By Femi Adesina
The Presidential candidate of the Peoples’ Democratic Party (PDP), Alhaji Atiku Abubakar, last weekend issued a statement in which he described President Buhari’s 2019 budget proposal as fundamentally flawed and failing to address current realities. He went on to identify the said “current realities” which in any case were issues already highlighted in President Buhari’s budget speech and further amplified in the detailed presentation by the Minister of Budget and National Planning, Senator Udoma Udo Udoma. Regrettably, however, Atiku Abubakar offered no substantive and workable solutions to the identified “realities”.
Further, Atiku described the underlying assumptions of the budget as generous, wild and untenable but did not propose alternative assumptions that would have been more appropriate. He argued that the economy is yet to recover from the 2016/2017 recession. Unfortunately, it is obvious that he cannot create his own definition of an economic recession, which is a technical term with a universally applicable meaning. In my explanation, when an economy experiences two consecutive quarters of negative GDP growth, it is said to be in recession and whenever it returns to positive GDP growth of whatever rate, it is said to have exited recession. It is therefore, doubtful if he understands the simple meaning of recession.
In accessing the terms of the statement issued, it indicates glaringly that Atiku attributed the sustained accretion to foreign reserves to “increases in the international prices of Brent Crude and foreign borrowing”. But, he conveniently forgot that under the immediate past federal administration, oil prices were at an all-time high with substantial growth in foreign borrowings, and yet foreign reserves nose-dived from a peak of $62 billion to as low as $24 billion. In addition, his repeated reference to the price of Brent Crude throughout his statement may be indicative of his lack of knowledge that Nigeria’s Bonny Light Crude trades at a premium of at least $2 per barrel over the price of Brent; just as his reference to Nigeria’s OPEC quota may also suggest that he does not know that Condensates do not count in measuring compliance with the quota.
From another spectacle, the PDP Presidential candidate faulted the provision of N305 billion for NNPC’s cost under-recovery on Premium Motor Spirit (PMS), but did not say exactly what he would do about PMS pricing. If however we are to go by an earlier statement from his campaign organisation, which promised to reduce the price of petrol to N87, then we can expect a much higher subsidy provision from an Atiku government. This is because he is not going to perform magic to get the refineries working at peak capacity immediately.
He described the 2019 budget as being very small, but did not offer any implementable options for improving domestic resource mobilization, which is the only sustainable means to achieving larger budgets. It seems that he does not understand or is just feigning ignorance about the critical role of revenue in budget preparations.
A careful look at Atiku’s statement would show that there is nothing original about his identified “realities.” These are the areas which President Buhari had already identified in his speech. For instance, the President recognised that the revenue performance of the Federal Government up till September 2018 has been less than spectacular. Leaving aside for a moment the fact that there has been a remarkable increase in Federal Account receipts in the last three months, a glimpse at the budget speech will show that the President specified a number of actions to tackle revenue weakness, including strengthening the on-going efforts at tax collection, liquidation of recovered assets, immediate recovery of past due oil royalties and charges as well as deployment of the National Trade Window to improve customs collections.
His most laughable criticism perhaps was his claim that “there is little evidence to show that increased investment in agriculture has yielded positive results”. Even the worst adversary of the Buhari administration would acknowledge that significant progress has been made in the agriculture sector.
In his often desperate attempt to rubbish the 2019 budget, Atiku has conflated foreign direct investment with capital inflows. This is wrong as capital inflows covers foreign direct investment, foreign portfolio investments, international borrowing and short-term deposits in money market instruments. He has complained about movements in foreign portfolio investment which are often volatile and reflect monetary policy normalisation in the United States. Meanwhile, he is silent on the positive trade surplus mentioned in the budget speech which truly reflects living within our means as a nation.
Atiku has also calculated the budget deficit as a percentage of current revenue, rather than as a ratio of gross domestic product which is the preferred standard for inter-temporal measures of the deficit. Using this more appropriate measure however, the national fiscal deficit is 1.3% of GDP which is well below the 3% specified in the Fiscal Responsibility Act and well within the best global norms. This reflects so much for those who have claimed that they have the magic wand to grow the economy.
A most glaring weakness in the statement by Atiku is that he did not take a stance on issues of public interest in the budget, which is utterly regrettable from someone who aspires to lead Nigeria. As President Buhari explained, the subsidy/under-recovery has been retained to reduce the burden on ordinary Nigerians at a time of weak purchasing power in a manner that avoids the abuses of the past. The truth is that contrary to the belief of people like Atiku that low fuel prices only benefit the rich, a large number of ordinary Nigerians rely on PMS to operate ‘keke’, ‘okada’, ‘taxi’ and ‘danfo’. Moreso, a lot of the generators used by small businesses use PMS. Indeed, it is amazing that a man who has promised N87 per litre of PMS can criticise a process of under-recovery/subsidy that is not being abused as it was in the past.
To further show Atiku’s lack of knowledge about basic issues in the petroleum market, he has contradicted himself in his quest to make a non-existent point. He complained about the benchmark price of $60 per barrel used for crude oil exports in the budget and tried hard to show understanding of the dynamics of the global oil market by referring to US shale oil production and pressures on the Saudi regime. Yet Atiku expects that OPEC quotas will come into force, in which case the price of crude oil may rise in the international market.
What is obvious is the fact that low oil prices impact negatively on shale oil production. For instance, recent reports from a Permian producer show that with West Texas Intermediate at near $45 per barrel, they have already cut back on rig count and use of completion crews. There is moreover, the demand side which has remained extremely strong in the United States as larger economies like China and India will continue to grow at over 6% and 7% respectively in 2019, and this will impact on crude oil prices.
Finally, Atiku moans about the capital budget without acknowledging the historically high capital expenditure over the past two budget cycles, continuing into the current 2018 budget cycle. Apart from the fact that the Federal Government has kept to its promise to keep capital expenditure at 30% of the budget, the PDP Presidential candidate is quiet about his plans to raise capital expenditure and reduce recurrent spending. The reality is that it can only be done by retrenching public sector workers and by not increasing the minimum wage to which this government is fully committed.
It is therefore conspicuous that Atiku’s statement on the budget was a poor attempt at playing to the gallery. Without a doubt, the country is facing some significant fiscal challenges, but the administration of President Buhari understands these challenges as well as the workable solutions thereto. Albeit, the implementation of some of the solutions needs to be paced and well-timed to avoid dislocating the growth trajectory of the economy.
Analogically, Atiku’s criticism of the 2019 budget proposal can best be described as high on populist rhetoric and low on any real solutions to the identified challenges.
Femi Adesina is the Special Adviser to the President on Media and Publicity.