President Muhammadu Buhari signed the 2016 budget into law last week. Political observers and economist believed the delay was partly due to due diligence to make the budget reflect the reality on ground. Barely 10 days after signing the budget, the entire system already wobbly.
Here is why that is sadly so.
President Buhari’s budget was planned on the grounds that his government would sustain oil production of 2.2 million barrels daily. A second basis for benchmarking the budget was the assumption that prices would remain at $38 barrels per day. Both of these projections has already started suffering heavy blows.
This is how:
Buhari’s government has failed to protect oil installations and pipelines in the oil rich Niger Delta. This has empowered a new but deadly militant group called Niger Delta Avengers. This new group is behind the most costly damages to oil installations and security challenges in the Niger Delta. Presently, the Buhari’s administration is only producing 1.6 million barrels per day. It could even slump further.
Secondly, the price benchmark of crude oil was pegged at $38 per barrel. Obviously, the Buhari’s administration neither read nor factored in international speculations on oil pricing. The International Monetary Fund, IMF, had speculated price swings in oil prices. According to IMF, oil prices would average $41 but that prices would fall well below that average or above it.
The least the government would have done was set oil prices at the least foreseeable price and plan from there. But no. They wished oil prices would keep rising; a very bad projection and poor analysis of international economics.
When both of these factors are put together, the result is that the nation is already losing about $8 million per day or 1.6 billion naira!
If the current trend worsens, heavens forbid, then Nigeria is not coming out of the wood anytime soon. Why do we say so? The total loss, should current trend continues will amount to about $7 billion dollars in one year or more than 1.4 trillion naira. This is approximately 25% of the entire budget for 2016.
Recall that in the 2016 budget, recurrent expenditure alone is more than 2.6 trillion naira. Losses would completely erase more than 80% of funds earmarked for capital expenditure. This alone renders the budget dead on arrival.
Let us put this put this mildly: Forget 2016. There is no change in the air. This is untenable owing to the poor economic state of Nigerians. The President should cut his numerous travels, call for help and restructure his team. If he continue to do the same thing, 2017 will suffer the same problems thereafter campaign for 2019 elections will begin and Nigerians would have lost 4 years.