Recently, the Vice President publicly confirmed what we have always suspected: That our national recurrent expenditure exceeds our overall national revenue, not counting capital expenditure:
“Taking a cue from today’s (Monday) presentation of Vice President Yemi Osinbajo at the Presidential Retreat for Ministers-Designate, Federal Permanent Secretaries and Top Government Functionaries , which dwelt on an ‘Overview of the Policies , Programmes and Project Audit Committee,’ a body he chaired, projected revenue of government falls behind recurrent expenditure even without having factored in capital expenditure.
“Consequently, it would appear that the country might be heading for a fiscal crisis if urgent steps are not taken to halt the negative trends in target setting and target realization in tax revenue.
“Anyone conversant with Federal Executive Council deliberations would have observed that issues bordering on revenue form the number one concern of what Nigeria faces today, and therefore, often take a prime place in discussions of the body.”
-Garba Shehu, Press Secretary to the President.
Secondly, The Response of the Federal Inland Revenue Service (FIRS) Chairman to the presidential inquiry on the Revenue shortfall highlighted the worrisome trend in our petroleum Revenue, the current mainstay of the economy.
“Please note that the variance in the budgeted and actual revenue collection performance of the Service for the period 2016 to 2018 was mainly attributed to the following reasons:
“1. The low inflow of oil revenues for the period, especially the Petroleum Profit Tax (PPT), was due to the fall in the price of crude oil and the reduction of crude oil production.
Notwithstanding government efforts to diversify the economy, oil revenues remain (remain) an important component of total revenues accruable to the Federation.
The price of crude oil fell from an average of $113.72, $110.98 and $100.40 per barrel in 2012, 2013 and 2014 to $ 52.65, $43.80 and $54.08 per barrel in 2015, 2016 and 2017.
There was also a reduction in crude oil production from 2.31mbpd, 2.18mbpd and 2.20mbpd in 2012, 2013 and 2014 to 2.12mbpd, 1.81mbpd and 1.88mbpd in 2015, 2016 and 2017 respectively.
“2. The Nigerian economy also went into recession in the second quarter of 2016 which slowed down general economic activities. Tax revenue collection (CIT and VAT) being a function of economic activities was negatively affected but the actual collection of the above two taxes was still higher in 2016 to 2018 than from 2012 to 2014. During the years 2012, 2013 and 2014, GDP grew by 4.3%, 5.4%, and 6.3% while in 2015, 2016 and 2017 there was a decline in growth to 2.7%, -1.6% and 1.9% respectively. “
Tunde Fowler, Chairman FIRS
Third is the realization that the total import bill for our domestic petroleum consumption exceeded the total revenue generated from our Petroleum Export.
“Nigeria Earned $54.5bn From Crude Oil, Spent $54.6bn To Import Petroleum Products In 2018” –Ships and ports.
Nigeria’s value of petroleum products imports was more than its exports in 2018, according to data released by the Organization of the Petroleum Exporting Countries (OPEC).
The report, Annual Statistics Bulletin (ASB) 2019, stated that the value of exports of petroleum products by the country in 2018 amounted to $54.513 billion while import was $54.645 billion.
While exports grew by $16.53 billion in 2018 from $37.983 billion in 2017, no gain was made as the value of imports already override its exports.
The Nigerian National Petroleum Corporation (NNPC) said recently that the country recorded a total export sale of crude oil and gas of $490.03million in February 2019 alone, which is 32.45 percent higher than the previous month’s sale.
According to the Monthly Financial and Operations Report (MFOR) released in Abuja, crude oil export sales contributed $350.29 million (71.48 percent) of the dollar transactions compared with $240.23 million contributions in the previous month.
The report, the 43rd edition of the NNPC MFOR, explained that the export gas sales amounted to $139.74 million in the month under review, stating that the February 2018 to February 2019 crude oil and gas transactions indicated that crude oil and gas worth of $5.94 billion was exported.
However, the country does not refine its crude oil, rather spends huge money on importation of petroleum products for its over 200 million inhabitants. The country’s population grew 5.3 million within the space of one year alone, 2017-2018, according to OPEC’s ASB 2019.
Nigeria spent N2.582 trillion on fuel importation in nine months, from January to September 2018, rising by 12.9 percent from N2.289 trillion recorded in the first three quarters of 2017.
According to data obtained from the National Bureau of Statistics (NBS) Foreign Trade Statistics for the Third Quarter of 2018, Nigeria’s fuel import stood at N845.12 billion, N720.4 billion for the first and second quarters of 2018 respectively.
Other figures in the ASB 2019 showed that Nigeria made more money from exports of petroleum products within the space of five years in 2014, which amounted to $75.196 billion.
During the crude oil price crash, which started in 2015, the country’s value of exports dropped to $41.168 billion and got worse in 2016 as the country made a meager $27.295 billion.
However, the country did not gain as such, as its value of imports last year, which amounted to $54.645 billion, was higher than its value of export of $54.513 billion the same year.
On the other hand, the country’s value of import in 2014 was $70.778 billion, dropped to $52.525 billion in 2015; $46.552 billion in 2016; $49.508 billion in 2017, and shooting upwards to $56.645 billion in 2018.
The above are significant red flags, to which no one seems to be paying serious attention.
Unless something significantly drastic is done and quickly enough, the impact and effects of the above may be disastrous.
It calls for drastic and urgent steps to be taken to arrest the inevitably ominous outcome.
Shortages, rationings, Riots, unrests, increased lawlessness, increased unemployment, increased robberies and kidnappings, and similar ugly developments may be the result of our continuous neglect.
The setting of a strategic team to monitor and proactively respond to these developments.
An immediate action that will have the least adverse impact is an across the board 50 percent reduction in our recurrent expenditure.
Least adverse impact, because the effects will be consistent across the board, and therefore reduces any negative impact to the barest minimum.
In addition, a state of emergency that ensures the curtailment of all but only critical expenditures.
An embargo on all foreign travels except when critical.
Elimination of all discretionary expenses.
Elimination of all constituency projects
Actualising a zero-based budgeting regime , that ensures the justification of all line items.
Identify and take other measures to stem this ugly tide.
BITE THE BULLET
Bite The Bullet: As bitter as this may seem, Removing the subsidy on petroleum products is a bullet we have to bite at this stage for our survival.
AGGRESSIVE EMPHASIS ON THE AGRIC VALUE CHAIN:
Ability to feed ourselves will cushion impending negative outcome
VALUE ADDITION AND PROCESSING:
Value Addition and Processing both petroleum as well as every primary resource from Nigeria, It may become necessary to place a ban on the export of raw Resources of any kind.
We will like to meet with you urgently to highlight the seriousness of these issues and to highlight specific steps, approaches, and methods to implementing some of the proposed remedies.