Kola Ibrahim *
The Buhari government claimed to have embarked on expansionary budgets,
despite adverse economic conditions, as a way of spurring development
and economic growth. Indeed, between 2015 and 2018, the government’s
actually-implemented budget size was N23.38 trillion. But these budget
sums should be situated within the existing economic situations. At N306
to a dollar, the value of the budgets (both the approved and actual) are
actually less than presented. For instance, the 2016, 2017 and 2018
actually-implemented budgets of N5.36 trillion, N6.46 trillion and N6.8
trillion respectively translate to $17.6 billion, $21.2 billion and
$22.3 billion in dollar term, compared to $21 billion (at N197/$1) spent
in 2014. This means that the actual budgetary spending in 2014 in dollar
terms was more than what was spent in 2016 and 2017 years of
‘expansionary’ budgets and almost at par with what was spent in
2018. When we even factor inflation – which grew from 9 percent in May
2015 to 17.55 percent in 2016, 15.37 percent in 2017 and 11.35 percent
in May 2019 – into the equation, then it will be glaring that the
actual values of Buhari government’s supposed expansionary budgets
were actually lower than those of previous government. This does not
imply that the Jonathan government’s budgets actually benefitted
majority of the population; indeed a significant percentage of the funds
found their ways into private pockets of politicians and big business
people with uncompleted budgets littering the country. But this reality
put a big question mark on the sincerity of the Buhari government
towards development. This means, for example, that the so-called capital
votes are really less than the 2014 vote.
Currently, in dollar terms, the Buhari government has borrowed $35
billion – N 10.68 trillion (about 65 percent increase since 2015) as at
first quarter 2019, with the government paying as much as $18.9 billion
(N5.806 trillion) for debt servicing between 2015 and 2018, an amount
that is more than the total capital spending, more than 80 percent of
total deficit, and more than half of what the government borrowed, all
within the same period. In fact, the total spending on debt servicing is
far more than the combined budgets for education, healthcare and water
resources within this period (2015-2019). This means that the federal
government is either borrowing to pay interests on debts (service debt)
or paying more interests than spending on development. In the 2017
fiscal year, the government spent N1.8 trillion to service debts while
it spent N1.5 trillion for capital votes i.e. debt servicing was more
than capital votes by over N300 billion. The Buhari government, rather
than stop this drift to the abyss, has rather worsened it with its
unparalleled appetite for debts. Currently the debt servicing to total
implemented budget is around 40 percent, which poses problem for the
country in the short or long term. The government is of course basing
its borrowing appetite on a more elusive debt to GDP ratio, which is
more virtual than debt-to-budget or debt servicing-to-budget.
It is true that austerity, as an economic term, involves cutting
government’s spending, especially budgets, as a way of reducing or
eliminating deficits. This is usually carried ot during economic
downturn like recession, or when government’s debts or public debts
are unsustainable, and government has to offset the debts, or reduce
public capacity to borrow, or assume private debts and force austere
living on the majority. In any case, austerity will mean attack on the
working people and the poor, who have no buffer or absorber for economic
shocks. This is why underfunding of social services (and their
commercialization or privatization), higher taxes for the poor, high
unemployment and exploitation of the working people (through salary
cuts, attacks on pensions, casualization, etc.) usually accompany
austerity policies. On the other hand, the rich and capitalist class (or
investors), use the opportunity to recoup lost profits through greater
exploitation of working class, and exploiting government’s austerity
to take more from public till.
However, that the Buhari government is not implementing a shrinking
budget or austere budget nominally does not mean that instruments of
austerity are not being deplored. It does not also mean that the
expansionary budgets have benefited the working people. What we have
seen is the government implementing some form of austerity programmes
for the poor as reflected in hike in fuel prices, electricity tariffs,
school fees across the country, currency devaluation, stagnated
salaries, and now through hike in VAT, and other sundry levies and
taxes; not to mention the planned increase in fuel price.
While it is true that there have been nominal increases in budgets for
education and healthcare, this, as noted above, does not necessarily
reflect real increase when devaluation and inflation are factored in.
But a closer look at the implemented budgets shows that there has been
lower allocations to education and healthcare between 2016 and 2018,
than pre-Buhari era. For instance, capital vote for education utilized
in 2011, 2012, 2013 and 2014 were N28.5 billion (55%), N47.6 billion
(86%), N36.2 billion (50%) and N20.7 billion (40%) respectively. On the
other hand, the utilized capital votes for 2015, 2016, 2017 and 2018
were N13.1 billion (56%), N20.8 billion (59%), N31.6 billion (55%) and
less than 45% respectively. This means that in nominal value, real value
and percentile implementation, capital education spending was worse off
under Buhari than previous period. While the recurrent expenditures
increased under Buhari government, this is lower, as percentage of total
budgets and when inflation and devaluation are factored in, than under
Jonathan/PDP government. Between 2011 and 2014, the average budget to
education was 10.4 percent, but between 2015 and 2018, under Buhari
government, the average was 9.0 percent. And worse still, percentage
implementation, while poor under PDP and APC, was worse under APC.
In fact, in real value, education and health budgets have shrunk as
noted earlier. Moreover, most of the capital spending have not resulted
in any significant improvement in facilities across educational
institutions. According to Punch newspaper editorial (3/5/2019), between
2016 and 2019, a meagre N475.3 billion was allocated to the 21 federal
teaching hospitals, an average of N22.6 billion for each hospital for
the three years (or N7.5 billion per year for each hospital). According
to the editorial, only N8 million is allocated to the OAUTH as monthly
statutory running cost, while the teaching hospital spends N13 million
on monthly electricity bill and N5 million to buy diesel. UNNTH, which
was allocated N5.5 million monthly allocation, spends N18 million on
electricity. This means that health services will have to be
commercialized the more in these health institutions, or quality of
health service delivery will fall. This is already happening, as health
service fees have increased in these institutions while two children
wards on OAUTH have been closed down.
While government claimed to wanting to build or rebuild 10, 000 primary
health institutions, which ordinarily should lead to massive employment
of medical doctors and health workers, the former health minister, Isaac
Adewole was recently quoted to have asked medical graduates to go into
farming, while labour minister public stated that Nigeria had adequate
number of doctors, even when doctor to citizens ratio is around 1:6400
as against WHO recommended 1:600. This is one of the signs that the
government is paying lip service to many of its programmes and budget
items, especially the capital aspect.
Consequently, the cost of running educational and health institutions
have increased as a result of inflation and devaluation. There has not
been any rise in income of workers, neither has there been massive
employment drive in the social service sector, which would have been a
pointer to any real increase in spending. When all this is placed
alongside introduction of various belt-tightening policies (fuel price
increase, electricity tariff hike, etc.), it will be clear that
austerity policies have been introduced in the social service sector,
even when nominal government spending seemed to have increased.
While it is true that low revenue made many aspects of the budgets
difficult to implement, the fact that the proposed capital items in the
budgets and the aspects of the budgets implemented did not reflect in
any improvement shows that the so-called spending are aimed at nominally
increasing GDP as a way of showing fake growth and exit from recession.
The latest employment report from NBS showing consistently growing
unemployment, four quarters after officially exiting recession
(unemployment is expected to have eased out or gone back to
pre-recession period at this stage) is a pointer to the fakeness of the
so-called expansionary budget. Therefore, we must dig deeper than the
textbook definitions.
The main areas where the huge budgets have gone to are debt servicing
and capital expenditure especially on government bureaucracy (office
buildings, furniture, military hardware, etc.), roads and rails. Aside
the fact that many of these projects are funded through loans, the
effects of these projects on the economy in terms of spending is
minimal. According to government’s chest-beating data, more than 1,262
km of roads have either been constructed or rehabilitation in the three
and half years of Buhari government. Also, more than N3 trillion has
reportedly been spent on capital projects, with about half of this going
to roads. Yet, according to government, this only generated less than
79, 000 jobs (mostly part-term or casual jobs associated with
construction industry), while most of the roads projects, especially the
crucial ones are not completed or half completed.
The effects of this ‘huge’ spending on roads and rails on other
sectors of the economy has been minimal or infinitesimal. The banking
sector is still not strong enough (even though the bank investors rake
in billions in profits), government’s independent revenue and tax
collection has not improved reflecting the poor performance of private
businesses, employment generation remain anemic, etc. It is therefore
not out of place to state that the huge capital outlay on roads and
rails, aside being funded through loans (and many of the projects
handled by foreign companies) are aimed at enriching the few in
corridors of power and big business, under the guise of developing the
country or stimulating the economy. Given the Buhari government’s
façade on fighting corruption, the rotten capitalist political and
business classes, have surely found a new means of massive looting of
public resources.
The summary of all this is that the Buhari government, with the hike in
fuel prices, devaluation of naira, hike in electricity tariffs,
government-instigated inflation, huge debt overhang and debt servicing,
and actually shrinking budgets (masked as expansionary budgets), has
introduced austerity measures/policies through the backdoor. This is
bound to worsen in the coming period as the government try to wriggle
out of the problems it created in the first instance: create the
illusions of expansionary budgets, funded mostly through huge borrowing,
but introduce anti-poor policies that undermine purchasing power, while
enriching the rich few in the corridors of power and big business. The
government has already announced plans to increase Value Added Tax
(VAT), while there is the possibility of another hike in fuel price,
even as government, through its agents (minister, NNPC officials, etc.)
doublespeak on this. The specter of this is reflected in the fact that
interest payment on existing debt is now around 60 percent of revenue;
while in 2019, projected budget deficit is put at N3.8 trillion, but as
government revenue continue to shrink, this deficit may be higher.
Government, according to 2019 budget, is projected to borrow N1.4
trillion to cover recurrent expenditure (debt and non-debt) alone. In
this scenario, government will be making effort to unleash more
austerity measures on the poor people.
Labour movement and other social forces must be prepared to resist these
austerity policies which will be heightened in the coming period.
* Kola Ibrahim, an author, labour activist and social/public policy
consultant, write this piece via ibromarx@gmail.com. This write-up is an
edited excerpt from his latest book, FIVE THESES ON NIGERIA’S 2019
ELECTIONS AND THE BUHARI/APC GOVERNMENT (RSP BOOKS, 2019)