A budget is a plan that shows one’s expected income and how it would be spent (and saved). In households, it is important because the kind of goods and services, hence the quality of lives, members can afford would depend on how much the family earns and what portion is earmarked for expenditurethe same applies to our national budget.
President Muhammadu Buhari has presented a budget of N10.33 trn to lawmakers, who would have to agree with the estimates before the president can sign the budget into effect.
The process has been designed to give serious consideration to the document before it is adopted because the budget would affect every Nigerian-including you.
Here are four ways the budget can affect you and your wallet.
Higher borrowing cost could impact business performance, lower stock return
It is no longer news Nigeria has been borrowing a lot in recent years to support the budget.
Debt service as a percentage of actual government revenue in 2018 was 54.3 percent and the government plans to spend about 30 percent of an ambitious N8.155 trn revenue it estimates next year on debt servicing.
While analysts fear the revenue target is too optimistic, meaning debt servicing to revenue may be even higher, they believe a shortfall in revenue would force the government to continue its borrowing spree.
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For the government to keep borrowing, it would have to offer attractive interest rates which could affect the cost of borrowing for businesses, and this could slow economic growth.
For the bonds market, higher interest rate means higher yields on new debt instruments while for stock market it means companies stock would fall as business performance suffers.
Rising debt cost means less investment in healthcare, education etc Another thing to note is that a high debt servicing means a trade-off on critical investment as no economic agent has enough money to do absolutely everything it wants.
In other words, the more the government spends on debt, the less it invests on things that can benefit you like education, health and social interventions.
In the proposed budget, 23 percent less would be spent on capital expenditure, and no new projects would be embarked on.
Sadly, virtually the same amount that would be spent on capital projects would be used to repay the national debt.
N2.46 trillion has been earmarked for capital projects and N2.45 trillion would be spent on debt servicing; if you calculated how much would be allotted capital expenditure on the health and education of (200 million)Nigerians, it would amount to N470 for a whole year! Yes, N1.3 a day.
Proposed consumption tax hike to exclude staple food items
There has been a proposal to review of Value Added Tax (VAT), a consumption tax, from 5 percent to 7.5 percent so the government can earn more money and reduce reliance on petrodollars.
Consumers bear the burden on this kind of tax because the more they consume the taxed products, the more they have to pay as tax but the government plans to exclude many basic food items from this tax, including pharmaceutical products, among others.
The exclusion would benefit Nigerians who already have a squeezed wallet since the 2016 recession but VAT on other products could potentially slow demand and hamper corporate performance.
More revenue could see the government pay new minimum wages Although it is unclear how the government hopes to rake in N3.7 trillion from ‘other revenues’, a boon in its wallet could enable it to pay N30,000 minimum wage that was signed into law earlier in the year.
The cash-strapped government has not been able to keep its end of a bargain reached in April but the 2020 estimated revenue if realised could put more money in your pocket especially if you get your chequebook from the government.
