Budget delay cripples economy - Experts

Lanre Oyetade, Dele Aderibigbe, Oluwaseun Ayantokun, Dele Ayeleso and Adewale Ajayi, Lagos - 25.03.2008

EXPERTS have expressed their views on the possible effects the delay in the passage of the 2008 Appropriation Bill into law may have on the economy and its constituent sectors, agreeing that such effects are undesirable.

Despite expectations late last year that the budget would be passed early following the cordial relationship between the executive and legislative arms of government, the passage of the Appropriation Bill into law has experienced an impasse between the two arms of government in recent times.

Commenting on the issue, the spokesman of the Central Bank of Nigeria (CBN), Festus Odoko, in a telephone interview on Sunday, said that an early passage of the budget would normally make things work out smoothly.

He pointed out that in the event of a delay in passing the Appropriation Bill into law like it is now, a provision existed that permitted the President to spend up to a certain proportion of the previous year’s budgetary allocation.

He added that though the fact that the President could continue spending to a certain limit to meet essential expenditures might reduce the undesirable effects of the delay, some contractors might resort to borrowing heavily from banks to meet their obligations, thus causing the various banks to be increasingly exposed in terms of credit given.

He added: “If the government additionally resorts to financing its projects through sources such as borrowing from the Central Bank, this might tend to have inflationary effects on general price levels, but happily, the government has since jettisoned this approach for other alternatives such as the issuance of bonds and the like.”

Experts in the maritime industry also cautioned against further delay in approving the budget, stressing that it was certain to impact adversely on the sector.

The experts, who included seasoned importers and master mariners like Captains Ernest Ishola and Niyi Adeyemo, also said that the adverse effect might not be immediately observable because the maritime sector was noted for having “delayed shipping, there is always delayed reaction time. Those who opened letters of credit three months ago are yet to have their goods in ports. So, the impression is always there that all is well.”

Adeyemo, who is the immediate past President, Nigerian Association of Master Mariners (NAMM) noted that while the impact of delayed budgets might be mild for now, it must be recognised that the impact could become more noticeable as the effect of further delay began to take direct toll on capital projects, and which in the long run would impact adversely on other activities.

Ishola said the tempo of shipping activities, especially in respect of imports and exports, ought to have improve more than this.

“It has not started having very serious effects yet, but it surely would, if it is further delayed. Or if the President fails to inject some desired funds into the system, as constitutionally empowered,” Ishola, explained further.

Stakeholders in the Nigerian telecoms industry are hoping that the 2008 Appropriation Bill still being delayed in the National Assembly would tackle the bane of the operation in the fastest growing sector of Nigeria’s economy.

Believing that the delay being experienced by the bill is technical and not political, Mr. Gbenga Adebayo, President, Association of Licensed Telecommunications Operators of Nigeria (ALTON), while speaking with the Nigerian Tribune on the phone, said they were hopeful that the government would grant the concessions and support needed through the budget.

“The delay is not impacting negatively only on our industry, but also on other sectors. They are also being affected; the only thing we require is that the budget should be decisive on the issue of power in this country.

“We believe whatever is churned out there from the budget as far as power and security are concerned will go a long way towards affecting network elements,” he said.

Also speaking on the budget issue, Mr. Tayo Ekundayo, GM, Corporate Affairs, Multi-Links-Telkom, said the issue of delay in passing appropriation bill into law was no longer new in Nigeria .

“It is a routine thing now and the government knows what the law grants them to spend in this kind of circumstance,” he said adding that the industry might not be expecting much from the Federal Government as far as investment was concerned.

On his part, the Secretary-General of the Association of Telecommunications Companies of Nigeria (ATCON), Mr. Godwin Morgan, said much was still expected of the government in the area of rural telephony.

In the insurance sector, it is believed that the delay in the passage of budget is to the detriment of the growth that the industry is just experiencing in the sense that government, as far as Nigeria is concerned, remains the single largest organisation that patronise the insurance industry.

While speaking with the Nigerian Tribune, Mr. Tope Adaramola of Nigeria Council of Registered Insurance Brokers (NCRIB) said that if the sector had started feeling the heat of delay in budget, it should be as a result of the escrow account money that was just released to them.

He said “so far, it does not have overt effect, because the insurance industry for now is still awash with the money from escrow which has just been released to them. It is like the insurance industry is having a new year on its own rather than the national year.

“There are lot of activities going on in the industry; you can see a lot of them venturing out of the country. I agree with you that if government refuses to release money, it is going to affect their business. By not releasing budget, its going to affect their business, premium will not be paid.”

Meanwhile, the Action Congress (AC) has expressed concern over the delay in passing and assenting the budget as the delay could make targets in the budget unachievable and further drive the economy into the doldrums.

The party, in a statement signed by its Publicity Secretary, Alhaji Lai Mohammed, on Monday, described the situation where the implementation of the budget was yet to begin, almost five months after the President presented it to the National Assembly, as an aberration.

AC, therefore, called on the legislature and the executive arm to urgently reconcile their differences, which it stated was responsible for the delay, and that the implementation of the budget should begin in earnest in the interest of the people.

The party also suggested that there should be a return to the old practice of announcing the budget — fully passed by the legislature and assented to by the President — in the first day of the new year, which means that the process would have started much earlier in the year.

“We understand that the President has refused to assent to the bill because, among other reasons, the National Assembly has yet to fully reflect the changes he suggested in the version passed by the Assembly and sent to him for his signature, and has also inserted some clauses which the executive believes could hamper its role in implementing the budget,” the party said.