Falling Naira and oil price
Underscoring the misfortune that will blight the Nigerian economy in the coming period oil is now being sold below the proposed Budget benchmark of $45. On the basis of this benchmark, the 2009 Budget has had an all time deficit of N1.09 trillion which already is a big pain in the neck. Yar’Adua did not state in his speech the exchange rate used for the budget. But some arithmetic puts the Budget estimates at N117 to a US dollar, whereas Naira is in free fall against dollar which saw it shedding about N15 in less than two weeks. At present the exchange rate is above N130 to a dollar and with the continued slide in the price of crude oil, the naira will most likely continue to depreciate. Therefore, both the Budget benchmark and exchange rate are too optimistic.
Though, Yar’Adua did not make such categorical statement, the government will tend to squeeze the poor masses and workers that did not benefit from the boom to pay for offsetting economic slump with increased taxes and neo-liberal attacks that will make them pay more for education, health care, self power generation as well as goods and service. Labour must be prepared to mobilize workers, youths and poor in the struggle against all neo-liberal attacks and specifically fight that public resources be really committed to socially beneficial programme like housing schemes, quality health care and education for all, stable and affordable water and electricity services, etc.
However, in his budget speech that is laced with half-truths and sweet-talks, Yar’Adua made futile attempt to give the false impression that all is well with the Nigeria’s economy. Due to the prevailing global capitalist economic meltdown, about two-thirds of the total revenue from crude oil exports has presently disappeared no thanks for the dramatic collapse of oil price internationally. Yet the President in a very laughable manner still lives in self delusion. Hear him, “Notwithstanding, the global downturn, Nigeria’s economic growth remains on track”!
Budget cuts in key sectors
Yar’Adua said that the 2009 budget provides 91% of the capital votes to five key priority sectors which include critical infrastructure, human capital development, Agriculture and water resources, Niger Delta and Security. On the surface, this appears cheering. But there is nothing to celebrate; emphasizing 91% is just playing up figure to deceive. In reality, compared to 2008 budget there is reduction in the allocations to the sectors identified by Yar’Adua as critical to his fabled seven-point agenda. For instance, education, health and transport have seen the capital components of their allocation reduced from N47.8bn, N49.37bn and N94.36bn in 2008 budget to N33.6bn, N39.6bn and N35.2bn respectively in 2009 proposed budget. Also, the capital allocation to the Niger Delta has plummeted from N84bn to N77.12bn shared between the new created Niger Delta Ministry and Niger Delta Development Commission. Worst still, there is zero allocation to the housing sector!
This informs why Yar’Adua fraudulently compared the 2009 capital allocation to that of 2007, instead of 2008. He had gleefully stated, “More crucially, the capital vote of N796.7 billion is significantly higher than the actual capital expenditure of N491billion in 2007.”
But while there is reduction in capital allocations, the total budget put at N2.87trillion “represents a 4.45% increase over the N2.748trillion initially appropriated in 2008 and an 8.42% increase over the 2008 Amended Budget’s level of expenditure of N2.647trillion”. This has raised questions on which areas or items the differential increase in the budget has been allocated. This is more so, when the government has created an impression of austerity measures with the suspension of investment in non-priority outlays like acquisition of new vehicles and construction and furnishings of offices as well as reduction in the cost of gallivanting within and outside the country. This is though a tokenist measure in the face of gargantuan economic downturn. A critical look at the budget however reveals that the beneficiaries of the budget increase include the politicians in the presidency and legislature which have seen 10% rise in their emoluments (Vanguard December 4, 2008).
While the government has expected people to tight their belts, it has increased the pay package of its functionaries who already loot the treasury on daily basis. Thus, Labour and pro-masses’ organizations must not allowed themselves to be blackmailed by the declined oil revenue, rather they should immediately raise the demand for a living wage at all levels for workers and opposition to retrenchment to cushion effects against the effects of the global economic meltdown. What is sauce for the goose is the sauce for the gander. More so, the poor masses that did not enjoy anything from the boom must not be forced to pay for financing economic slump with increase in VAT and other taxes.
Illusions in private sector
With the increase in the budget it should have been expected what to be increased is the capital votes for the enormous developmental challenges facing the country, more so when by government own admission the 2008 budget could only achieve about 40% implementation. But for this self-serving government run on neo-liberal capitalist principle the responsibility of economic development and improved living standard has been ceded to the private sector through public private initiative, leaving huge public resources for looting and over-bloated pay for the politicians. Yar’Adua has said that, “private initiatives are expected to complement the Government’s interventions in key areas of our economy with the overarching objective of making a positive, tangible and enduring difference to the life of the ordinary Nigerian”. But the meager capital allocations suggest that the government expects the private sector to play the lead role. Shamsudeen Usman, the Minister of Finance has been categorical in this regards when he said that the private sector was a “more preferred” method of financing infrastructure provision (This Day October 24).
The United Nation Conference on Trade and Development (UNCTAD) had in a report in 2007 expressed the utter incapacity of private sector as the driver of development. The reports states inter alia, “the widespread market failures, along with the huge financial resources involved in implementing the earlier stages of development imply that private sector cannot be expected to play lead role” (BBC September 27, 2007).
But the Yar’Adua government has thought otherwise even at a period when advanced capitalist economies are injecting huge funds into the economy with a view to avoid deep recession. Yet there is capitalist logic in what is happening now. The imperialist countries are moving heaven and earth to try to stabilize their economies, but even in these countries this is at the expense of working peoples’ living standards today and the likelihood of inflation and spending cuts tomorrow. In countries like Nigeria more crucially is the question on whether the private sector will raise fund to finance infrastructure in the face of the rampaging global financial meltdown. Already, the world’s big banks have cut down the credit lines to the Nigerian banks. But even when the oil price was high before this worldwide economic crisis started the Nigerian ruling class refused to invest in Nigeria. The ruling elite’s long established looting policy reflects Nigerian capitalism’s inability to develop in a world economy dominated by the imperialist powers. This is why Keynesianism, the bourgeois alternative to neo-liberalism, will not fundamentally develop Nigeria with its policies of state support for capitalism.
New debt burdens
Determined to help the private sector vampires out of the credit crunch, Yar’Adua government is proposing to raise $500 million, in naira denominated bonds, from the international capital market. This has shown that the so-called private sector’s lack of both will and financial capacity to develop infrastructure. The government is therefore providing them with funds to finance infrastructure and make huge profit from the users; while the Nigerian working masses will be saddled with new international debts. The Yar’Adua government, like its predecessors, is in power to gratify corporate profit interest at expense of poor working masses. It is the same way government pays huge interest from public resources to banks under the guise of mop-up excess liquidity. Whereas the so-called excess liquidity is the idle funds banks refuse to lend to the real sector and left in vaults knowing fully well that it would yield a huge return when government comes for them. However, it should be stressed that refusal of banks to provide credit facility to the real sector actually reflects the depth of socio-economic crisis in Nigeria. In the face of pervasive infrastructure decay and attendant high cost of doing business, to the banks the risk of granting loan to the real sector is unbearable.
The payment for the banks’ idle funds constitutes a huge part of the domestic debt stock. Already, N283.6bn budgeted for debt service in 2009 appropriation bill is more than the combined capital votes for power (N88.5bn), education (N33.6bn), health (N39.6bn) and transports including railway (N35.2bn). This fact alone shows the utter bankruptcy of capitalism prioritizing debt repayment to both international and local finance speculators at the expense of critical economic and human needs! Just less than 3 years ago, a whopping sum of $12.4bn was paid to international capitalist vampires under the guise of debt repayment and with a false promise of a debt free Nigeria.
What Labour must do
Nigeria requires huge injection of public funds to infrastructure development like roads, railway, power, housing, schools and hospitals. Labour and pro-masses’ organizations must demand, in addition to public resources from other sources, the use of a large part of the foreign reserve for this purpose instead of putting at risk of global financial meltdown. Already, the reserve has dipped from $63bn as of September 18 to $58bn at present. Labour must show force and voice against attempt to plunge the country in another debt peonage. The last debt overhang was offset by the foreign reserve, why not using the same resources for economic development instead of keeping it to mop up the mess.
However, like the probe of power projects, where about $16bn has gone down the drain, has revealed, budgeting public resources to capital votes or infrastructure is not enough. It must go side by side with an open democratic control of the projects by the working people, community representatives and professionals.
Also importantly, to finance the huge developmental challenges and social reforms, the foreign reserve is not enough. The commanding heights of economy including oil industry, banks etc must be put under public ownership and democratic control in order to mobilize adequate resources for socio-economic development. The recent nationalization of banks and financial institutions in Europe and US, though aimed at saving capitalism, has shown the crisis of private ownership and that public ownership of commanding heights is not utopian. These nationalizations, and the massive state aid being given to the auto and other industries, show the limits of capitalism. But for working peoples’ needs to be met, genuine socialist nationalization with democratic control of working people is needed. However this could only be implemented by a working class and poor government that itself could only be ushered in by a mass working peoples’ political party. This is one the reasons we of the Democratic Socialist Movement have been calling, for some time, on the NLC, TUC and LASCO to facilitate the formation of such party that could chase out the thieving ruling elite from power at all levels. The party being argued for should in and out power intervene in the daily struggles of working masses to both win immediate improvements and build a movement that can finally liberate Nigeria from the chains of capitalism and backwardness.