation to agriculture when we should be planning for food security. Look at our hospitals. Many of us who can afford it prefer medical treatment abroad. It is a shame. These are where the money should be channeled to. Let them channel the money to these areas. The NASS plays a supervisory role. They should ensure that the allocated money is efficiently utilized.”
Dr. Salau noted that President Buhari had proposed expenditures of N20.51 trillion in the 2023 budget before the National Assembly. The budget passed the second reading at the National Assembly. Salau conceded that the high amount of budget could only be justified given current global inflation and the aftermath of the Coronavirus pandemic. But he also insisted that the budget should impact positively on the welfare of Nigerians before the presidency, which is proper in a real democracy.
Come to think of it.
According to the external debt stock reports from the Debt Management Office, Nigeria’s total external debt rose from $10.32 billion on 30 June, 2015 to $40.06 billion on 30 June, 2022. This shows that there has been a debt increase of 288.18 % in seven years of the Buhari administration.
A breakdown of the figures shows that in 2015, 36 states had $3.27 billion external debt while the Federal Government had $7.05bn. By 2022, states’ external debt rose to $4.56 billion, while the Federal Government’s external debt increased to $35.5 billion. The debts included loans from multilateral sources such as the World Bank, the African Development Bank and the International Monetary Fund. They also included bilateral loans from China, France, Japan, Germany and India, as well as commercial sources including Eurobonds and Diaspora bonds.
Nigeria’s external debt ballooned as the naira lost value, increasing Nigeria’s debt service burden and worsening its ability to service its debt. The International Monetary Fund recently said that the long-term rate of the depreciation of the naira equated to a loss of 10.6% of its annual value since 1973. According to the IMF, this rate was 1.5 times higher than the long-term rate of the currencies of other emerging markets and developing economies at 7.2% and sub-Saharan Africa at 7% over the same period. The IMF said its exchange rate underwent more persistent depreciation. ‘’Nigeria’s long-term rate of currency depreciation on average of 10.6% annually since 1973 was 1.5 times higher than both EMDE (7.2%) and SSA (7%). Given limited availability of long-term data, it is difficult to estimate the exact reasons.”
The Bank of America recently also said Nigeria’s local currency unit was set to weaken further next year as its current exchange rate to the dollar was well above fair value. According to a report by Bloomberg, three indicators, the widely-used black-market rate, the central bank’s real effective exchange rate, and our own currency fair value analysis show the naira is 20% overvalued. “We see scope for it to weaken by an equivalent amount over the next six to nine months, taking it to as high as N520 per USD.”
During a workshop on tax expenditure organised by the ECOWAS Commission in Abuja, financial experts advised that Nigeria and other West African countries should move away from reliance on foreign assistance to the financing of developmental projects in the region. According to them, over-dependence on financial aid and external loans might affect long-term prosperity of the entire region.
The Special Advisor to the Director (Custom Union and Taxation in ECOWAS), Gbenga Falana, while observing that the debt profile of most of the countries in the sub-region was mounting, emphasized the need for West African countries to look inwardly and finance local projects through effective domestic resource mobilization. Reacting, the Managing Director and Chief Executive Officer of Cowry Asset Management Limited, Mr Johnson Chukwu, said that high external debt would impose a huge debt service on the economy.
He said: “This will impose a huge debt service on the economy, particularly at a period when we have low revenue from oil sales. If the revenue from oil sales does not improve, then the government will be struggling to meet that debt service obligation to foreign lenders.” However, he noted that Nigeria could service its foreign debt at the current level, but a constant increase in debt without a corresponding increase in foreign currency earnings could put the country in a difficult position.
Despite this, analysts at CSL Research said the Central Bank of Nigeria (CBN) was likely to allow the naira exchange rate at the Investors and Exporters’ (I&E) window to depreciate towards N455/$1 at the end of this year. The analysts, who stated this in a report released over the weekend, also said they believe that the Bank of America’s recent prediction that the naira would be devalued to N520 per dollar at the official market after the election next year “may not be farfetched.”
According to the analysts, although Nigeria is grappling with one of its most serious forex crisis in history, the naira’s exchange rate for the rest of 2022 will depend on the CBN’s capacity and willingness to defend the local currency rather than valuation pressures. According to the analysts, “the naira has fallen to low levels in the past weeks, in the midst of the ongoing dollar scarcity.
Nigeria is experiencing one of its worst FX crises in history due to increasing demand for FX in the face of low supply. Fundamental market pressures are clearly turning depreciatory and are likely to remain so over the remainder of the year in the face of declining investment inflows and fiscal expansion. However, the rate is clearly being heavily managed by the CBN. As such, the rate for the rest of the year depends more on the CBN’s willingness and ability to maintain it at its current level rather than sulk over fundamental or valuation pressures.
They further stated that from a willingness perspective, they believed that the CBN has always been keen and is very keen to prevent further devaluation especially during the run up to the elections, when devaluation of the currency would be an unpopular decision. “As for the CBN’s ability to maintain the rate at its current level, we note that despite the high oil price, occasioned by the Russia-Ukraine war, Nigeria has failed to benefit from it due to limited production and the maintenance of a subsidy regime, which is estimated to cost the country at least N4 trillion this year. High oil prices imply increased cost of refined products and Nigeria continues to spend a huge part of its FX earnings on the importation of Petroleum Motor Spirit (PMS) and other refined products due to the complete absence of local refining capacity. The country has also failed to significantly increase its non-oil exports,’’ the experts observed.
In another development, the Central Bank of Nigeria, in line with its mandate to promote stability, inclusion and growth in the financial and payment system, says it has introduced a national domestic card scheme that would become effective on 6 January 2023.
A statement from the Director, Corporate Communications, CBN, Osita Nwanisobi, said Nigeria is Africa’s largest and most vibrant economy and the pace of digitization and innovation, alongside the expansion of mobile penetration and the proactive policy initiatives of the CBN, had driven the accelerated adoption of digital financial services. He said: “Considering the strength and breadth of its banking sector and the rapid growth and transformation of its payments system over the last decade, Nigeria is ideally positioned to successfully launch a national card scheme. Building on this platform to accelerate financial inclusion requires infrastructure that can deliver lower-cost payments services that are more accessible and affordable for Nigerians. Domesticating our card scheme also enhances data sovereignty, enabling the development of locally relevant products and services and reduces demands on foreign exchange.”
He said the scheme could also be leveraged as a platform for the seamless dissemination of government-to-person payments and other social impact initiatives, enhancing financial access and supporting the growth of a robust and inclusive digital economy. The national domestic card scheme, he noted, would be delivered through the Nigeria InterBank Settlement Systems Plc, Nigeria’s central switch, in conjunction with the Bankers Committee and other financial ecosystem stakeholders. “It will foster innovation within the Nigerian domestic market, while enabling African and international interoperability, allowing banks and other institutions to offer a variety of solutions including debit, credit, virtual, loyalty and tokenized cards amongst others,” he said. We at Imo State Business Link Magazine are worried about the state of the national economy and the manner allocations are made from up to down. In a normal democracy it should be from down to up. The government monitors what the needs of the people are, through their elected representatives – medical care at an affordable cost, well furnished schools and colleges, agricultural support, recreational centres etc. These are not going to gulp the billions and trillions allocated to the presidency. But it will make the people happy. And when the people are happy, they won’t be bothered if you were stealing government money or not. They won’t even think of agitating because there will be no need for it. That is the truth. And that is why our politicians should grow wiser.