The negative changes in key parameters used in preparing the 2002 budget approved by the National Assembly, raise many issues, not least the continuous dependence of the country on a single commodity — oil exports. Over the years, Nigeria has experienced the good, the bad and the ugly aspects of oil. Oil has made the country very lazy and unable to tap the full potential of its rich human and natural endowments. No nation in the world has achieved sustainable development on the basis of a natural resource. Natural resources have only provided the means of financing development in agriculture, manufacturing and technology. Once again, we have been unable to mitigate the impact of the negative developments in the world oil market on the Nigerian economy.
According to the Chief Economic Adviser to the President, the immediate cause of the decline in Government earnings is the reduction of Nigeria's oil quota by the Organization of Petroleum Exporting Countries (OPEC) from 2.25 million barrels per day (mbd) in 2000 and 2001 to 1.7 mbd this year. The current OPEC production quota to Nigeria also included 360,000 barrels of condensate, which in the past were not part of it. Thus, the smaller OPEC quota and falling international oil prices have together contributed significantly to the reduced projected revenue for 2002.
Other expected revenue sources have also failed to meet the Government's target. The failed privatization of NITEL, from which the Government was expecting about US$1 billion, and the difficulties of repatriating looted funds from the Abacha family's foreign accounts have contributed to the huge dip in Government budgetary expectation. To put the seriousness of the problem in perspective, the Governor of the Central Bank of Nigeria (CBN), Chief Joseph Sanusi, pointed out that provisional data for the first five months of 2002 showed that federally collected revenue decreased by 5.6% to N658.85 billion.
While the Federal Government had projected a revenue of N435.7 billion and an expenditure of N448.98 billion for the period under review, the recorded income was N231.88 billion, a shortfall of 46.8%. Expenditure, however, declined to only N325.51 billion, leaving an estimated budget deficit of N93.27 billion.
The impact of the growing budgetary deficit will be felt all over the country. The capability of the Federal Government to fund adequately its Poverty Alleviation Program, Universal Basic Education (BPE) and other major projects will be seriously hampered. The fall in earnings will also lead to a decline in Nigeria's foreign reserves. These have already declined from US$10.44 billion in December 2001 to the current level of US$8.887 billion. This increased pressures on the Naira in the foreign exchange market, affecting the exchange rate, the domestic inflation rate, the interest rate and even the level of domestic investment.
The Minister of State for Finance, Alhaji Jubril Martins Kuye, has hinted that the significant drop in Nigeria's revenues must affect revenue allocation to all levels of Government. This would further compound the financial problems of the states and local authorities. States and local authorities in many parts of the federation are already finding it extremely difficult to meet their commitments to their workers.
The declining revenue, therefore, calls for greater fiscal discipline at all Government levels. All areas of fiscal waste must be addressed. Hard working Nigerians should not be made to bear the cost of the Government's inability to put the economy on a path of sustainable growth. Finally, there is an urgent need to diversify Nigeria's production and export base. The fate of Nigerians should not depend on the vagaries of international oil politics.
