Talking Drums

The West African News Magazine

Nigeria's New Year austerity measures

From Akwasi Atta Amoah, Lagos

The budget broadcast by the Head of State, Major-General Buhari on January 1, 1985, continues to be a subject of serious debate and analysis. In this article a correspondent examines the austerity budget against the background of the country's economic problems
The Government and people of Africa's largest and most populous nation, the Federal Republic of Nigeria entered the New Year on another austerity budget which is geared in the direction of reviving the economy.

As highlighted in the Budget broadcast by the Head of State, Major- General Muhammudu Buhari on January 1, 1985 Nigeria's total external indebtedness in respect of medium and long term loans as at 31st October, last year stood at approximately N7.92 billion (or $10.32 billion US).

Of this amount N5.57 billion represents Federal Government indebtedness, whilst N2.35 billion is owed by State governments.

"We must bear in mind that we cannot have a turn around within one year of an economy which has taken more than four years of indiscriminate and planless operations to batter to a most unfortunate state." Dr Onaslapo Soleye, the Minister of Finance pleaded while giving the budget breakdown in Lagos a day after Head of State Buhari had announced it.

"This administration" he assured his countrymen "is nevertheless determined to succeed in transforming the Nigerian economy for the benefit of all its people."

Viewed against the critical background of Nigeria's external indebtedness - vis-a-vis her declining foreign exchange earnings especially from crude oil the Federal Government has decided that no external borrowing for new projects should be undertaken in the 1985 fiscal year, except for projects considered absolutely essential in the public interest.

In this regard the Federal Government has intimated its willingness to secure some World Bank and bilateral loans which carry longer maturities and lower interest rates for agriculture and agro-allied industries.

Dr Soleye announced that in order to alleviate social hardships in certain areas of the country, approval has been given for external financing of vital on- going water projects in Borno, Cross River, Lagos and Sokoto States in the current fiscal year. He pointed out that in all other cases, external financing would be restricted to only Federal and State projects spilling from the fiscal year just ended.

Contrary to the view that Nigeria may not pursue negotiations embarked upon with the International Monetary Fund because of the latter's uncompromising and generally unfavourable terms with Third World Countries, the Finance Minister said the negotiations which started in April last year will be pursued with a view to reaching agreement with the IMF whose team is scheduled to visit Nigeria this month for consultations.

To build up internal reserves it has been decided that Nigerians can now operate foreign accounts with Commercial Banks in their country. Such monies are to be kept in a different account from the Naira account

Asked why Nigeria insisted on taking the IMF loan despite the tapping of all areas to improve the nation's revenue collection the Minister said that Nigeria as a contributory member of the IMF "is entitled to take a loan." He did not see anything wrong in the Government's decision to continue with the negotiations.

But while the Federal Government insists on pursuing the more than N1.8 billion loan being sought from the IMF to improve the lot of Nigerians, the people themselves were indirectly asked to make further sacrifices.

In the Budget statement the Government slapped another N100 levy on air travel, payable by air travellers who go beyond Africa. Diplomats and infants are exempted from this levy. In another move it has been proposed to introduce pre-operation levy of N500 on registered companies which fail to commence business after the first six months of registration.

Such levy, according to Dr Soleye, would continue to be imposed for as long as such companies remained dormant. He said that arrangement for the collection of the levy was already being worked out by the Federal Board of Inland Revenue.

Still on government revenue the Finance Minister said that it had been decided to introduce fees for application for banking licences and the granting of such licences. Applicants will initially be required to pay N2,500 while another sum of N10,000 will be paid when such application is granted.

But in spite of the austerity measures which are driving school children from the classrooms following the abolition of compulsory and free education, the defence budget took the lion's share in the recurrent estimates.

The Minister of Finance announced that N656,569,890 has been approved for the needs of defence, N382,134,330 for Police, N256,856,000 for the Ministry of Education, Science and Technology and N282,212,530 for the Ministry of Information, Social Development, Youth, Sports and Culture.

Dr Soleye said the Internal Affairs Ministry would spend N176,893,170 on its recurrent need while that of Employment, Labour and Productivity would get N16,031,400. The Ministry of Health had N167,726,570, Communications N292,090,050 and the Federal Cabinet will utilise N164,860,780.

To build up internal reserves it has been decided that Nigerians can now operate foreign accounts with Commercial Banks in their country.

Such monies are to be kept in a different account from the Naira account.

Giving the assurances at the Press briefing on the Budget statement Dr Onaolapo Soleye said "we have representations that a lot of Nigerians and Nigerian registered companies have foreign exchange which they would like to use for the benefit of this country."

"If you have one thousand or 10,000 US dollars don't be afraid; go and put it in the bank. When you want to go, you take the same currency. The details will be worked by the Ministry of Finance and the Central Bank. It will not lead to dual exchange rate. . ."

"And we know it will work. You do not need to have to hide your foreign currency abroad, you do not need a coded account which benefits other countries while you can use it at home." "If you know you can bring in your money legally which you earn outside and take it when you are going, as the case may be, there would be no problem" the Finance Minister added. One of the earliest reactions to the Budget came from Mr Gamaliel Onosode, one of the budget advisers to deposed President Shehu Shagari. In an interview with the Guardian Newspaper in Lagos the former adviser described the 1985 budget as "a good follow-up to last year's in so much as it is also aimed at spending less and achieving greater results.”

Mr Onosode who is now chairman of Cadbury (Nigeria) Limited commended the government for making it clear that the greater part of the budget would be financed by earnings from oil.

"It is inconceivable now to think of any alternative to oil as the main income earner because diversification of the economy to de-emphasise the leading role of oil is a long-term programme."

He praised the government for not indulging in external borrowing to finance more projects, and said the decision to rather use the nation's foreign exchange earnings to service external debt commitments would avoid a "snowball effect" which only increases indebtedness.

In the long run, Mr Onosode said, Nigeria's debt obligations would reduce and more foreign exchange would accrue to the national coffers, if the strategy on foreign exchange disbursement was adhered to.

The former adviser was not happy that the new Budget failed to tackle the problem of inflation, which he noted, had been more vexing because local production had not been enough to meet demand.

In another development, the Head of Department of Economics, University of Calabar Professor Eskor Toyo in an open letter to Head of State know Buhari, published in two instalments by "The Punch" on New Years Day simultaneously with the role and the Budget Statement asked the Nigerian leader to "Change the Battle Plan." In an undisguised allusion to recent mass retrenchment of workers he wrote:

"Anyone who believes Nigeria can be saved the way we are going, is living in a fool's paradise created by the illusions and non-creativity of those who are perhaps more worthless in their own jobs than those they retrench."

The economist noted that Latin American countries have gone through crisis upon crisis in the last one hundred and fifty years of the type "we are undergoing" and regretted that each time the prescription had been the same curtailment of imports, devaluation, wage freeze etc. retrenchment.

He noted that poverty, inflation, unemployment, corruption, foreign exchange crises and depressed economic conditions are nowhere more severe today than in Latin American countries outside Cuba.

The Professor said capitalists their fellow travellers regard unemployment as inevitable and and depressions and massive retrenchment as "unfortunate disasters" to be endured by the poor and argued that Socialist countries that firmly restrict the capitalistic type of market mechanism and practise self-reliance depression nor unemployment.

Professor Toyo advocated. He said for farming, government could get armed forces personnel, university students and secondary school pupils by a special mobilization effort to help in the forest clearing and land preparation, that are necessary for starting new farms.

He advised Nigerians to get out of "our conventional neo-colonial stupidity and save the suffering people of Nigeria by applying some original solutions that place men above all things" ideas, he said, which will never Occur to the International Monetary Fund, World Bank, and conventional American-British text- book economies. But they can work, he argued.

Meanwhile the austerity measures continue to stare the masses in the face. At his recent end-of-year (1984) press conference the Governor of Oyo State, Lt-Col Oladayo Popoola announced the decision of his government to re- introduce the payment of tuition fees in the State ranging from N5 per term in primary schools, through N30 per term in Secondary Schools, to a minimum of N120 per session in Post Secondary institutions. If the new measures come into effect it will end the free primary education scheme pioneered in Nigeria in January 1955 by the pre-independence government of Chief Obafemi Awolowo in the old Western Region of the country.

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